Lloyds Banking Group has set aside £450mn to cover potential costs relating to a UK regulatory probe into its historic motor finance commission arrangements.
The Financial Conduct Authority launched an investigation last month to determine whether people were overpaying for car financing loans. Under so-called discretionary commission arrangements, some UK banks had allowed motor dealers to adjust the interest rates customers paid on loans, increasing their commission — a practice banned in 2021. The FCA stated that settlements would be sought if evidence of widespread misconduct is found before that time.
Lloyds announced this provision alongside news of record pre-tax profits for 2023, amounting to £7.8bn. This marked a 50 per cent increase over the previous year and surpassed market expectations of £7.4bn. The Financial Times reported that analysts at RBC Capital Markets estimate the motor loans scandal could cost Lloyds £2.5bn, more than any of its rivals.
—
The UK retail group Frasers is suing Morgan Stanley for $51mn over alleged costs and lost trading profits after the bank forced a margin call on the company’s trading position in the German fashion brand Hugo Boss in May 2021. Frasers alleges that Morgan Stanley changed the purpose of the margin call after discovering that the retail group stood behind the trades held by Saxo Bank.
British retail tycoon and owner of Frasers, Mike Ashley, told London’s High Court yesterday that the $1bn margin call was “out of any proportion to any actual risk” and “partly the result of snobbery”, due to his humble beginnings. The legal team representing Frasers said that senior leaders at Morgan Stanley had a “personal dislike” of Ashley, whom they regarded as an “upstart” and the margin call was a “class-driven” decision.
Morgan Stanley has rejected the claim as contrived and without merit. It argues it had no contractual relationship with Frasers, only with Saxo Bank. The bank said the margin call, based on a potential 400 per cent rise in Hugo Boss shares, was properly designed to protect the bank from exposure to stock market bets. The trial is expected to last for three weeks.
—
India’s financial stability panel has announced plans to introduce a uniform approach to know-your-customer verification processes aimed at preventing illegal lending through online applications. The announcement follows a meeting of the Financial Stability and Development Council, chaired by India’s finance minister, Nirmala Sitharaman, which brought together all the country’s financial regulators.
Its fintech sector faced a crisis earlier this year when regulators ordered Paytm Payments Bank, a former fintech unicorn success story that had attracted backing from Warren Buffett and SoftBank, to cease the majority of its banking activities. This action was taken after discovering that the company had not conducted proper background checks on the source of its funds before onboarding clients.
—
The World Bank has warned that emerging economies must achieve a “much faster” rate of growth in order to meet their debt obligations and avoid a move towards restructuring. “When it comes to borrowing, the story has changed dramatically. You need to grow much faster,” Ayhan Kose, deputy chief economist of the World Bank, told Reuters in a recent interview.
The warning comes as international bond sales from emerging market governments reached an all-time high of $47bn in January. While issuances from less risky emerging economies such as Saudi Arabia, Mexico and Romania led the valuations, some riskier issuers are now accessing funds at higher rates. Notably, Kenya recently accepted a yield of more than 10 per cent on a new eurobond in a bid to avoid default later this year — a rate some analysts consider as potentially unaffordable.
—
Poland’s central bank has rejected allegations of misleading the country’s government over its finances. Governor Adam Glapiński told Poland’s finance ministry in August last year that his institution would contribute profits of around 6bn zlotys ($1.5bn) to the state budget, but this will now not be possible as it will report a loss. The bank explained that its results in 2023 were negatively affected by $7.8bn at the end of last year due to the strengthening zloty.
According to Bloomberg, Prime Minister Donald Tusk’s ruling coalition is set to submit a preliminary motion, aiming to bring Glapinski before a state tribunal by the end of March, which could lead to his dismissal.
