BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Insurance

FCA chief says zombie probe ‘not finest hour’

Posted on March 31, 2014

Martin Wheatley, CEO of the FSA, photographed at their office in Canary Wharf today.©Charlie Bibby

Martin Wheatley, head of the FCA

The UK’s chief financial watchdog admitted his organisation faces serious questions after confusing reports about a new insurance inquiry led to “extreme movements” of more than 20 per cent in some sector share prices last week.

Martin Wheatley, chief executive of the Financial Conduct Authority
, said the organisation’s handling of its plans to examine zombie insurance funds was “not the FCA’s finest hour”.

    The regulator’s board has already ordered an independent probe of the episode and Mr Wheatley said that as CEO he expected to be personally affected by the inquiry.

    The gyrating share prices caused by the zombie inquiry reports have also triggered concern elsewhere in government, with one Treasury official on Monday describing them as “extremely serious,” adding “clearly we need to get to the bottom of what happened”.

    Andrew Tyrie, chair of the Treasury select committee, has said the episode was an “extraordinary blunder”.

    The FCA provoked fury among insurers and investors on Friday because it waited for six hours after the stock market opened to make clear that the scope of the probe was much narrower than originally reported in the Daily Telegraph. The initial report sparked fears of a wide-ranging investigation into 30m policies and led to hundreds of millions of pounds being wiped off the sector’s market capitalisation.

    The FCA later said it did not plan to review all those individual policies or retrospectively impose current standards on old contracts. Its board then called in external lawyers to look at its actions.

    Mr Wheatley said on Monday that he took responsibility for what happened in his organisation.

    He said: “Whenever markets move as they did on Friday, scrutiny rightly follows, and it is no different for the FCA as for any other firm. If firms were involved in events like this, like those we saw prior to the weekend, we would ask serious questions. It is now incumbent on us to answer the same questions.”

    Lombard: FCA boss should stay on

    Jonathan Guthrie

    FCA boss Martin Wheatley is rocking back on his heels but he has not yet passed the tests for a private sector chief executive to step down, writes Jonathan Guthrie.

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    The insurance probe was one element of the FCA’s business plan, which was published in full on Monday morning. In the document, the FCA proposed a 2014/5 budget of £452m, up 1 per cent from the previous year. It also made a special funding request of £41m to cover its new responsibilities for overseeing consumer credit.

    The watchdog warned that the growth of consumer credit may pave the way for “unaffordable debt” in the UK and vowed to scrutinise areas including credit card lending, overdrafts, payday lending and debt management advice.

    The FCA this year takes on powers to oversee 50,000 consumer credit providers for the first time – doubling the number of firms it regulates.

    The UK household debt-to-income ratio has fallen to under 140 per cent from a peak of 170 per cent, but the FCA warned that further debt accumulation would leave households vulnerable to “interest rate changes, incomes shocks and changes to credit conditions.”

    The watchdog also said it was planning to shine a spotlight on how investment banks handle flows of confidential information within their own organisations, as well as how they manage conflicts of interest and curb the scope for traders to manipulate prices and benchmarks.