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Home » Daily Briefing » Daily briefing - 23 January 2017

Daily briefing - 23 January 2017

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Could the mood be more different in bank boardrooms on either side of the Atlantic? The big American banks appear buoyed up by the Trump administration's hostility to regulation and the prospect of tax cuts. In Europe, by contrast, bank chiefs are weighed down by worries over Brexit, the economy, the euro and Italian banking. Cybercrime may seem minor in comparison to these headaches, but the problem has grown to such an extent that the European Union is now mulling whether to introduce banking stress tests for cyber risks. Lloyds Bank in the UK is the latest notable victim of a cyber attack, with the lender's digital services repeatedly knocked offline for two days.

Britain may have escaped the woes of the euro, directly at least, but the challenges of Brexit continue to worry many in the City of London. The Sunday Telegraph reports that UK bank chiefs are lobbying frantically to persuade opposite numbers in other countries to delay any plans for shifting operations to other EU-based financial centres. An unnamed source told the newspaper: "We are trying to get a permanent agreement for banks with London operations to access the EU. If we can't do that, what we've asked for is a three-year standstill agreement. We don't want to trigger contingency plans in advance because of a lack of certainty so we are saying 'hold on'."

Italian authorities also have a long list of headaches, from natural disasters to precarious governance, but the pressure on the country's banks remains a pressing issue: the rescue of Banco Monte di Paschi di Siena may just be the overture to a tumultuous opera. If the euro goes the way of the gold standard — and one cannot argue that its future looks rosy — the continent's bankers, report the Financial Times, are already preparing themselves for the risk of a eurozone break-up, cutting back on some lending until 2017's key elections (in France, Germany and the Netherlands principally) reveal the lie of the land. Spanish banks meanwhile are totting up the costs of the recent mortgage floor ruling handed down by a European court: "The Bank of Spain has estimated the total cost to Spain's banks could reach almost €4 billion [with banks given] three months to settle with customers," report Reuters. In a low interest rate environment and with the likes of CaixaBank and Banco Sabadell competing in the market, the prospects of making a profit in Spanish consumer lending seem to be fading fast.

Finally, Chinese authorities, tightening up their capital controls regime, have brought down the portcullis on banks transferring currency overseas. Regulators in Beijing are barring banks from making net renminbi outflows. "According to several people briefed on rules introduced this month, banks in Shanghai must 'import' Rmb100 for every Rmb100 they allow a client to remit overseas, ensuring no net outflows of the Chinese currency. Shanghai-based banks had been allowed to remit Rmb160 overseas for every Rmb100 they brought back into China", reports the Financial Times.

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