Fears over scrutiny in shake-up of brokers Cable: Tories ‘gave up’ on bank branch pledge
NEW European rules expected to herald the biggest City shake-up in a generation come into force this week.
Experts fear the new Markets in Financial Instruments Directive could stifle broker research – a staple in the City for decades – which shines a light on company and markets performance.
MiFID II, as it is better known, is aimed at protecting investors and increasing transparency in financial markets.
The most controversial change involves so-called ‘unbundling’, where fund managers will pay brokers for research and trading costs separately instead of paying for them together in a lump sum.
It has led to concerns that less analyst research will be carried out, reducing scrutiny of the City.
However, it is understood that many large City firms plan to absorb the costs of research rather than charge investors. That could cause a cost squeeze and lead to job losses for some analysts at smaller City brokers.
The legislation is being introduced by the EU but the Financial Conduct Authority supported the changes, which come into effect on Wednesday.
Firms that do not comply with the new legislation face multimillion pound fines.
A report earlier this month by internet service provider Timico revealed that 39 per cent of the UK’s financial services firms did not know whether they were compliant or not.
Timico’s chief technology officer Kevin Linsell said: ‘It’s clear that many businesses are massively unprepared for MiFID II, despite having had the last 12 months to prepare for the impending legislation.’ BANKS have been accused of ignoring a pledge not to close the ‘last bank in town’ after shutting one in 10 branches in just 12 months.
Liberal Democrat leader Sir Vince Cable told The Mail on Sunday that it was vital for communities to have at least one bank branch on their high street – a pledge made by the Government and endorsed by banks in 2015.
That would maintain basic access to financial services in an area from at least one banking chain, a lifeline to old or vulnerable customers. But Cable said new figures indicated the Government was not doing enough to police the code, introduced when he was Business Secretary, as it emerged that closures have reached record numbers.
A definitive survey by The Mail on Sunday, whose Personal Finance section has led the way in highlighting the closures, indicates nearly 900 branches closed this year.
The number of UK bank branches has more than halved in 30 years and major UK lenders now operate around 7,500 outlets – down from an estimated 18,000 in 1989.
Cable said: ‘ The Government seems to have given up and washed its hands of the problem. There was a code of conduct, but banks are not taking it seriously and the Government isn’t following up on it.’
Alongside a potential decline in cashpoints he said many communi- ties are being left ‘financially isolated.’ He added: ‘If there are not branches and no cashpoints what on earth are people supposed to do?’
Banks argue they need fewer branches because of the growth of online banking.
Age UK’s Caroline Abrahams told The Mail on Sunday: ‘The effect is to leave some customers – especially older people who are off-line or living in rural areas – stranded and many towns and suburbs without any bank branch at all.’ She added: ‘The increasing reliance on online methods is difficult for many, particularly those who don’t have smartphones or i nternet access. There is still quite a sizeable proportion of the population, on our assessment four million people, who are not online at all.’
The Royal Bank of Scotland has shut 255 branches in 2017, including 205 belonging to its NatWest subsidiary. Lloyds Banking Group – which owns the Lloyds, Bank of Scotland and Halifax brands – has closed 195 branches. HSBC closed 117 and Barclays closed 100.
The number of branches run by the big four banks – RBS, Lloyds, HSBC and Barclays – is now down to around 4,700. Smaller banks have also cut back this year, while RBS and Lloyds have already said they will shut 259 and 49 branches respectively in the New Year.
Challenger banks Metro and Handelsbanken have bucked the trend, increasing the number of branches they operate across the UK.