The Latest Headlines From Across The Banking Sector - November

2021-12-08 |  Ben Dineen

With the end of 2022 drawing near, there is much conversation in the sector around change and looking towards a more sustainable future for banking. Some of the key headlines that caught our eye were the increased focus on the role banks are playing in 'green finance' and their race to get a bigger bite out of the mortgage market.

Spotlight On The Sector's Green Credentials

  • As we entered November, COP 26 had just kicked off. The biggest commitment from over 450 of world banks was to the Gfanz (Glasgow Financial Alliance for Net Zero). In doing so they pledged to report annually on the carbon emissions linked to the projects they lend to
  • The initiative, which was unveiled in April this year, also targets the provision of “Green Finance” as well as commitment to net zero emissions by 2050 – known as the Net-Zero Banking Alliance (NZBA) to which the 8 largest lenders and 30 other institutions in the UK have signed up to
  • With financial institutions making these big commitments, we’re seeing green initiatives becoming more visible in the market. Examples this month include NatWest tightening their policy on coal lending, Barclays announcing a partnership to support corporate clients in reducing environmental impact. Visa launching a package of sustainably focused benefits for account users, linking spend with environmental impact. Further afield, Dutch digital bank Bunq celebrated planting its 5 millionth tree as a result of its pledge to plant a tree for every £100 spent on their card
  • The financial sector will be integral to the commitments made at COP 26, and now organisations recognise the significant operational risk climate change brings, they are responding to the challenge

PEN Point of View:

ESG is becoming more prevalent in the sector, with more regular headlines, driven by its growing prominence in wider society. The focus over the coming years for Banks and Building societies will be on the E of ESG – how can they reduce their environmental impact directly and indirectly? Organisations have slowly come to the realisation that this is more than a CSR initiative, there is financial risk associated too. Hence why we’ve seen good progress in the last year such as through product development in “Green Finance”. 

Aside from their direct impacts, and eye catching initiatives like tree-planting, there are two core questions to this:

What are the financial incentives for lenders to influence the greening of our economy? Where companies are owned by shareholders, they are currently being driven to maximise profits not their wider impact;

To what extent are lenders prepared to wield their considerable financial power to change how our economy runs? Lenders undoubtedly have the power to change how we operate as a society but that will involve difficult choices and to what extent is it fair for governments to delegate this problem to the FS sector. As a result, don’t expect this to lead to transformation of the balance sheet any time soon. 

Banks Finding New Ways To Get A Bigger Bite Of The Mortgage Market

  • As we predicted last year, the mortgage market was hit by high demand resulting from the stamp duty break as well as excess savings built up through the Covid pandemic. As a result, the market has been more competitive than ever leading to lenders looking to attract new customers with profitable margins
  • Kensington Mortgages have launched a mortgage product allowing customers to fix their interest rates for 40 years to address people’s concern about living costs, with the inflation rate currently at a decade-high 4.2 per cent, and the prospect that the Bank of England will increase their rates in the coming months
  • Making use of black Friday, other banks launched limited time deals to attract younger customers offering cheaper rates
  • Challenger banks are trying to make a dent in the market too, with Starling Bank reportedly buying a mortgage book worth around £1 billion, with hopes of competing with the big players in the market. Elsewhere, NatWest have begun to take legal ownership of 13,000 mortgages from Metro Bank, valued at around £3 billion and are launching a green buy-to-let (BTL) range
  • With hybrid working becoming more common, it will be interesting to see if more people embark on self-build projects to build homes that can adopt to current and future needs including separate office space. Build Loan, one of the biggest players in the space certainly believe that to be the case and have launched some new attractive offers, teaming up with Furness and Bath Building Society

And in case you missed it…

  • Atom Bank is offering the option of a 4 day working week for all of its employees, the largest company in Britain to do so. This is in response to changes in ways of working brought on by the pandemic and the ever increasing battle for talent
  • Open Banking continues to make headlines, with this update outlining progress on strengthening corporate governance at the Open Banking Implementation Entity (OBIE). On the subject of Open Banking, Tide has opened access to its suite of business banking tools to SMEs 3rd party business bank accounts
  • The CMA agreed to push back the introduction of Variable Recurring Payments (VRPs) for sweeping services by six months from January to July, given that most Banks were not going to meet the deadline

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