Regulators want reckless bankers to be criminally liable under new plans
The bosses of leading City firms are to be made more accountable for their actions under proposals that could make them wait up to seven years for their bonuses and potentially be jailed if their banks fail. Responding to recommendations made by the parliamentary commission on banking standards, the two main City regulators on Wednesday set out lengthy consultations aimed at framing a new licencing regime for bankers and the creation of a “potential criminal liability under a new offence relating to a reckless decision causing a financial institution to fail”. The Financial Conduct Authority and the Bank of England’s regulation arm, the Prudential Regulation Authority, want the new regime to be in force by January next year and would force bankers to prove they had acted appropriately – a reversal of the burden of proof. Bankers would be subjected to annual checks to ensure they comply with a regime which covers those involved in what is known as a “significant harm function”. But the regulators have stepped back from the idea of the parliamentary commission – set up in the wake of the Barclays’ fine for rigging Libor two years ago – that bonuses be deferred for as long as 10 years. “The PRA and FCA note that increasing the overall length of deferral is not the only way in which the typical present pattern of deferrals might be altered to improve risk alignment. There is scope to increase the proportion of awards that are held for longer within the overall deferral period, either by requiring a greater proportion of awards to be deferred, or by delaying the start of vesting, which typically starts a year following the initial award,” the regulators said. Instead, for the most senior bankers, bonuses must be deferred for seven years and for less senior staff for five years, according to the consultation. And the new rules coming into force will allow bonuses to be clawed back for up to 10 years. This would force bankers to repay bonuses already received as well as having deferred bonuses withheld. GUARDIAN
Energy firms to ‘double’ profit margins, predicts Ofgem
A year ago, Ofgem estimated that suppliers would make an average profit of £53 per dual fuel customer, a margin of 4%. But in the year ahead they now expect energy firms to make £106 per customer, increasing their margin to 8%. The industry said the figures do not take tax or interest into account. However Ofgem – which will officially publish the details on Thursday – said it was further evidence that the market was not working as well as it should. It has already referred the industry – and the profits it makes – to the Competition and Markets Authority (CMA). It has also written to the suppliers to ask why falls in wholesale prices last winter have not resulted in lower bills. BBC NEWS
UBS and Deutsche Bank questioned over ‘dark pool’ trading
Two more banks – UBS and Deutsche Bank – have been drawn in to the controversy over “dark pools”, the private trading systems recently highlighted by bestselling author Michael Lewis in his latest book on Wall Street. Dark pool exchanges are operated by banks and allow dealers to remain anonymous until their trades are executed. Lewis argues they are used by high frequency traders who try to make profits by trading faster than everyone else. Barclays is already defending itself against accusations of fraud by the New York attorney general over the way it advertised its dark pool. GUARDIAN
Nearly 2m working adults still live at home with parents
A leading charity has called on politicians to stop pumping money into loan schemes that ‘inflate’ house prices further and instead take ‘bolder action’ to build more affordable homes for a ‘clipped wing generation’ who cannot fly the nest. The plea comes from Shelter, which pointed to exclusive Census data showing there were 1.97million young adults in England who are still living with their parents despite working – this amounts to a quarter of all those aged between 20 and 34 in employment. And a separate survey of 250 young adults who live with mum and dad found nearly half of them are not moving out because they cannot afford to rent or buy a home, Shelter added. Campbell Robb, chief executive of Shelter, said: ‘The “clipped wing generation” are finding themselves with no choice but to remain living with mum and dad well into adulthood, as they struggle to find a home of their own. And those who aren’t lucky enough to have this option instead face a lifetime of unstable, expensive private renting… From helping small local builders find the finance they need, to investing in a new generation of part rent, part buy homes, the solutions to our housing shortage are there for the taking.’ DAILY MAIL
Renting in London ‘unaffordable’ as average rents soars to £1,412 a month but earnings lag behind
The cost of renting a home in London is now double that in the rest of the UK, pushing the capital ‘beyond the boundary’ of what is affordable as wages struggle to keep up with rent rises. The average monthly rent in London soared by 11.2 per cent to £1,412 in June compared to the same time last year – more than twice the rest of the UK, where, excluding the capital, rents average £694 per month, according to the latest HomeLet Rental index. But people in the capital earn on average just 2.23 times the median annual rent, while, experts say, a tenant’s gross income must be at least two and a half times his or her annual rent for a rental property to be affordable.Average monthly rent in the South East has soared by 4.4 per cent over the past year and now stands at £863, with the South West recording a similar rise of 4.6 per cent to £813 a month. But the average tenant’s gross income in those two regions was respectively 2.93 and 2.55 times the average annual rental value, making it just about affordable to rent. Out of the country’s 12 regions, only the North East of England and Scotland witnessed minor falls in rental prices, with year-on-year drops of 2.3 per cent and 3.8 per cent respectively. Scotland had an average monthly rent of £578, while tenants in the North East pay £507 on average, specialist insurer HomeLet’s Rental Index showed. The English Housing Survey published last week showed that private renters spend about 30 per cent of their income to pay for accommodation, while home owners are looking at 20 per cent, feeding the vicious circle that makes it harder to save for a deposit to buy a house. In 2009, 31 per cent of all households aged between 25 and 34 rented privately – but by 2013 this had increased to 45 per cent, according to the survey. DAILY MAIL
New Centrica boss to get less than predecessor, but up to £3.7m in pay and shares
British Gas owner Centrica is to hand its new boss, Iain Conn, a pay-and-shares package of up to £3.7m this year, less than his predecessor’s remuneration, in an effort to avoid a new political row in the energy sector. Sam Laidlaw, who leaves at the end of the year after leading Centrica since 2006, received £1.4m last year. However, he was in line for an annual package of up to £7m had he stayed in the job and was paid £5.7m in 2012. Centrica caused a public outcry in April when it handed Laidlaw shares worth up to £2m. Just days earlier he had handed his £851,000 cash bonus to charity. Centrica has come under fire from politicians on both sides as the average annual household energy bill has soared from £819 to £1,353 in the past five years. The big six energy companies are now the subject of the widest investigation into the sector to date, by the new watchdog, the Competition and Markets Authority. It has already identified opaque pricing and lack of competition as the main negative factors. Consumer groups accuse the suppliers of profiteering, which Laidlaw has always vigorously denied. The investigation could result in the energy companies being split up. Centrica has come under fire from politicians on both sides as the average annual household energy bill has soared from £819 to £1,353 in the past five years. The big six energy companies are now the subject of the widest investigation into the sector to date, by the new watchdog, the Competition and Markets Authority. It has already identified opaque pricing and lack of competition as the main negative factors. Consumer groups accuse the suppliers of profiteering, which Laidlaw has always vigorously denied. The investigation could result in the energy companies being split up. GUARDIAN
Longest UK slump in a century ends
The collapse of Lehman Brothers in 2008 heralded a savage moment of reckoning for Britain’s economy; the shock that started in the financial sector wiped 7.2 per cent off national output, wrecking the public finances. Of the G7 major economies, only Italy has taken longer than the UK to regain its pre-crisis size and output per head in Britain is still 4 per cent below its pre-crisis level. A muted Mr Osborne admitted there was “still a long way to go”. Output grew 0.8 per cent in the second quarter of this year, in line with expectations, which means the economy is now 0.2 per cent bigger than it was at its previous peak. But Britain’s population has grown in the meantime and Ed Balls, shadow chancellor, said: “With GDP per head not set to recover for three more years and most people still seeing their living standards squeezed this is no time for complacent claims that the economy is fixed.” Growth was so much weaker than expected in the aftermath of the financial crash that Mr Osborne was forced to extend austerity from five years to eight in order to meet his target to close the budget deficit. But fewer people have lost their jobs over the past six years than many economists had feared and this month the employment rate reached a new record high, last seen in 2005 – a source of Tory optimism. FINANCIAL TIMES
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