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Questions have been raised over whether the Financial Conduct Authority (FCA) acted too slowly to limit the risks of peer-to-peer lending after an email cache revealed senior leaders at the regulator were discussing problems in the industry as early as 2016. By the time the regulator introduced rules for the sector, platforms with a quarter of a billion pounds in active loans had collapsed leaving investors with life-changing losses. The emails were disclosed during a recent employment tribunal which saw former FCA risk manager Walker Sigismund accuse the watchdog of forcing him out after he raised various concerns including problems in the peer-to-peer industry. Mark Bishop, a financial services campaigner, said the emails showed “smart and diligent people within the FCA knew the regulator’s stance on peer to peer was wrong, and that people would lose their money,” but “senior figures suppressed those voices, because they didn’t accord with the ’house line’ which was one of light-touch regulation and hoping for the best.”

 

The Times

An investigation by the Daily Mail reveals that Britain has become the global capital of fraud, with losses from scams soaring to almost £3bn a year. Losses of £36.02 per person in the UK are far higher than in other leading Western economies. This is more than double the amount lost per capita that year in the US, according to figures from the Federal Trade Commission, more than five times that recorded in Australia, and almost six times the amount logged in Canada. New Zealand had a rate of just £1.73 per person in 2021. The Mail points to research by Crowe UK in conjunction with the Centre for Counter Fraud Studies at the University of Portsmouth which last year found all fraud cost individuals and businesses in the UK £137bn a year. UK Finance said: “The banking and finance industry is committed to stopping fraud," adding "We agree that more needs to be done and have long called for a regulated code, backed by legislation, to ensure consumer protections apply consistently.”

 

Daily Mail

Barclays is hiring a team of investigators to claw back up to £1bn of Covid loans that have been siphoned off by criminals. The bank issued 345,006 loans worth £10.8bn to small firms under the government's Bounce Back Loan Scheme at the height of the pandemic. These were fully guaranteed by the Treasury so that banks were not exposed to excessive risks. However, this has left taxpayers on the hook for potentially huge losses from borrowers who are either fraudulent or genuinely cannot pay. Barclays has held talks with the Cabinet Office over its move to outsource the Covid fraud investigation. The bank is likely to be given a green light by ministers, who are keen to recoup as much of the losses as possible. Its elite team will include experts in insolvency, law and forensic accountancy.

 

The Mail on Sunday

The Wall Street Journal considers the efficacy of the comply or explain principle inherent in UK corporate governance rules. In light of the UK government’s recent proposals for an update to audit regulations, which held back from holding directors personally liable for failed oversight of internal controls but does plan to have them either comply with newly proposed audit rules or explain why they don’t, Jennifer Williams-Alvarez looks at comments by academics and regulators on how the changes may improve trust in audit. Jan du Plessis, chair of the Financial Reporting Council, said last week that failing to apply stricter oversight requirements for directors was a missed opportunity. The watchdog said it expects to issue guidance soon on how it plans to respond to the government’s proposal. Valentina Bruno, a professor of finance at American University in Washington, recently said that explanations from companies on noncompliance are “typically opaque and uninformative,” adding that she is uncertain that the proposed changes will enhance accountability.

 

Wall Street Journal

The Financial Reporting Council (FRC) has hired EY to advise on a new classification scheme for insurance contracts. The move has been criticised by Conservative MP and chairman of the cross-party group on fair business banking, Kevin Hollinrake, who said: "You'd expect the FRC to have this expertise internally rather than having to hire a firm that it regulates to do it. It's a clear conflict of interest. I don't think it's appropriate." A source close to the regulator said the classification scheme is highly technical and there are few specialists with the necessary skills to advise on it. The source added that EY will only be advising on its implementation rather than on creating any new regulatory standards. EY will receive £50,000 from the FRC for its services.

 

The Sunday Telegraph

The global chairman of KPMG has reiterated the firm’s commitment to retaining the multidisciplinary business model which comprises both audit and consulting services. In a memo to partners, Bill Thomas wrote earlier this month: “We are a partnership that has been strong and growing in some countries for over 150 years . . . Our culture fuels this growth and stability.” Sky News’ Mark Kleinman says the message implies that EY’s reported plans to cleave its audit and consulting arms apart “would be akin to an act of corporate vandalism.” EY's break-up is reportedly likely to result in multimillion dollar windfalls for partners, and Mr. Thomas’ memo continued with apparent reference to this: "To monetize the goodwill of our firm that has been created for over a hundred years, at the expense of the next generation, would be entirely contrary to our culture." Sources told Sky News that the board of KPMG's Global network had also discussed the issue of a break-up at a meeting this month, with a determination that it would retain its present structure even in the event that the other members of the Big Four followed EY's lead.

 

Sky News

The Bank for International Settlements (BIS) says the world’s leading central banks should not be shy of inflicting short-term pain or even recessions to prevent a shift into a persistently high-inflation world. “The global economy could be set for a period of stagflation, involving both low growth, if not an outright recession, and high inflation,” it said. Agustin Carstens, general manager of the Switzerland-based BIS, explained: “The key for central banks is to act quickly and decisively before inflation becomes entrenched. If it does, the costs of bringing it back under control will be higher. The longer term benefits of preserving stability outweigh any short-term costs.” Claudio Borio, head of the BIS’s monetary and economic department, told the Times that shadow banks faced a liquidity crunch that could trigger a chain of corporate bankruptcies as central banks raised borrowing costs to fight inflation. “There is a hidden liquidity mismatch which erupted in March 2020 and we cannot rule out further possibilities of strain in the shadow banking sector,” Borio said.

 

Financial Times

Reuters

The Times

Experts say a move by the Bank of England to remove a requirement for banks to check that borrowers can afford mortgage payments at higher interest rates will not result in a lending free-for-all. The mortgage market affordability test rules were introduced in the aftermath of the 2007-2008 financial crash, but opponents of the rules said the test was too strict and prevented some who could afford a mortgage from being given one. Those in favour of removing the test say it will be of particular benefit to first-time buyers and point out that banks and building societies are still restricted on how much lending they can do above 4.5 times salary, and the Financial Conduct Authority still insists that lenders check affordability at one percentage point above the rate borrowers will move on to.

 

The Guardian

Russian e-commerce firm Ozon is selling goods on its platform through a parallel imports mechanism. Russia has legalised so-called parallel imports, which allow retailers to import products from abroad without the trademark owner's permission, to try to limit the impact of Western sanctions. "Goods imported with the help of parallel imports are available on Ozon," the company told Reuters, adding "We have already started selling popular electronics brands on Ozon, including smartphones and their components." Ozon rival Wildberries has previously described the parallel imports mechanism as an effective support measure, with importance for small and medium-sized businesses and for the import of socially-significant products. Meanwhile, electronics retailer Svyaznoy has extended its range to sell games consoles and smartphones from the likes of Apple and Samsung, the Kommersant daily has reported. Svyaznoy told Reuters it was not an importer of appliances and electronics, but replenishes stocks available inside Russia.

 

Reuters

The COVID-19 Bereaved Families for Justice group is considering bringing a judicial review over Prime Minister Boris Johnson’s failure to provide a setting up date for the inquiry into the UK government's handling of the pandemic. The group says the delay could cost lives, as it slows down how quickly lessons can be learned. A lawyer acting for the group adds that the delay “makes it far more likely that key evidence will be lost or destroyed.”

 

Bloomberg

A shortage of microchips means energy companies have failed to meet their smart meter installation targets, leaving them facing multi-million pound fines from Ofgem and putting the government’s net zero plans behind schedule. Every home was supposed to have a smart meter by 2025. In evidence submitted to MPs on the Business, Energy and Industrial Strategy Committee, Energy UK said: “The medium-term outlook for an improvement in the availability of semiconductor materials is highly uncertain.” Manufacturers have been suffering from microchip shortages since 2020 when production was hit by coronavirus lockdowns.

 

The Sunday Telegraph

Sainsbury's investor Schroders has confirmed it will side with the retailer in its battle with campaigners over the living wage. In a note to be circulated among clients, the investor described Sainsbury's battle with ShareAction as a "pivotal moment" in the debate over how investors engage with companies. The campaign group has tabled a resolution for the grocer's annual meeting next month demanding that it become accredited with the Living Wage Foundation. Sainsbury's already pays directly employed staff the "real" living wage - £9.90 an hour outside London and £11.05 in the capital. Kimberley Lewis, Schroders' head of active ownership, says the fund manager will not back ShareAction and "would urge other shareholders to think carefully before doing so." She says the resolution "fails to fully consider both the business implications and potential wider stakeholder impacts" and adds Sainsbury's is "definitely not a laggard" in terms of employee relations and that accreditation could "inhibit [its] ability to remain competitive," which would "ultimately be worse."

 

The Sunday Times

Efforts to break the deadlock over a new global corporation tax rate are continuing with Hungary currently blocking progress in the EU, while the Democrats’ slim majorities in the U.S. House and Senate make passing legislation a challenge for those pushing the programme. Nearly 140 countries agreed last year to impose a 15% minimum tax on large companies but eight months later, there has been little progress on changing national laws to implement the tax. Hungary argues that uncertainty about Europe’s economic outlook makes it a bad time to raise taxes. But some observers believe it is holding out for concessions elsewhere. Meanwhile, the EU is withholding pandemic relief funds earmarked for Hungary.

 

Wall Street Journal

A letter to G7 leaders signed by the heads of companies including Bank of America, BP, EY, Shell, PwC and State Street calls for world governments to introduce ambitious climate policies that offer the private sector the clarity and stability it needs to get behind serious efforts to tackle climate change. Environmental campaign groups are also urging G7 leaders not to sacrifice progress on climate as they attempt to tackle the energy and food supply crises.

 

Financial Times

The Independent

According to estimates from PwC, businesses could see price rises of between 10% and 20% in their annual insurance bill. The research suggests that rising prices have significantly increased the costs of materials and labour involved in the settlement of insurance claims. Mohammad Khan, head of general insurance at PwC, said: "Industrial action will no doubt have made a significant impact on businesses, and firms face a double blow with the potential of a 10-20 % increase in their annual insurance bill. Insurers have increased premium rates to cover higher claim settlements."

 

The Times