The chief executive of Lloyds Banking Group made something like a warning statement to British politicians, describing measures such as a tax on unforeseen expenses of banks as thing that should be excluded amid expectations of a busy election year.
Charlie Nunn, chief of the specified financial institution, says that currently City firms and investors are looking for certainty and clarity about what the future will be. This kind of trend is observed against the background of Labor’s silence about plans for City regulation, even though they are leaders in opinion polls.
The media believe that Charlie Nunn’s statements should be interpreted as a call for assurances that the United Kingdom will not repeat the practice of some European governments that have decided to introduce new taxes for organizations operating in the banking sector. It should be clarified that the said measures concerned financial institutions accused of receiving additional profits for several billion euros as a result of the implementation of corporate policy to raise interest rates. Another important circumstance is that in this case, the profit for the last year is implied.
Charlie Nunn calls on British politicians to keep their hands off profits, paying dividends to shareholders, and the amount of interest intended for lenders who keep cash in the Bank of England.
The chief executive of Lloyds, during a conversation with media representatives at the global banking summit in London on Tuesday, November 28, said that nervousness in the sphere of financial services is related to what was observed in Italy, Switzerland, and Spain regarding windfall taxes, reserve remuneration or withholding of dividends. According to him, the desire of his bank and the shareholders of this lender is clarity about the fact that financial institutions will be able to continue to work effectively, support customers, and safely make a profit for holders of their securities.
In August of this year, the Italian authorities shocked the markets after deciding to introduce a 40% tax on windfall taxes for the banking sector. Against this background, a drop in the value of local financial institutions was recorded. Similar decisions were made by the authorities of Lithuania, Spain, and the Czech Republic. This policy of European regulators has aimed at the profits of financial institutions, which have increased significantly against the background of rising interest rates.
With the help of higher rates, banks have been able to increase the amount charged to borrowers for mortgages and loans, often showing dynamic income of return exceeding the intensity of rates offered to depositors. In this case, financial institutions assign the difference, designated as the net interest margin, which is the main indicator of the profitability of lenders.
The situation of banks in the conditions of economic realities, in which interest rates are rising, has become a reason for criticism from British parliamentarians from the Treasury Committee, who accused these organizations of speculation during the cost-of-living crisis. Last month, they confirmed the relevance of their claims. Parliamentarians reproach the largest British financial institutions for too slow remuneration of depositors. Criticism escalated after HSBC doubled its profits and distributed 2.5 billion pounds to shareholders.
The Positive Money, campaign group, said that if a windfall tax is introduced in the United Kingdom, it will be possible to raise 3.4 billion pounds from the operations of the four largest local banks. In this case, Lloyds, NatWest, Barclays, and HSBC are meant. Preliminary calculations of the campaign group were made based on data on the profits of banks received in the first half of 2023.
There is also currently a discussion about the amount of interest that large financial institutions receive for placing their cash in the central bank in the form of reserves.
The Swiss authorities in October decided on tough measures within the framework of the specified issue. In this country, commercial banks will no longer be paid the minimum amounts that they must keep in the reserves of the central bank.
Experts suggest that Charlie Nunn’s appeal is highly likely to be taken into account to one degree or another by Labour and the Tory, who, on the eve of the likely elections next year, are trying to get a positive attitude from City firms and want to enlist the support of business.
Lloyds chief says that politicians should increase the international credibility of the United Kingdom and gain investors who, in case of tough measures, will refuse to be wary of betting on Britain. From the point of view of investment prospects, the problem was the catastrophic budget cuts of Liz Truss in 2022.
Charlie Nunn says that the British banking sector wants a level playing field compared to other international markets and in relation to the dynamics within the country. He welcomed the Conservative government’s attempt to overhaul City regulations as part of a set of changes dubbed the Edinburgh Reforms, noting that there should be long-term support. According to him, the most important thing in the next decade will be the formation of confidence in the largest British financial institutions that they will again implement innovative solutions on behalf of customers.
As we have reported earlier, Lloyds Banking Group Continues to Close Its Branches.
