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Home » Daily Briefing » Morning Briefing 24 June 2016

Morning Briefing 24 June 2016

Morning Briefing

UK prime Minister David Cameron may have become the first person to lose his job as a result of the country voting to leave the European Union but he is unlikely to be the last, according to Patrick Jenkins writing in the Financial Times: "The most likely outcome is that foreign banks with large operations in London will shift staff to a spread of eurozone locations where they already have operations -- including Frankfurt, Dublin, Paris, Warsaw and Lisbon. That would fragment the financial services industry in Europe, potentially weakening the continent's ability to compete internationally."

Market turmoil ensued after the Leave side snatched a dramatic referendum but it is too early to assess how the decision will affect the UK and European banking sectors. Citigroup, however, immediately downgraded Barclays and Lloyds to "sell" stating in a note: "We also foresee 10-20% downside for European banks. Banks which are most exposed to Brexit include the investment banks, with primary (and secondary) volumes likely to be subdued for some time on heightened uncertainty. EU banks with UK operations — such as Santander, Bank of Ireland and Sabadell — will also get hit directly on FX translation as the sterling weakens versus the euro".

The Financial Conduct Authority in the UK said this morning that UK financial regulation that is derived from EU legislation will remain applicable for the time being. "The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future. We will work closely with the Government as it confirms the arrangements for the UK's future relationship with the EU," it said.

Meanwhile, shares in HSBC and Standard Chartered were down 11 and 12 percent respectively in Hong Kong before European markets opened. Standard Chartered said it was well positioned to weather market volatility given its capital and liquidity strength.

In other news, all of the big banks in the United States passed the first stage of the Federal Reserve's annual stress tests, with the Fed saying the largest banks had significantly shored up their defences and would be able to continue lending even in the event of a deep recession.

Some of those large banks, including JPMorgan and Citigroup, performed particularly well, comfortably surpassing the capital ratio requirement of the Fed. Overall approval or rejection of the banks' capital loan plans will be revealed on 29 June when results of the second part of the test are released.

The Reserve Bank of India revealed its strategic plan — "Payment and Settlement Systems in India: Vision-2018" — for building "best of class payment and settlement systems for a 'less-cash' India" on its website yesterday. Vision-2018 will focus on four strategic initiatives: responsive regulation, robust infrastructure, effective supervision and customer-centricity.

MasterCard plans to invest $800 m in India over the next 4 years
MTN bets on mobile money with new CEO
Mexico's route to financial inclusion begins with commitment to reduce the use of cash
Warren would give a middle finger to Wall Street as Clinton's vice-president
Merrill Lynch to pay $415 million for misusing customer cash: SEC

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