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B of E has said that mortgage approvals for house purchase fell in September, from August, with the biggest drop since July 2013. A tougher leverage ratio is anticipated in specifying the minimum amount of core capital a bank must hold as a proportion of is total assets, regardless of how risky or safe a lending policy may be, as part of the Basel 111 reforms. The ratio is set at a provisional 3% but there is an expectation, for some, of between 4% and 5%. There is an argument from some Building Societies that their balance sheets, whilst large, are made of low risk home loans; a high leverage ratio is unfair.

Although no UK banks failed the EBA tests, the upcoming Bank of England tests (results due 16 December) may prove differently with their focus on the UK economy.

Change in Gross Domestic Product (GDP) being  the main indicator of economic growth showed an increase of 0.7% in Q3 2014 compared with growth of 0.9% in Q2 2014, with output increasing in all four main industrial groupings ; services, production, construction and agriculture. The next estimate is due 26 November.

Sweden has cut its interest rates to zero, stating that inflation is too low. Meanwhile, back at the ranch, one of the Bank of England’s policymakers has said interest rates should increase for the UK, in order that it’s kept ‘gradual and limited’.  MPC minutes show members voted 7-2 to hold interest rate at 0.5%

Quantitative Easing (QE) has left the room  of the US Federal Reserve; there will be no more purchasing of bonds, as happened after 2008. Closer to home, Europes’ bank stress tests  gave, in effect, ‘nil points’ to 25 of their banks. The ECB hasn’t fully implemented QE however, with persistently low inflation; there is some chatter amongst the chattering classes of action that encroaches into the area of QE.  Introduced in the UK in 2009, the B of E purchased £375bn Government bonds up to 2012.

The DCLG (Department for Communities and Local Government) has amended Planning Practice Guidance  for councils on identifying appropriate land to meet development needs.  A question put forward (not in isolation) is `Do housing and economic needs override constraints on the use of land, such as green belt’?  The changes from the Right to Build plan mean that, for those wanting to build their own home, the council should be able to help in identifying a suitable plot.

Image and Article credit: Copyright SUF © 2014

It’s anticipated that sometime during October the Government-run British Business Bank will unveil its first deal with a lender.  The scheme offers to share the risk of certain losses on a portfolio of new loans made to small and medium-size businesses. In effect the smaller banks (i.e. challenger banks) could be enabled to lend more ‘easily’.  Over to you, lenders.

If you’ve seen anyone hawking tax disc holders cheaply it’s because the paper tax disc is no more. As from October 1 cameras will be relied upon to detect number plates and DVLA will rely on digital records.  Unless people turn to displaying their nearest and dearest on their windscreens, the space can be officially cleared   as part of the DVLA’s promise to be more efficient for the motor trade and  ‘a better digital platform enabling more self-service’.  Over to you Motor Traders.

The Financial Policy Committee will be publishing it’s response to the Chancellor’s request of advice, on any new Direction powers to guard against risk in the housing market, and it’s annual review of the Help to Buy Mortgage Scheme. Over to you BoE.

New rules for Lettings Agents, who from this month, must be a member of one of three government approved re-dress schemes, similar to the Ombudsman. Members can be expelled for misconduct and compensation awards made to victims as part of the consumer protection measures. Over to you Landlords.

Changes to stamp duty and land tax relating to valid Local Authority codes mean that paper returns with a non-valid code will be rejected. Over to you Solicitors.

Sobriety is being encouraged with a sobering October of no hangovers. Go Sober for October the charity initiative given to this month, along with Stoptober (no smoking). Over to you willpower.

Image and Article credit: Copyright SUF © 2014

Bank Rejects’ Offer

 

When does the one syllable, four-letter words into minute-long sentences, yelled out in single syllable breaths monster surface?

Think about the last time you were on the receiving end of rejection.Finger

Did the ‘it’s- not- fair!’ Monster surface when you were reminded that the world’s not fair, and this time, it’s not fair in your favour?

Deserved and fair or undeserved and unfair, it’s an uncomfortable place to be, with an uncomfortable word placed hanging in the air: Reject.  A powerful word with disrespectful connotations that’s used in high places and, the considered term for those whose bank loan application is turned away: the rejects.  However, any bank rejects may feel slightly more comfortable about their tag when they hear about the proposed forcing for some banks to close the Billy-No-Mates zone and offer their cast-offs to other lenders.

Can you go forcing something if it’s just not right?

Mothership
Apparently ‘tis so, the plans have been confirmed. The Treasury is drawing up their strategy in preparation for legislation and announcements during the Autumn (sometime when leaves are on the line, hay fever has turned to flu, blankets are being brought out because there’s a reluctance to put the heating on, and an Autumn Statement is due).

I can’t even begin to guess how many business groups and trade associations are linked with recent business statistics that show there are 4.9 million UK businesses, of which 4.7 million are categorised with micro status and  (though some are incorporated for deposits) there are somewhere in the region of 181 ‘banks’ (not including Building Societies) listed as active in the UK by the Bank of England. From amongst all those glorious numbers there were a magnificent ‘over 45 responses’ (I’m not certain whether ‘over’ means 46 or whether somebody decided 45 was enough before it was time to put the kettle on) rallying to the call from the consultation, to answer questions on  ‘help to match SMEs rejected for finance with alternative lenders’. WatchOut2

Sounding remarkably similar to the processing of victims in stocks (although it’s an image that might work for some, that would be the wooden pillory variety not the trading type) the proposed linking to ‘alternative lending opportunities’ suggests, for the mandatory process, ‘SME’s will be forwarded on to platforms’, whenceforth by their visibility, be sped to open market (I added that bit).  Similar to how some banks already operate (i.e. Santander and Funding Circle), ‘rejects’ will be asked if their details can be shared on Government designated private sector platforms for exposure to those who have an interest in staking their claim for a lending opportunity.

It wouldn’t surprise me if the mandate wants a `Guide for the Innocent’ creating which would be placed at various points of the youthful open spaces that have replaced privacy discussion areas in banks; no applicant will be left unturned and no applicant will be deemed capable of understanding why (notwithstanding unfavourable times) their business might be viewed by a particular lender as unfavourable. The leaflet’s headings likely something along the lines of How to improve your Chances for a Successful Application, Prepare your Business Plan, Know your Numbers, to a final If Your Application Fails. Then, more Disney than Dragon a simple statement ‘don’t worry, somebody will want you – ubiquitous smiley face’. 

Smiley
Finishing with:  If Your Application Fails:  OK, expect to see the taxi with no brakes waiting, not certain how much fuel will be in the tank. Destination? How should we know?  We want to close the door ASAP, you’re an unwanted guest. No guarantees but, if you’re lucky someone will pick you up, to cosy up over the spreadsheets, won’t (but maybe should) happen.

Despite HM Queen Elizabeth II stating (4 June 2014) ‘The Bill (Enterprise and Employment Bill 2014-2015) will support small businesses by cutting bureaucracy and enabling them to access finance” I humbly ask (not wishing to spend any time in those stocks), am I alone in an ever sceptical viewpoint?

Any bank, with new goals of bigger fish, being forced to share data with other parties about an applicant they deem a reject will definitely cut bureaucracy. But, (and this is the big but, possibly with a double T) to manage a referral system that treats all applicants equally, that is mindful of them falling down open gaps left over from perceptions of ‘non-quality’ custom, that ensures the Guide for the Innocent has all the lines in between read, that clears the applicant’s path of stumbling blocks to avoid a missed opportunity, means managing the difference of enabling them to access finance and enabling finance to access them.

Businesses (and not forgetting that lenders are businesses) are exposed to all manner of risk; market, operational, financial, consumer and pure liabilities; all contributing to continual and continued exposure.

Some businesses will manage to hide from some risks, some are on a hiding to nothing; the risk is, what do you expose and what do you reject?

 Image and Article credits: Copyright SUF © 2014

Some statistics  and studies for September – Make of them what you will…..

56% of a recent Future of England Survey felt public spending in Scotland should be reduced and 66% think Scottish MPs should be prevented from voting on English laws if it decides to remain part of the Union after the Scottish Independence Referendum.

Giving a balance of plus 25, a CBI Survey shows retailers optimistic about sales, with more shop owners with expectations of sales rising over the next three months than expectations of sales falling. The highest figure since May 2002, sales have grown at their fastest pace in six months.

London owes the highest amount in mortgages according to The Royal Mail Postcode 40th Anniversary study. The Royal Mail’s online Postcode Finder is one of the UK’s most used webpages with around 100,000 visits a day – more than 40 million a year.  There are 3,000 postcode districts in the UK. The postcode HD7 5UZ in Huddersfield, West Yorkshire, covers seven streets, more than any other in the UK and Westfield Shopping Centre in Stratford, East London, is so big it has its own postcode, E20, which was previously the fictional location for BBC soap EastEnders.

14% of the 993 of Europe’s largest public companies Accounts showed improved days working capital (DWC) for three consecutive years, shows the European Working Capital Survey.  Businesses are benefiting from an increased focus on working capital but sustaining working capital remains a major challenge.

The results of a study in Australia  (the first country to standardise packaging for cigarettes) suggests there  is ‘no evidence’  behind many of the “fears” proposed by opponents of standardised ‘plain’ packaging of cigarettes and that no evidence was found of small retailers being hurt by the change.

House prices average is now £189,306  according to Nationwide, with a +11% comparable to August rise. Property values were +0.8%, a sixteenth monthly increase and Land Registry figures suggest price increased by +1.7% in July, the biggest monthly upswing in five years, with Merthyr Tydfil beating London as the area with the strongest house price growth at local authority level.

Image and Article credit: Copyright SUF © 2014

Know Anywhere I Can Get It Cheaper?

 

Hello – My name is Mike and I’m an addict.

 

I realised I had an addiction when I’d reached for something stronger than face-palm.

And as it seems, rarely does a week go by when I remain ‘sober’, and my head doesn’t take and involuntary rest on the desk because someone always swings by to tell me they’ve done the maths, know the numbers and all they now need to know is…. ‘can it be done cheaper?’

That’s my relapse cue for some surface impact, now being achieved through the namely Headdesk (known to some as BHOD – Bang Head On Desk), an extreme form, which for those who partake be warned – taken too swiftly can almost knock you out.

The root cause for my habit comes from back in the day and some novice landlords: there is no rationale where there is no experience, therefore I shouldn’t have allowed this to be be sufficient reason to start using facepalm and, had I managed to find some form of alert to those coming to me with bad habits, I might not have compromised myself by moving on to double facepalm.DoubleFacePalm

I admit that my drug of choice is a crutch. It gets me through when I’m dealing with  those who don’t want me sharing my impartial knowledge, offering honest feedback or benefit from my working world’s experience. But, although it’s a dependency spurred by people following their own bad habits, doing things they might not want to do but not knowing how (or wanting) to let go, it’s not a vicious habit and only happens when I witness opportunity, strategy and long term thinking being sidelined. For example, when I’m presented with a cost-saving notion because it’s a snapshot to a quick fix or deemed the cheapest option, I take my own quick fix; which doesn’t impair my work performance, and hasn’t caused any short term damage (not certain about the long term!). Except that, now, because I’ve turned to Headdesk, with its giveaway thump, I realise my downfall might be around the corner,  “Hey Mike, is that the sound of you wracking your brain because you didn’t know this already?”

When we want to find the cheapest option and the easiest route, our expectations deflect away from wearisome bureaucracy and finding gateways, it appears easier to spend time with a comparison site. And, when I’m asked to confirm if something can or cannot be done cheaper, there is a bonus for these prospectors because I’m happy to confirm to them the comparison site is indeed a straightforward way of getting information. Comparatively, before any hard surfaces meet my forehead, I’d be focusing on features that mitigate costly blunders, the things which aren’t found on comparison sites and the things which by their very nature aren’t straightforward.  When I notice an equation is missing some numbers which can make a difference in yields, it’s not always received as helpful information: the response lever releases an exit where sheep are separated from goats.

“Those who mind don’t matter, and those who matter don’t mind” (Seuss)

These are confusing times, who to trust and who not to trust is difficult enough without involving one of the most emotive commodities: Money.

That’s the reason you’ll sometimes find me with my head deeply embedded in my desk!

BangHeadHere

Image credits:  Article credit: Copyright SUF © 2014

Difficult to think about December in August however, Saturday 6 December is Small Business Saturday, the celebration day of ‘shop local’ and use independent-owned businesses, an initiative that promotes at all levels the support of small firms and have started their 100 countdown.

Santander apparently had an issue with the ‘moral problem’  of the aptly named Circus Uncertainty (you couldn’t make this stuff up!) when they wanted to set up a business account.  It seems that burlesque-style outfits worn by the showgirls of the 40 strong troupe might have made the bosses backtrack (wonder if that was at risk assessment?), that the bank didn’t want to be associated with. But ‘committed to supporting the local business community’ (and some press coverage) the bank has now re-opened discussion with the circus owner.

Money’s still too tight to mention according to the BoE,  who began collecting data on loans to non-financial small businesses in 2011. Consequently,  there is to be a wide-ranging regulatory probe (their words not ours) into the UK banking sector that will focus on personal and business accounts.  Still with the BoE, new plans have been revealed for Bankers who break rules (following alleged Libor rate-fixing) to face potential bonus clawback, and the prospect of custodial sentencing as part of risk management and regulation. The next MPC meeting  to August 7 will see the next interest rate decision. New Deputy Governor Nemet Shafik, who will join the bank on 1 August, had said the bank was likely to revise down its estimate that spare capacity in the UK economy is equivalent to 1% to 1.5% of GDP in its August update – a sign that the time for a rate rise is moving closer.

The Tax Office is to go on strike because of backlogs, delays and apparently private debt collectors. Strikes will be spread across the country on different days.  Plans are also being introduced by HMRC for new Direct Debit recovery powers under which they will be able to deduct tax owed directly from the accounts of debtors (providing £5,000 remains across all accounts including ISA’s).

HSBC is closing accounts to some Muslim organisations with a reasoning given of the service provided would be outside the bank’s ‘risk appetite’.  The bank has said that it was ‘applying a programme of strategic assessment to all of its businesses’, following a fine over poor money-laundering controls.

With 25% of small businesses still not online, the UK’s largest domain registrar is on campervan tour around the UK to highlight the importance of having a digital presence.  Starting in July (Newcastle) and finishing in London (12 August), they’ll apparently be demystifying the online world.

Image and Article credit: Copyright SUF © 2014

 

 

Stuck in a Rut?

In the intervening years since I last viewed an end of year school report, things may have changed. Rarely containing a personal comment, they had to be scrutinised for hidden meanings to talk over on parent’s evening. Promises of trying harder were made for after the summer break… the fresh start of un-graffiti-riddled folders and un-bitten pen sets.

Similar to an end of year school report, commercial lending annual client reviews have content which rarely deviates too far from standard statements. Comment of the, could do better or has the ability but needs to focus ilk is made to those whose promises go unfulfilled, with the more usual fare being about fiscal sustainability and continued improvements, steady and measurable progress, operational effectiveness and manageable growth.

To sustain trying harder away from being an abstract concept, the follow through is measurement.  Numbers3

Capital, cash flow, credit, reserves, liquidity, surpluses and reorganisation are boring (for the most of us). It’s only when I get my teeth into a project that the structure of those elements take on a different shape, when their life-cycle comes alive, then I get interested. But, for the smaller business owner, when there’s little or no co-operation from the channels or instruments used for these elements, it can be very frustrating – and easy to see why focus disappears. There’s a trajectory to the great unknown which is daunting enough without increasingly hearing the latest in vogue F-word lavishly bandied about.

Distracted focus from a commercial liability can undermine its strength when the base-lines used to measure creditworthiness or business performance keep shifting.

Aversion, happening further up the food chain of global markets, acts to exacerbate the problem of financing for the smaller business owner. Limitations are trickling down in the real economy, at the same time as costs rising; disconcerting the independent business owner and disorienting general financial conditions. Even with positives to a business investment, even for the risk-averse and even in an F-for-Frugal environment, sustaining profitability can suffer from caution as businesses are being forced to operate differently.

Lending banks won’t deviate from their deposit base as they shore up their capital base. The UK inflationary pressures are low, with a likelihood of interest rate increases looming ever nearer.

CanaryWharf6
Banks, and other lending sources, are businesses – hugely complex businesses. They have a business plan or operating strategy (that includes a marketing presence). They’re run with strategic focus, which has strategic objectives and a perception of risk. They have lending profiles and use cost control. Targets seek returns and are derived from KPI’s (Key Performance Indicators), monitored by KRI’s (Key Risk Indicators) for losses (immediately and effectively).  They often have a mix of funds and borrowing, debt and equity to operate with. They use monitoring systems for their operating expenses and price margins. Sometimes mid-term reviews are implemented for corrective measures to their targets. They look to minimising their cost of capital and balance their own capital, borrowed funds or reserves and their internal management systems expect customers to operate similarly.

What happens when a businesses system doesn’t have those elements available or implemented?

The only difference between a Rut and a Grave…. is the depth.

Image credits: Sonny Abesamis and SUF   Article credit: Copyright SUF © 2014

 

 

 

 

 

 

The FPC (Financial Policy Committee) has proposed new rules for mortgage lenders which caps loan-to-income ratios and includes interest rate stress tests. Lenders will not be able to have more than 15% of new mortgages at loan-to-income above 4.5 times and it applies to all Help-to-Buy loans. Coming into force 1 October, the test ruling applies to the first 5 years of the loan and assesses the borrower being able to afford repayments, if their interest rate rose by 3% above the rate at origination. The stress tests are generally in line with those already implemented by major lenders as part of their affordability calculator and are part of policy measures being taken to limit the risk of house prices being detached from earnings. The restrictions cover owner-occupier loans however the FPC minutes  state ‘The FPC considered the need to monitor mortgage lending activity beyond the scope of the recommendation…This included close monitoring of the buy-to-let market….’

Payday lenders and other firms offering high cost, short-term credit will face new rules applied to rollovers, continuous payment authorities and risk warnings, from July 1. Such high-cost short-term lenders are restricted to two unsuccessful attempts to use CPA (Continuous Payment Authority) to take a repayment and can’t use CPA for part-payment. Similar rules are applied to loans repaid in instalments.

UK house prices increased by 1% in June (11.8% higher than June 2013), according to Nationwide Building Society; all regions showed annual price gains in the second quarter of the year. Their current figures state the average price for a home is £188,903, with price increases 14 months in a row.

According to a survey of 1,000 NLA members the average void period experienced by UK landlords has continued to fall and is down to 2.7 weeks, bringing it to 2012 levels. High tenant demand is credited to keeping the time a rental property is empty between tenancies. The survey was to find the top factors that landlords consider when getting ready to make a BTL purchase. Quelle Suprise!  Landlords prefer to invest in areas where they have local knowledge and understanding of market trends. Other factors were cited as strength of tenant demand in the chosen area, local rent levels, capital growth prospects, local transport connections and almost ¾ of the participants said they’d be looking near their own home.

The British Retail Consortium has published recommendations for the reform of business rates. Calculated on the rental value of properties in 2008 (before the recession) it is therefore thought not fair to businesses competing against online-only businesses. The recommendations include reducing the total amount of business rates and that they are shared more fairly between different industries, including incentives for energy efficiency.

The Market Purchasing Managers’ Index (PMI)  showed a score of 57.5, up from 57.0 in May. Any figure above 50 indicates growth in the industry and the UK manufacturing sector has grown at its fastest pace for 7 months (June) with job creation growing at its fastest for 3 years.

That’s the serious bit….. now, on a more flippant note…..

A 55 year old Entrepreneur / Consultant has recently joined LinkedIn with an apparently list of more than 150 careers. The former astronaut and fashion designer always has a ‘smartphone, tablet and briefcase by her side’;  she is apparently a ‘smart, stylish career woman’ whose business is named Dream Incubator. And (for those who like management speak) her tagline ‘If you can dream it, you can be it!’ might inspire a LinkedIn invitation…… to the plastic lady known as Barbie ….. she might be dressed, but is she ready to work?

Image and Article credit: Copyright SUF © 2014


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