Bank Industry Insights: June 2024 edition

As headlines are dominated by the news of a general election in July, it seems that the health of the UK economy will likely be the main factor in deciding the outcome. It was recently reported that UK inflation was at its lowest level in almost three years (2.3% in the year to April, down from 3.2% the month before). Having credited higher interest rates for reducing inflation, the Bank of England previously hinted that interest rates could be cut this summer (currently at 5.25% - the highest level in 16 years). However with an election imminent, the FT predicts that the Bank of England will almost certainly avoid the June rate cut it had pencilled in and wait a bit longer.

The US seems to be in a similar position, as a top Federal Reserve official this week called for interest rates (currently at a 23-year high range of 5.25 to 5.5%) to stay on hold for an “extended” time. Speaking to the FT, the official explained that lowering borrowing costs before inflation was under control would put the foundations of US prosperity at risk.

Moving faster than its US and UK counterparts is the European Central Bank, which has just cut interest rates for the first time in nearly five years (by a quarter percentage point to 3.75%). The ECB said it was “now appropriate to moderate the degree of monetary policy restriction” in response to a more than 2.5 percentage point fall in inflation since its last rate increase in September 2023.

Back in the UK, the FCA has published key insights and observations for firms preparing to comply with operational resilience rules by 31 March 2025. Insights like this helpfully show what "good" (and "bad") looks like in the regulator's eyes, and where their focus will be for supervisory engagement following the transition period. For a summary of the FCA's publication, this article by our Ashurst colleagues neatly sets out the key points. ?And if you're interested in hearing more from the Ashurst team, don't miss episode three of our mini-series on regulatory enforcement of the UK’s financial services industry. In this episode, our experts discuss the FCA’s focus on criminal actions and prosecutions, the efforts to reduce the backlog of cases, and the targeting of financial crime, market abuse, operational resilience and consumer protection.

Finally, a reminder to sign up to the Banking Disputes webinar on 20 June, as our Ashurst colleagues cover the retrieval duty, reasonable endeavours in force majeure clauses and non-party access to court documents. Click here to register your place.