Groundsure offers climate analysis module for conveyancers and lawyers
ClimateIndex analyses data and then translates that into risks climate change may pose to a property and gives an overall score for the effect on a property over one, five or 30 years.
This includes risks around flooding, ground subsidence and coastal erosion.
The module will be included in Groundsure’s main residential and environmental search reports, which are typically used by conveyancers in their buyer search reports.
Lenders can also access the data and the accompanying analysis and interpretations through Groundsure’s valuation network through Siteguard.
Groundsure currently provides climate date to Santander, Barclays, RBS and Natwest.
Dan Montagnani (pictured), chief executive of Groundsure said: “Thanks to the Bank of England, the Prudential Regulation Authority, forthcoming new guidance from the Law Society and lenders, property lawyers will soon be required to report on risks posed by climate change.
“This is why we have developed ClimateIndex. It portrays data clearly and concisely, making it simple for property lawyers to advise clients on property transactions and allow people to make better decisions.”
He said that ClimateIndex was provided at no extra cost in its key residential and commercial searches and should ensure lawyers are climate compliance-ready.
“It is the first inclusive climate data that has been added to conveyancing search reports to meet future compliance requirements,” Montaganami added.
Recognise Bank completes £8.7m capital raise
So far, COLG has raised almost £65m in investment for the bank.
The capital will be used to support business lending and create a new team with an aim to build on the bank’s digital capabilities. This will include the development of new products and revenue streams.
The latest investment comes from two of COLG’s existing shareholders, PV27, the family office of real estate entrepreneur and digital pioneer, Ruth Parasol, and Max Barney Investment Limited (MBIL), the London based property firm. PV27 and MBIL exercised warrants received during the last fund raise in August 2021.
Recognise Bank recently reached £100m in lending, six months after receiving its full banking licence from the Prudential Regulatory Authority.
Bryce Glover (pictured), chief executive of Recognise Bank, said: “To receive this fresh investment from two of our keystone shareholders shows their continued support for Recognise Bank and commitment to our strategy and vision. Investing in our digital capabilities will help us build a world-class business bank, for today and the future.”
Phil Jenks, chairman of the City of London Group, added: “We have consistently delivered on time and in line with our strategy to create a new bank for Britain’s growing businesses, firms that are the lifeblood of our economy, but are consistently ignored and let down by the mainstream banks.
“The latest investment from Ruth Parasol and Max Barney is an important moment for Recognise, because it means the bank can build on a foundation of £100m in lending and £95m in savings deposits to push its digital capability even further and create a bank that perfectly blends speed, service and innovation.”
Vida broadens self-employed and contractors’ criteria
Self-employed contractors can borrow up to 48 times their weekly rate, which is up from 46 times their weekly rate previously.
The lender said it will also consider contractors with a minimum track record of one year’s employment within the same line of work, half it’s previous minimum.
Contractors can also apply for a mortgage if they have three months left on their contract, compared to before, when borrowers had to have six months remaining on a current contract or a three month rolling contract that has been renewed at least once to be eligible.
Richard Tugwell (pictured), director of mortgage distribution at Vida, said: “We are determined to provide attractive, accessible products that support contractors and the wider self-employed market, who have been cut out of traditional high-street lending.
“We continue to see strong demand from our intermediary partners and want to continue growing our lending and offering a great service to brokers and customers”
Vida has had a very busy first quarter after updating its offering, increasing its procuration fees and tripling its product range to around 270 products in January.
The lender also brought out a key worker product and released limited edition residential and buy-to-let products.
It also created a specialist relationship team to offer a more “focused approach” to produce better broker and customer supports whose needs were more complex.
The lender is also working on its banking licence applications and is targeting £1bn plus of mortgage lending this year, which is roughly double the amount it lent in 2021.
Masthaven Bank to withdraw from UK banking market
In an announcement on its website, the bank said that as part of its withdrawal plans it will “reduce and ultimately sell” its long-term and short-term loan books and return its savings deposits to customers.
It reassured customers that it was “well-funded” and had “sufficient capital and liquidity” to repay customers by the end of 2023 or before customers’ contractual maturity dates.
Masthaven was launched in 2004 as a non-bank lender, specialising primarily in bridging loans and secured lending.
The firm went on to secure its banking licence in 2016, launching first charge mortgages in 2017 then business savings and buy-to-let products in 2018.
The bank currently offers personal savings, business savings, first and second charge mortgages, buy-to-let, bridging finance and development finance.
Leigh Bartlett (pictured), who was appointed chief executive of Masthaven Bank in 2020, said a “comprehensive strategic review” of the business had been conducted with advisers to see how it would achieve its growth ambitions.
He said: “We assessed a range of options, but all of them required a significant commitment of long-term capital and we have not been able to secure the level of investment necessary to grow the bank while serving our customers efficiently and effectively.
“I’m very proud of what the team has achieved in what is a very competitive UK banking market and I recognise this news will come as a shock and disappointment to colleagues, customers, intermediaries, and others. We will do everything we can to answer their questions and address their concerns over the coming weeks.”
He added: “I must stress that this was a strategic decision, and we are working to a detailed plan which will be implemented carefully over the next two years.”
Masthaven is working with the Prudential Regulation Authority and Financial Conduct Authority on its two-year process.
Barclays CEO Staley steps down amid FCA Epstein investigation
The FCA (Financial Conduct Authority) and the PRA (Prudential Regulatory Authority) continue their investigation into Barclays’ statement characterising Staley’s relationship with Epstein.
The statement said it should be noted that the investigation makes no findings that Staley (pictured) saw, or was aware of, any of Epstein’s alleged crimes, which was the central question underpinning Barclays’ support for Staley following the arrest of Epstein in the summer of 2019.
The Board stated its disappointment, adding that Staley has run the bank successfully since December 2015, clarified the group strategy, transformed its operations and materially improved its results.
Barclays said: “The regulatory process still has to run its full course and it is not appropriate for Barclays to comment further on the preliminary conclusions.”
With effect from 1 November 2021, C.S. Venkatakrishnan (known as Venkat) will take over as group chief executive, subject to regulatory approval, and as a director of Barclays.
Prior to his appointment as group chief executive, Venkat served as head of global markets and co-president of Barclays from October 2020 and group chief risk officer from 2016 to 2020.
Before joining Barclays in 2016, he worked at JP Morgan Chase from 1994, holding senior roles in asset management including chief investment officer in global fixed income. He also held senior roles in investment banking, and in risk.
Venkat will receive fixed pay of £2.7m, delivered 50 per cent in cash paid monthly and 50 per cent delivered in Barclays shares as part of his remuneration package.
Staley is entitled to 12 months’ notice from Barclays so continues to receive his current fixed pay of £2.4m per annum delivered in cash and Barclays shares, a pension allowance of £120,000 per annum and other benefits until 31 October 2022 alongside eligibility to repatriation costs to the US.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown said: “The repercussions from the Jeffrey Epstein scandal stretch far and wide, and now Barclays finds itself at the centre of the storm. For the chief executive, Jes Staley, to step down following an investigation by city regulators into his dealings with Epstein, it’s clear the conclusions of the probe are critical. While the probe did not centre on Mr Staley’s role at Barclays but what he disclosed about his previous position at JP Morgan, what was under question was how he characterised his former relationship with the disgraced financier.
“Although detail is limited, it appears regulators believe there was a distinct lack of transparency over this relationship. It’s understood Staley will contest the conclusions, and clearly the board want to distance Barclays from what could be a long drawn out process.”
Barclays shares fell three per cent in early trading.
In May 2018, the FCA and PRA hit Staley with a £642,430 fine – or a tenth of his salary – for failings relating to a whistleblower at the bank.
Staley tried to uncover the identity of a whistleblower at the bank following an anonymous letter to Barclays in 2016 from someone who claimed to be a shareholder.
The letter contained various allegations, some of which concerned Staley. The regulators said that given his conflict Staley should have maintained distance and consulted with teams within Barclays with responsibility for whistleblowing, but he failed to do this.
The FCA and PRA added that he had not acted with due skill, care and diligence in his response.
Recognise Bank raises £14m in capital raise ‘major milestone’
The lender, which received its banking licence in November last year, is currently not authorised to take deposits but by meeting capital requirements it can apply for approval to launch savings products for personal and business customers.
According to Recognise Bank, it plans to offer savings accounts to personal customers in the coming weeks, then business customers later this year and personal savers in the next five years.
The capital raise includes an additional £10m investment by existing shareholder Ruth Parasol, who is real estate investor and entrepreneur Ruth Parasol.
She said: “Recognise is the right bank, with the right team, to change SME business banking in the UK. Recognise combines personal service with the cutting-edge digital banking technology to increase speed and service to its customers. As a fully authorised bank, Recognise will be able to offer a much wider range of services to business and personal customers.”
Jason Oakley (pictured), chief executive officer of Recognise Bank, said: “This is a major milestone in our journey to create Recognise Bank and change the complexion of SME banking in the UK.
“We set out on a mission to help the UK’s growing small and medium sized businesses, who need expert support more now than ever before. This successful capital raise is proof that we are on the right trajectory.”
The bank currently offers commercial mortgages, bridging loans, working capital loans and professional practice loans for architects and solicitors, as well as the medical and healthcare sectors. It plans to launch buy to let loans in the near future.
Since it opened its doors last year, it has received £750m in lending enquiries and is targeting £1.3bn in lending to more than 5,000 SME borrowers over the next five years.
TSB adjusts raft of resi and BTL mortgage rates
Effective 23 August, the bank made reductions to other mortgages including reductions of up to 0.05 per cent on selected five-year fixed house purchase at 75-85 per cent LTV rates and five-year fixed remortgages at 60-80 per cent LTV.
It also made reductions of up to 0.25 per cent on rates on selected buy-to-let fixed and tracker remortgages of up to 75 per cent LTV.
Nick Smith, TSB’s head of mortgages, said: “We’ve made a number of changes to our mortgage range with the sole purpose of helping more people borrow well, our changes are aimed at helping landlords as well as homeowners with both small and large deposits.”
Since the beginning of this year, Moneyfacts analysis has shown that the strongest rate competition appeared to take place at the maximum 95 per cent LTV market. As a result, the two-year average fixed rate at this tier was driven down from 3.46 per cent on 1 January to 3.24 per cent by 16 May, where it has remained relatively unchanged since.
Darren Cook, financial expert at Moneyfacts, said: “I can confirm that there has been little activity at high LTVs.
“What may be happening in this instance is that competition at high LTVs was strong, lenders were clearly cutting risk margins to compete, the PRA showed some concern in May, now lenders may be looking at recovering these risk margins that they previously sacrificed.”
In May, the PRA said it had a “a very sceptical eye” on mortgage lenders and their strategies for managing lending risk exposure. The price wars in the market had resulted in lenders “risking up”, evident in the increase in higher loan-to-value and loan-to-income lending.
Sam Woods, Bank of England deputy governor for prudential regulation and chief executive of the PRA, said at the time that although the shifts may be “well within firms’ management capabilities”, the regulatory body would be watching the sector “like a hawk”.
Serious failings uncovered in FSA oversight of Co-op Bank’s near collapse
The review, conducted by Mark Zelmer, warned that although improvements had been made there was still further work to do and made a series of recommendations for regulators to improve their oversight.
Zelmer added that the Bank of England (BoE) and Prudential Regulation Authority (PRA) should not let their regulatory focus slip in any prolonged periods of financial calm.
He also noted that there was a risk that Open Banking could lead to more runs on banks and building societies, particularly smaller institutions.
Missed chances to intervene
Zelmer’s review examined how regulators oversaw the Co-op Bank between 2008 and 2013, during which it neared collapse.
Regarding the Co-op Bank case, Zelmer found the FSA missed several chances to examine the bank in greater detail, particularly around its purchase of the beleaguered Britannia Building Society.
However, he also noted that the FSA acted reasonably in not intervening to halt the bid and acknowledged the unprecedented situation at that time in the UK financial system, and that it would be unreasonable to have begun stress tests sooner.
Key findings of the report included:
- FSA’s stress tests were appropriate and conducted early enough;
- FSA did not interrogate Co-op Bank’s due diligence of the merger with Britannia Building Society in enough detail;
- FSA should have reviewed performance of Co-op Bank’s loan book sooner;
- FSA did not pay enough attention to the refinancing risk of Co-op Bank’s loan book;
- FSA approved the merger despite balance sheet issues;
- FSA supervisors did not check the impact of Co-op Bank’s substantial IT expenditure;
- FSA acted reasonably in not intervening to halt the bid.
Regulation reform recommendations
Zelmer also assessed how the regulatory environment has changed since then and if it was well prepared for further shocks.
As a result eight recommendations were made on how the regulatory environment needed to be amended.
Zelmer signed off the report by highlighting the risk of letting prudential supervision slip away if there was a period of longer-term financial stability.
“I conclude by noting that if the UK experiences a protracted benign economic environment in the future, there is a risk that prudential oversight could fade into the background at the BoE and receive commensurately less executive attention and resources in an institution where the culture is heavily skewed in favour of macroeconomics,” he said.
“The PRA and the BoE may wish to consider how they can best guard against this risk in the future.”
The eight recommendations are:
- The PRA and the BoE should continue to evolve their stress test exercises so that they encompass a broad range of risks to which banks are exposed, and consider how best to incorporate the inherent uncertainty that would prevail as a stress scenario unfolds in real life.
- The PRA and BoE should continue to study how best to use the new resolution tools in systemic situations.
- The PRA should consider how best to balance its objective of promoting the safety and soundness of PRA-authorised firms, with its particular focus on the harm that firms can cause to financial stability, against the interests of individual classes of depositors or creditors that may end up being adversely affected or exposed to more risk in response to the actions of the authorities.
- The PRA and BoE are encouraged to take advantage of the new information on asset encumbrances and consider whether there should be some formal or informal constraints on the extent to which banks and other deposit-taking institutions can encumber their assets in normal circumstances and how best to factor encumbrances into the recovery and resolution plans for these institutions.
- PRA supervisors would benefit from more detailed internal guidance on how to assess the risks to which regulated financial institutions are exposed and the associated mitigants, as well as on how to assess significant transactions of those institutions.
- The Prudential Regulation Committee and the executive management of the PRA should continue to play a leading role in ensuring that supervisory strategies for individual firms proactively take account of emerging regulatory developments.
- The PRA should continue to pay close attention to any attempts by banks to circumvent regulatory and supervisory requirements and focus on the economic substance of transactions, not their accounting treatment or how they are funded.
- The PRA should consider introducing more formal third-party reviews of key prudential information supplied by banking groups through their regulatory data returns.
The Bank of England and PRA published a joint response to the report, which included substantial replies to all eight recommendations.
FCA chairman Charles Randell said: “The PRA and the bank welcome the report, which acknowledges the significant changes to prudential regulation that have taken place since the financial crisis, and notes the very challenging environment in which the FSA operated during this time,” they said.
“The PRA has started working on the recommendations, and will provide published updates.”
Bank of England softens funding stance for ‘no negative equity’ lifetime mortgage guarantees
The bank’s Prudential Regulation Authority (PRA) said it was generally standing by new requirements first laid out in July for equity release providers to change how they assess liabilities related to house price growth.
However, the regulator has softened its stance over some of the capital requirements for insurers.
It means some lenders will not be required to hold as much capital as initially feared.
Just Group said the “regime envisaged is considerably less onerous” than first set out, but added the requirements are still “very prudent”.
The rules are set to take effect in December 2019, also giving insurers more time to prepare than initially proposed.
Core proposals unchanged
Equity release mortgage redemption payments are ultimately funded by the sale of property, and firms therefore remain exposed to the risk that house price growth above the risk-free rate does not materialise, David Rule the PRA’s executive director, insurance supervision warned in a letter to a letter to chief executives.
He said: “While we have made some changes based on consultation responses, the core of our proposals is unchanged.
“We will use our Effective Value Test [EVT] as a diagnostic tool to ensure compliance with Solvency II requirements relating to the calculation of the matching adjustment benefit where liabilities are matched by restructured equity release mortgages, recognising in particular the risks arising from the no negative equity guarantee feature.”
In response, Rodney Cook, group chief executive of Just Group, said: “We welcome the greater clarity provided by the policy statement, and the PRA’s recognition of the important role played by equity release mortgages for our customers as they plan their retirement finances.
“The regime envisaged is considerably less onerous for Just than set out in the consultation, particularly in respect of pre-Solvency II business, and the outcome is well within the range of what we have been planning for.
“However, even at the 13%/1% parameters confirmed today, we view the EVT as very prudent, as for JRL2 it is equivalent to holding capital and technical provisions sufficient for the price of every house in the portfolio to fall immediately by over 35% and then remain there indefinitely.”
David Burrowes, chairman of the Equity Release Council, added: “Equity release is a prudent and highly regulated area of financial services to ensure market stability and good customer outcomes.
“Having fed into the PRA’s consultation process, we welcome the revisions included in today’s policy statement in addition to the extra time provided to implement its proposals.
“We will seek to work closely with the regulator ahead of 31 December 2019 to ensure that implementation supports this socially important product.”
PRA delays equity release solvency rules by a year
Its consultation, which was published in early July, closed on 30 September and set out further detail on the expectations for firms investing in equity release mortgage portfolios.
The PRA initially proposed implementing the new rules at the end of this year.
However, in response to the consultation feedback it has pushed this back to 31 December 2019.
In a statement, the PRA said: “The proposed implementation date for the proposals in the CP was Monday 31 December 2018. Based on feedback to the consultation, the PRA has decided that the implementation date will not be before 31 December 2019.
“The PRA is making this announcement now in order to clarify the position for insurers planning their year-end 2018 processes.
“The PRA is currently giving careful consideration to the consultation responses and the impact, if any, of the updated implementation date to the proposed phase-in period. The PRA will publish final policy and supervisory statements in due course,” it added.
The new requirements will change how equity release providers assess their liabilities which could require lenders to hold more capital to cover their lending.
Some lenders had warned that the changes could affect their profit levels and so the year delay is likely to be welcomed by the industry.