Bad month banking sector
During the month, ratings agency Moody’s downgraded the credit ratings of 15 financial institutions around the world. UK banks involved in the downgrade included Barclays, HSBC and Royal Bank of Scotland (RBS). Moody’s cited concerns over the banks’ “significant exposure to volatility and risk of outsized losses”.
During June, the FTSE 100 index rose by 4.7%. Larger companies performed better than their medium-sized and smaller counterparts over the month. According to the latest data from the Investment Management Association, the UK All Companies and UK Smaller Companies sectors experienced outflows during May although demand for UK Equity Income funds remained very strong.
Shareholder dissatisfaction over excessive levels of executive pay continued to rumble on. During June, almost three-fifths of shareholders at advertising agency WPP voted down the directors’ remuneration report. Elsewhere, the Bank of England announced new measures intended to safeguard the UK’s financial system. These plans include the provision of cheap loans to banks that are intended to address the high cost of loans and mortgages.
Nevertheless, June proved a torrid month for the UK’s banking sector. The start of the month saw the release of a White Paper on banking reform, which is intended to protect retail banks by ring-fencing their deposits from the risks created by their investment banking operations. Later in June came the news Barclays had been fined almost £300m following an investigation into allegations traders had manipulated the interest rates at which banks lend to each other.
Meanwhile, RBS suffered an embarrassing consumer backlash following massive IT problems that affected the bank accounts of millions of customers of RBS, NatWest and Ulster Bank. By the end of June, the company’s share price had fallen by more than 13% from its mid-month high. As if that were not enough, the Financial Services Authority announced it had found that a number of leading high street banks had mis-sold specialist interest-rate insurance policies to small businesses.
The contents of this article should not be construed as advice and do not necessarily reflect our views. Independent Financial Advice should always be attained in order to assess your own individual circumstances.