BoE says watching mortgage price war
Regulators are watching a price war in mortgages like a "hawk" and may need to slap stricter minimum capital requirements on lenders, Bank of England Deputy Governor Sam Woods said on Friday.
The price war may be good news for consumers wanting to buy their first home, but it was less good for a bank concentrated in mortgages, Woods told the Building Societies Association. High loan-to-value ratios and higher loan-to-income home loans can be well captured by the BoE's capital requirements.
"But we should be watching them like a hawk," Woods said. Falling capital levels have been seen at lenders who use their own computer models to work out the riskiness of loans on their books and therefore how much capital to hold.
"The amount of capital being set aside to cover mortgages has been falling," Woods said. The BoE's supervisors were making strenuous efforts to check on how models are being used.
"Still, I think we should approach this trend with a very sceptical eye and need to consider whether there is a case to impose more floors in firms' models, particularly given the current stretch in some measures of house price valuation," Woods said
On the other side, Deutsche Bank shares slid to fresh lows as its boss announced "tough cutbacks" for the investment bank following a fraught year of money laundering allegations, failed merger talks, and lawsuits by Donald Trump. At a marathon annual shareholders' meeting in Frankfurt that lasted more than eight hours, chief executive Christian Sewing said the bank would push ahead with a further €1bn (£880m) in cost cuts this year, following similar moves in 2018 that led to 6,000 job losses.
Sewing, who has been in the job for just over a year, said Deutsche has already slashed €130bn from the investment bank balance sheet. "So I can assure you: we're prepared to make tough cutbacks," he said.
Business Today: sign up for a morning shot of financial news But investors fired a warning shot at the board, with 25% refusing to endorse the chief executive's performance over the past year and 29% voting against the chair, Paul Achleitner. Shareholders are angry over a maelstrom of bad news that has caused a major slump in the bank's share price.
Deutsche Bank's shares fell to fresh lows of €6.35 per share on Thursday. The stock - which hit €107 before the 2008 banking crisis - has lost more than 40% of