It's been a relatively quiet month to start the year in the banking sector and, as such, fewer headlines than usual. Here’s a short summary of the stories that caught our eye in January.
Spotlight on the savings market
- Figures in the House of Commons briefing paper this month indicate the average household savings ratio has increased from 9.6% in Q1 2020 to 29.1% in Q2 2020
- The effect of lockdowns has meant a significant number of people have reduced spending and paid off debt, a trend that should last as long as people are prevented from non-essential expenditure.
- Since the NS&I savings cut in November, a number of savers switched directly to building societies for risk-free savings, while others have turned to the stock market in an effort to get better returns.
- Some predictions are suggesting this savings habit may continue well into 2021. However, we see this as only temporary and predict a bit of a post-lockdown bounce in activity, driven by pent-up demand and the low cost of borrowing.
Clamp down on homeworking
- This month the FCA updated guidance to banks to record all communications while working from home. They have hinted that standards of surveillance at home should meet those that are in place in offices, as outlined in the obligations of firms adhering to Senior Management Arrangements, Systems and Controls.
- A number of banks and building societies have been able to continue locating teams with customer interactions from an office location.
- It is those firms that now have alternative working arrangements (specifically homeworking) that should assess their ability to monitor calls and electronic communications.
- Makeshift solutions that have been put in place will need to be reviewed to ensure they are compliant and meet the recording obligations, otherwise we expect the regulator to begin clamping down on these new arrangements.
And in case you missed it…
- Figures came out from the Treasury this month showing nearly £71 billion has been provided to businesses by lenders through Covid-19 loan schemes so far. With these unprecedented amounts being borrowed, it will be interesting to see how the industry can support businesses as we come out of the pandemic.
- The FCA will be consulting on raising the contactless payment limit to £100, another indication of the shift in consumer habits towards digital.
- Perenna, a new mortgage lender, announced this month that they will look to offer 30 year fixed rate mortgages, twice the length of anything currently available in the UK.
- TSB outlined their pathway to net-zero carbon, something we predicted would be a focus in 2021. This is further evidence that ESG is coming onto the Exec radar in banks now, way behind other FS sub-sectors such as investment management.
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