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 >  Daily briefing - 05 July 2019

Daily briefing - 05 July 2019

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Writing about SME banking, it's astonishing how often bankers shake their heads sorrowfully when asked to explain why it's so difficult to lend to small businesses. It's the lack of paperwork, they say, the complexity of separating the owner's finances from the business finance. Right. Talking to customers tells another story altogether: banks make SME customers jump through hoops to get a business account, including requiring business owners to switch their current accounts to the bank. This isn't in the same league as RBS, which ran down small businesses and seized their assets, hardly the supportive bank partner businesses hope for. Now the UK's competition and markets authority has told Barclays to sharpen up its act. "Barclays, which had signed up to the rules over small businesses in 2002, must improve its practices, the CMA said. The rules prevent banks from insisting that businesses open or maintain current accounts before they are able to access their other products, the regulator said. 'The bank's actions led to unnecessary costs to some SMEs who were made to hold accounts they did not need,' the CMA said." The CMA does not have powers to impose major fines so Barclays will pay a paltry fine of £2,000. Is that the cost of doing business?

With Yemeni rebels holding out against the UAE and Saudi armies, Gulf alliances continue to fray and the UAE banks are feeling the pain. We've reported on the wave of banking mergers in the region that are celebrated in the regional press as efforts to stabilise the economy but on the ground, it means thousands of job losses for the mostly Indian managers who run the Abu Dhabi banks. Banker Middle East notes that the merger between Abu Dhabi Commercial Bank, UNB and Al Hilal will result in a quarter of the combined group's jobs being cut. ADCB previously employed just over 5,000 workers, down from 5,600 a few years earlier. Al Hilal employed 1,500 staff, while UNB had 2,000 works, adding to a total of about 8,500. A loss of 2,000 jobs is almost a quarter of the workforce. "The Government of Abu Dhabi has stepped up efforts to create leaner and more competitive financial institutions," it reports. "The merger follows a tie-up between the emirate's two biggest banks and the combination of sovereign wealth funds. The job cuts are likely to weigh on the second-biggest Arab economy that is already being battered by falling home prices and slow growth. According to the International Monetary Fund although economic activity is expected to accelerate to 2.8 per cent this year, it's still well below the average in the 15 years to 2015."

Revolut said it is planning to enter India in 2020 as part of its international expansion plan, according to the Times of India. "Currently, it is exploring options for licensing and is actively hiring a broad range of roles, the startup said. As a digital-only bank, Revolut targets the tech-savvy millennials to whom it offers pre-paid debit card for cash withdrawal in over 100 countries, money transfer, savings tools and insurance for smartphones and overseas travel. Revolut had raised $250 million led by DST Global at a valuation of $1.7 billion last year." This is an interesting move as it would allow Revolut to step into the UK-India remittance corridor, currently estimated to be the second biggest outbound remittance corridor from the UK. Western Union and Moneygram currently charge between seven and nine percent for the service, but Revolut has built its business on the back of free international transfers. Revolut does not yet operate in the US but if it plans to do so, it would add the US-India remittance corridor to its network.

It's fair to say that lending platforms have still not convinced everyone of their viability, though crowdfunding has become a major part of business, even for banks such as Monzo, or nonbanks such as Coconut. Platforms which intermediate the emission of transferable securities or loans fall under the scope of the new European regime, and have to obtain a license from the national supervisor agency to operate cross-border. But the European Commission has suggested that a harmonized regime, rather than opting-in on a country-by-country basis is a better approach. Now, lending platforms will be able to directly intermediate between SMEs and investors, and will not need individual licences across Europe. "The original intention of the regulation of creating an easy way to provide Crowdfunding services in Europe is still in place, since according to the Council, platforms only have to register in one country in order to actively offer their Crowdfunding services in other countries," notes Crowdfunding Insider.

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