City vs government in Russian freeze to seize debate

SNEAK PEEK

— U.K. government scared of seizing Russian assets, MP says.

— Treasury talks tough on fraud with new rules for banks.

— City minister summons banks to chat growth.

Good morning readers! 

Absolute ripper of a newsletter today, if we do say so ourselves. Read on to get the latest on why an influential MP thinks the government is wavering on seizing Russian assets. Elsewhere, Martin Lewis’ car loan redress portal goes gangbusters, and MFS U.K. has all the details of the City minister’s meeting with banks later this week. 

There’s plenty more, so get stuck in. 

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DRIVING THE DAY

MARGARET HODGE TALKS FREEZE TO SEIZE: MFS U.K. spoke to Labour MP Margaret Hodge, who says that the British government should seize frozen Russian assets to help the reconstruction of Ukraine. Yet she believes the reason for the lack of action is the government’s fear of the consequences. 

City pressure: Few countries are quite as reliant on their financial services sector as Britain — and Hodge reckons that the government is scared of angering the City by seizing assets. “It’s the City of London, who says nobody will trust the U.K. banking system, and they’ll stop banking in the U.K. if we start saying they’ll seize your assets,” she says. 

Brexit: The economic mood in Britain is hardly joyful. And Hodge believes that lackluster economic growth and Brexit upheaval gives the City a strong hand in this fight: “Since Brexit, with the impact that’s had on the economy the government is reluctant to tackle the financial services sector.”

Big state bucks: There are both individual and state Russian assets in London that could be seized by the government. It’s the state-level assets where most gains could be made — but it’s also what she believes scares the City the most. “The Russian state assets are where the big money is,” says Hodge. “I think the financial services sector is putting huge pressure on the government not to act.”

But but but: Taking a stand against Russia would mean coming to terms with London’s rather sketchy reputation: “We’ve become such a center for attracting dirty money that losing it in the short term would damage the financial center,” says Hodge. 

Taking on the territories: Hodge also spoke about the efforts she’s led to tackle money-laundering, like ensuring there are public registers of beneficial ownership in the U.K.’s overseas territories and Crown dependencies, where dirty money is rife. The legislation was passed in 2018 but has yet to be implemented. “Given the role that our tax havens play in the world of economic crime, I think implementing that is sort of priority number one,” she says.

WHAT’S ON

House of Commons Treasury Committee: Oral evidence session with OBR on the 2024 budget, 10 a.m. 

House of Lords Economic Affairs Committee oral evidence session with Bim Afolami on how sustainable national debt is, 3 p.m.

Day two of U.K. government’s Global Fraud Summit, London.

Bank of England publishes Mortgage Lenders and Administrators Statistics for Q4 2023. 

Office for National Statistics publishes U.K. labour market figures for March 2024. 

**A message from Nationwide: Unlike the banks, Nationwide Building Society is owned by its members, not shareholders. That’s anyone who banks, saves or has a mortgage with us. Which means we can always focus on what’s best for them. It’s our fundamental difference and what makes us a good way to bank.**

FRAUD

TREASURY TACKLES FRAUD: City minister Bim Afolami will publish here at 10 a.m draft legislation aimed at tackling the scourge of authorized push payment fraud.

New rules: Under proposed legislation beginning Oct. 7, payment service providers — such as banks — will be given an extra 72 hours to contact customers, police, and other relevant parties when they have reasonable grounds to suspect fraud before they send a payment. The idea is that this will give banks a better chance of stopping money being sent to fraudsters, rather than the existing situation with instant transactions which sees the money lost forever.

Push payment problems: Authorized push payment fraud, which involves the fraudster deceiving the victim into sending funds, has been a massive problem for U.K. customers in recent years, with £485 million lost to these scams in 2022 alone — often due to online scams. The U.K.’s payments regulator has finalized rules putting banks on the hook for reimbursement, due to begin later this year (although they think tech firms should pay).

Banks pleased: Ben Donaldson, managing director of economic crime at UK Finance said: “UK Finance has long called for firms to be allowed to delay payments in high-risk cases where fraud is suspected, and we are delighted to see draft legislation supporting this. This could allow payment service providers time to get in touch with customers and give them the advice and support they need to avoid being coerced by the criminals who want to steal their money. This could potentially limit the psychological harms that these awful crimes can cause and stop money getting into the hands of criminals.”

Recap: It comes after the U.K. and allies pledged yesterday to work together to fight online fraud at the first day of the government’s Global Fraud Summit. Read more here.

DIGITAL CURRENCY

FCA UPDATES ITS POSITION ON CRYPTOASSETS: The FCA “will not object” to professional investors accessing cryptoasset exchange-traded notes (ETNs) via recognized investment exchanges, the regulator said yesterday — as Bitcoin hit an all-time high of $72,000. It’s a reasonably big step for crypto, but a ban on the sale to retail investors remains.

It’s official: The London Stock Exchange announced shortly afterwards that it would accept ETNs backed by Bitcoin and Etherum. 

Left wanting more: For some in the crypto industry, the changes aren’t enough. For the most devoted believers, cryptocurrencies are a way to democratize the global financial system, by ensuring the movement of money is not entirely controlled by a few giant financial institutions. Leaving out the little retail investor isn’t part of their grand plan. 

CryptoUK said: “Whilst we fully support a robust suite of investor protections, we want to highlight concerns around whether these bans are proportionate and in line with policy for similar investments that do not involve cryptoassets. Today’s announcement marks an important milestone in the UK government’s vision to become a ‘global hub for cryptoasset technologies’ that supports a variety of innovations, including blockchain and distributed ledger technology.”

WELL TIMED: Yesterday, representatives from the industry met cross-party MPs in Parliament to discuss the regulatory framework and how to make the U.K. a global cryptoasset hub. The meeting was hosted by the Crypto and Digital Assets all-party parliamentary group (APPG), with industry body CryptoUK (which sponsors the APPG) in attendance. It included representatives from several law firms, including Clifford Chance, Simmons & Simmons, and Taylor Wessing, plus firms like Gemini, Moonpay and Bitcoin Policy UK.

BRITCOIN MEMBERS WANTED: MFS U.K. has seen an email from the head of the Central Bank Digital Currencies APPG, Andrew Henderson, encouraging non-parliamentary members to write to their MPs and ask them to join. 

Keeping control: New rules will come into force on April 1 which change how APPGs are run. The CBDC APPG (heavy on the acronyms here) needs more MPs to keep operating. 

A helping hand: Henderson was kind enough to draft an email for members to send to their MP. It included the lines “As a constituent I work in this sector and it is therefore important to me” and “[CBDCs have] the potential to change the UK both digitally and financially by creating opportunities for new services and products which only a CBDC can support.”

BANKS

BUSY BIM: The City minister has been busy lately, and that trend continues this week. MFS U.K. understands Bim Afolami will meet leaders of some smaller banks at some stage this week to chat about ways to unlock the potential of lenders to boost economic growth.

Guest list: This newsletter has heard that Metro Bank CEO Daniel Frumkin is invited, as is John Mountain, the interim CEO of Starling, and Monzo boss TS Anil. 

BANK BACKLASH: Martin Lewis, consumer champion and founder of MoneySavingExpert, yesterday revealed that his company’s car finance reclaim tool has so far received 1.8 million complaint letters against lenders: over 30,000 a day since it was launched on Feb. 6. MSE said the most complained about lenders so far are Black Horse (owned by Lloyds Banking Group, which has already set aside £450 million in case of redress), Volkswagen Financial Services and Stellantis Financial Services. 

Regulatory probe: The FCA announced in January that it is investigating the car loans market to see if commission payments to brokers were too high. Analysts expect the entire financial sector’s total compensation bill for the loans could hit £16 billion, making it the costliest consumer banking scandal since the payment protection insurance fallout in the noughties and 2010s — which resulted in over £38.3 billion in redress to consumers.

INSURANCE

WELL OIL BE DAMNED: Ministers have no plans to close loopholes allowing U.K. insurers to protect shipments of Russian oil (some of which is sold over a price cap agreed with international allies), the government told our colleagues at Playbook PM. A government spokesperson said: “The oil price cap is designed to allow G7+ insurers to remain in the market. It maintains global energy security and flows of affordable oil to countries that need it, while bearing down on Putin’s most lucrative revenue stream and constraining funds for his illegal war.”

Not impressed: “It is shocking and frustrating to see the British government stubbornly refusing to close the loopholes that allow Russia to evade oil sanctions,” MP Margaret Hodge told our colleagues. “By failing to enforce sanctions effectively we are allowing a pipeline of money to reach Russia that is then used to prolong and intensify the outrageous attack on Ukraine.”

TRADE

GUILDHALL GOOD TIMES: On Monday morning the Treasury welcomed the Swiss ambassador to the U.K., and a few dozen City figures and MPs to a brief summit in the Livery Hall to discuss the recently signed Berne Financial Services Agreement between the U.K. and Switzerland. 

Who was there: City minister Bim Afolami, Swiss ambassador to the U.K. Markus Leitner, Chair of TheCityUK Swiss Market Advisory Group Joe Cassidy, Clifford Chance’s Caroline Dawson, UK Finance’s Sarah Boon and the Treasury’s director of financial services, Richard Knox. Also seen in the wild was Labour’s Sir Stephen Timms, who is the government’s trade envoy to Liechtenstein and Switzerland.

Good vibes only: Knox told attendees that the U.K. is open to signing similar cross-border financial services agreements with other countries. But … he warned that as the treaty needs to go through various parliamentary processes to be ratified, we shouldn’t expect to see it implemented by the end of next year “at least”. 

What Knox said: “Regulators on both sides need to be on board … We think this is a really good step forward, and are open to having conversations [about an agreement] with other jurisdictions. The question is, how many other dancing partners are there around the world who fulfill the requirements?”

ECONOMY

BUDGET REVIEW: The Treasury Committee is having one of those weeks again, and will probe OBR chair Richard Hughes and members of the budget responsibility committee this morning almost a week on from the spending watchdog’s spring budget forecasts. MPs will also gather the views of leading economists later in the day.

The big one is on Wednesday afternoon … when Chancellor Jeremy Hunt sits down for a few hours of grilling from the group of cross-bench MPs. The committee’s scrutiny is likely to focus on the spring budget’s impact on businesses and households across the U.K., with inflation, taxes and economic growth likely to be hot topics. 

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INVESTING

HOMELESSNESS FUNDS: An “innovative” new funding approach could help those facing homelessness and save the government millions, according to research published today by Big Society Capital. The research focuses on “homelessness property funds,” which work by attracting capital from institutional investors like pension funds to purchase properties, refurbish them, and lease them to homelessness charities and housing associations. In the last ten years, five funds using this approach have housed 3,300 people and saved the government £140 million on temporary accommodation, healthcare, mental health and criminal justice services.

WHAT WE’RE READING

Air fryers and vinyl music in, sofa beds and rotisserie chicken out: the new inflation basket, in the BBC.

French banker can’t keep €4.5 million payout because of smaller U.K. award, reports Bloomberg. 

UK accounting watchdog in talks to leave City of London, writes the Financial Times.

Thanks to: Fiona Maxwell and Izabella Kaminska.

**A message from Nationwide: Fraud is the most prevalent crime in the UK, costing victims £12.8 billion in 2021-22, and more needs to be done to protect consumers from fraud and scams. Nationwide is calling for the creation of a central “hub” that brings together multiple industries – from big tech and social media to telecoms and financial services – alongside government and law enforcement to share data and collaborate to tackle fraud. We believe there should a cross-industry solution, with liability for costs of reimbursement sitting across all organisations in the “fraud chain” including social media platforms. Find out more.**