Bank IT Failures Probe Launched By Watchdog

By Mark Kleinman, City Editor

The City regulator will next week launch a probe into the resilience of high street banks' IT systems following a series of glitches which have threatened to further undermine the industry's image.

Sky News can reveal that the Financial Conduct Authority (FCA) will set out on Monday its intention to conduct a review of the systems of major lenders, just weeks after the partly state-owned Lloyds Banking Group saw an IT glitch shut down half of its cash machines for several hours.

The FCA will disclose its intention to carry out the work in its annual business plan, which details the key areas of focus for the regulator during the following 12 months.

The robustness of banks' IT systems has become an urgent priority for watchdogs amid concerns that repeated glitches are damaging already fragile consumer trust in the banking sector.

In December, Royal Bank of Scotland (RBS) suffered a systems outage on the busiest online shopping day of the year, the third time in about 18 months that such a problem had prevented customers from using cards, cash machines and online banking services.

Clive Adamson, director of supervision at the FCA, told Sky News that the IT resilience work would be a top priority for the regulator this year:

"To access and manage our money we depend on the banks' IT systems being reliable. But IT outages continue, interrupting key banking services. 

"We want to make sure that the banks have resilient IT systems in place that are able to cope with consumer demand, so customers aren't left financially stranded or disadvantaged."

The regulator has the power to impose swingeing financial penalties on banks whose systems are defective, with RBS the subject of an ongoing investigation by the FCA's enforcement division into an IT crisis during the summer of 2012.

The FCA's new work will be carried out in conjunction with the Prudential regulation Authority and the Bank of England, and will examine how banks and building societies manage their exposure to IT risks.

It will also look at the level of engagement by bank boards on the issue as well as whether directors are sufficiently knowledgeable to challenge executives.

Industry sources expect the FCA's work to hasten the collective spending of billions of pounds required to modernise banks' IT systems, which have suffered from years of under-investment.

RBS has already said that it will increase its £2bn annual IT budget by £450m, with other major lenders looking at similar hikes.

The regulator, which expects its work to conclude early next year, signalled in a report last year that the growth of mobile banking by customers has outpaced banks' investment in their IT systems..

The RBS problems in 2012 prompted the FCA's predecessor, the Financial Services Authority, to write to the chairmen of the nine biggest banks and building societies to request information about their critical infrastructure and banking processes.

Industry insiders expect the watchdog to take tough action if insufficient progress is deemed to have been made on the issue since then.

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Missing Flight: BA Sorry For Indian Ocean Ad

British Airways has said sorry for an advert urging people to escape the commute and "discover the Indian Ocean" amid the missing plane mystery.

The ill-timed advert was spotted on an escalator at a London underground station and posted on Twitter, quickly going viral.

The picture of the advert - taken by Alan Milford - has now been viewed more than one million times.

Alan Milford's initial tweet BA responded after the picture went viral

The text "Escape the commute and discover the Indian Ocean" is overlaid on a picture which appears to have been taken underwater.

After spotting the advert, Mr Milford, 29, tweeted: "Unfortunate advertising from BA up the escalators at Euston."

The advert ran on a video screen at the tube and rail station as the hunt for missing Malaysia Airlines flight MH370 continues.

There were 239 people on board the plane which is feared to have crashed somewhere in the vast Indian Ocean.

Map shows the search area in the Indian Ocean

The plane took off from Kuala Lumpur in Malaysia early on March 8 and had been expected to make a six-hour trip to Beijing in China.

BA has tweeted an apology, explaining the advert "contained pre-scheduled content that we recognise is inappropriate at this time".

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F1 Investors Drive Off With £200m Dividend

By Mark Kleinman, City Editor

Shareholders in Formula One motor racing are in line for a £200m windfall just weeks before Bernie Ecclestone stands trial in a case which could spell the end of his reign at the sport's helm.

Sky News has learnt that the board of Delta Topco, F1's parent, agreed this week to issue a $332m (£199.8m) dividend for last year.

The dividend is technically funded through a redemption of shareholder loan notes, and follows the latest of several financial restructurings undertaken by F1 in recent years.

The biggest recipient will be CVC Capital Partners, the London-based private equity owner of 38% of the sport, which will receive almost £80m.

Among others who will receive windfalls will be the estate of Lehman Brothers, the investment bank whose collapse in 2008 was one of the triggers of the global financial crisis.

Lehman is in line for a payment of approximately $40m (£24m), according to sources close to F1, while Mr Ecclestone, the sport's chief executive, is expected to receive about $17m (£10.2m) by virtue of his 5.3% stake.

F1's other shareholders include the fund managers BlackRock and Waddell & Reed, Norway's sovereign wealth fund and the municipal retirement fund of Texas's teachers.

The dividend plan underlines the continuing financial strength and cash generation demonstrated by F1 despite the broader challenges now confronting one of the world's biggest spectator sports.

Mr Ecclestone's trial on bribery and corruption charges is scheduled to begin in Munich towards the end of next month.

It relates to a $44m (£27m) payment to Gerhard Gribkowsky, a banker who was involved in organising F1's sale to CVC nearly a decade ago.

Mr Gribkowsky has since been jailed and may appear as a witness at Mr Ecclestone's trial.

The F1 chief executive, who has consistently denied any wrongdoing, has conceded that he made part of the relevant payments to Mr Gribkowsky, but said that he had done so because he was concerned that the receipient would make unfounded allegations about his tax affairs to Her Majesty's Revenue and Customs.

He has recently been quoted by British newspapers as saying that he might opt to step down at the end of the year, regardless of the trial's outcome.

The prospective termination of Mr Ecclestone's vice-like leadership is not the only headache facing the sport.

Drivers, executives and media groups complained that engine changes to cars first deployed at the season-opening Australian Grand Prix this month have diminished the sport as a spectacle.

CVC has already made billions of pounds from its original investment in F1, and is waiting to dust off plans to float the company on the Singapore stock exchange.

It has conceded that that idea is unworkable until the legal issues surrounding Mr Ecclestone are resolved.

Sources familiar with the situation said that Delta Topco's board had discussed issuing a substantially higher dividend than the £200m being paid out.

Its decision not to issue additional debt to fund such a move was made with one eye on a revival of the flotation and demonstrated "restraint", one said.

F1's profitability and cash-generative nature has meant that the company's newest investors have already received a series of multimillion pound payouts, suggesting that it would continue to pay attractive dividends if it does eventually pursue a public listing.

Peter Brabeck-Letmathe, the chairman of the Swiss consumer goods giant Nestlé who also chairs F1's parent company, is taking a more hands-on role with the company during the six months that Mr Ecclestone's trial is expected to last.

In a statement issued in January, the board of Delta Topco, F1's parent, said that Mr Ecclestone would step down as a director but remain in day-to-day control of the sport he has run for the best part of four decades:

"Mr Ecclestone has reassured the Board that he is innocent of the charges and intends to vigorously defend the case which will commence in late April 2014," it said.

"After discussion with the Board, Mr Ecclestone has proposed and the Board has agreed that until the case has been concluded, he will step down as a director with immediate effect, thereby relinquishing his board duties and responsibilities until the case has been resolved."

The board said it believed that F1 would be best-served by Mr Ecclestone retaining his management responsibilities but said he would be "subject to increased monitoring and control by the Board".

Approval for significant commercial contracts would become the responsibility of Mr Brabeck-Letmathe and Donald Mackenzie, the CVC founder who is Delta Topco's deputy chairman, the board added.

An F1 spokesman declined to comment on this week's dividend discussions.

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'Brit Culture' Test For Video Game Tax Break

By Joe Tidy, Sky News Reporter

UK games developers are to be granted large tax breaks for creating titles that pass a British "culture test".

To become eligible for money back, games will be appraised on several criteria, such as having British characters, a British story and being set in Britain.

Titles will also be rewarded for promoting UK culture and employing British production staff, and can claim back up to 20% of the total costs of production.

The Independent Game Developers' Association (Tiga), which represents the UK video games industry, has campaigned for seven years for the tax breaks.

It says they are worth £188m in extra investment for UK games businesses over the next five years.

The move was first announced in the previous Labour government's final budget in March 2010, but was being blocked by the European Union commission, which spent time deciding whether or not the British industry needed the boost.

Dr Richard Wilson, Tiga's chief executive, said: "This is a superb decision by the EU Commission and magnificent news for the UK video games industry.

"It is also a striking success for Tiga, for its members, and for the wider video games industry that Tiga represents. The tax break will create jobs, boost investment and enable the production of more British video games.

"Tiga built a compelling case which demonstrated that video games are cultural products similar to other audio-visual creations and so merit support and that the UK video game industry is competing on an unlevel playing field because our key global competitors already benefit from tax relief or other forms of government support."

The move could have a major impact on the sorts of games that developers make as companies shift products to take advantage of the tax incentives.

Jason Kingsley OBE is the chief executive of games maker Rebellion, based in Oxford, and said: "We won't be compromising the game just to get tax breaks, but, if it were a choice between creating an American lead character or a Brit, it might swing our decision."

There are other ways to take advantage. For example, Rebellion is currently developing Sniper Elite 3 - a war game set in North Africa during the Second World War.

It will not get any "culture points" for its setting or characters, but it could be considered to be culturally relevant as it is about the war, so Jason and his team are hopeful they will get some money back.

"It doesn't have to be people walking around with bowler hats and driving red buses in London to qualify," he said.

"It's all on a points system - which opens up a lot more possibilities."

It is also hoped that the tax breaks will bring in foreign games makers, who can also get money back through hiring British developers on productions in a similar way to the British film industry. It is estimated that a quarter of British games will be eligible.

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Microsoft Office: Word Tops iPad App Chart

Microsoft Word has jumped to the top of the Apple Store free app chart, after releasing an iPad version of its Office software.

New chief executive Satya Nadella announced the move at his debut launch event.

Within hours Word, Excel, Powerpoint were the top-ranking free apps and allow users to read documents.

However for users who want to create and edit items an Office 365 subscription is required.

The UK Office 365 Home subscription costs a third more in the UK than in the United States.

The British price is set at £79.99 but the app costs just $99.99 (£60) in the US.

Microsoft's OneNote was ranked number four in the chart, allowing auto-cropping of whiteboards and document photographs.

A significant number of iPad users have grumbled previously about not being able to use Microsoft's signature software on Apple's flagship tablets.

Mr Nadella said he hoped it helped people "to be productive across all devices".

"We are taking great focus and great care to make sure Office on any device shines through."

It is now expected Microsoft will speed up future releases of app versions for other mobile computing devices.

The company's former CEO Steve Ballmer released an iPhone version of the Office suite last year.

Industry analysts expect there to be near parity this year between tablets and the PC/laptop market, at around 275 million in both sectors.

More than half of Microsoft's operating profit, around £10bn, has come from the Office suite on the back of a resurgent business sector requiring its software.

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Ed Miliband Proposes New Energy Price Controls

Ed Miliband has proposed new controls on energy prices to give small businesses "equal protection" with households from "unacceptable" treatment by energy companies.

The Labour leader said annual energy bills for small businesses had risen by an average of £10,000 since 2010.

He called for a new regulator to be formed with powers to ban suppliers from changing people's tariffs without their consent, or hitting them with "crippling" back-dated bills.

Sticking to his cost of living agenda, he also reiterated plans for a 20-month price freeze for households and businesses when he addressed the Federation of Small Businesses (FSB) in Manchester later.

He said the move would save small fiirms, on average, £5,500.

"It is unacceptable that companies like yours do not have even basic protections that are available to households under the law from unfair energy contracts," Mr Miliband said.

"Since the turn of the century, the number of people working for themselves has increased by over one million.

"Small businesses are now the bedrock of our economy - and they will be even more so in the future.

"Some of the costs of running a small business have got larger and larger in recent years. The next labour government is determined to tackle this problem, and give every sort of business the chance to succeed."

Mr Miliband also pledged new legal rights for business organisations like the FSB to take cases such as late payment by firms to court on behalf of members.

Labour would also invite the FSB to help set the agenda for the new Competition and Markets Authority's investigations - like Which? and Citizens Advice already do - to ensure a fair deal for consumers and businesses.

It comes after energy watchdog Ofgem on Thursday referred the sector to the CMA amid concerns over profits, price co-ordination and barriers to new suppliers.

The competition inquiry could lead to the so-called 'big six' firms being broken up.

Mr Miliband said following the announcement there could be "no justification for further price rises".

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BlackBerry Loses $423m In Three Months

Struggling smartphone maker BlackBerry has made a quarterly loss of $423m (£254m), after suffering a revenue drop of more than 60%.

The company said its revenue for the last quarter of 2013 was $976m (£587m), down from $2.7bn (£1.6bn) in the previous year.

It was the first time the Canadian company had reported quarterly revenue of below $1bn (£600m).

The figure was more than a tenth lower than what analysts had forecast.

Sales of smartphones fell from 1.9 million in the third quarter to 1.3 million in the fourth quarter.

It was the second quarterly results under new boss John Chen, amid a strategic shift from being hardware based.

"The guy is on the move fast," BGC Partners analyst Colin Gillis said.

"He can control expenses but you can't magically make revenue happen."

Early last year the company released BlackBerry 10 but it failed to spark a turnaround in its fortunes.

The BlackBerry, once considered an essential business tool, has been hammered by competition from iPhone and android-based rivals.

Last week the firm said it moved ahead with plans to sell off most of its Canadian property portfolio to help shore-up its finances.

Despite the massive quarterly loss, early Friday trades in BlackBerry were some 5% up, buoyed by faster-than-expected cost cutting.

In January, its share price surged after the US military put in a huge order for its phones, as it announced it would outsource production to Taiwan's Foxconn.

BlackBerry helped create a culture of mobile users glued to smartphones - and were once nicknamed "CrackBerrys" in reference to the addictive habit of checking emails.

The encryption system used by the firm was also seen as a benefit for many firms, including the White House administration.

But the firm lost its pre-eminent position as people swapped to Apple and Android devices.

The company still has around 70 million subscribers worldwide, but most of these are using older handsets.

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FCA Probes Millions Of 'Bad Deal' Investments

The City watchdog is to scrutinise millions of finance products sold to consumers over three decades, because of fears they are shackled by unfair terms and conditions.

It is estimated around 30 million policies, including pensions, endowments, life insurance and investment bonds were sold by companies between the 1970s and the end of the century.

The Financial Conduct Authority (FCA) is expected to announce the decision on Monday, as part of its annual business plan.

The investigation, due to begin in the summer, comes amid suspicion new customers receive better deals while long-term customers receive poor service and higher fees.

Many of the suspect policies penalise consumers if they try to swap to better deals offered by rivals.

The share price for many of the big insurance companies fell on Friday, with early trades in Resolution down 7%, Aviva down 6% and Legal & General trading more than 4% lower.

According to the FCA, some people risk losing half of their investments if they change provider from the so-called zombie funds.

The funds are closed to new customers and many of those who invested are suspected of subsidising other products because of the high charges.

FCA director of supervision Clive Adamson told The Daily Telegraph: "We want to find out how closed-book products are being serviced by insurance companies.

"As we are concerned insurers are allocating an unfair amount of overheads to historic funds.

"As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten.

He added: "We want to ensure they get a fair deal. As part of the review we will collect information to establish whether we need to intervene on exit charges."

The FCA was born out of the now-defunct Financial Services Authority, which was abolished by the current Government in the wake of the financial crisis.

Next week it also takes responsibility for the consumer credit market.

Earlier this week, it imposed a £12.4m fine on Santander UK for failings in its investment advice to customers.

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Business Round-Up And Week Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

: Monday March 31

From Monday, energy suppliers are required to publish the price at which they will buy and sell on wholesale markets up to two years in advance and the cost of a first class stamp goes up from  60p to 62p.

:: Tuesday April 1

The Competition and Markets Authority (CMA) takes on its full powers on Tuesday. Regulator, Ofgem has referred the energy market to the CMA for a full investigation into the competitiveness of the market and air passenger duty is due to rise in line with the Retail Price Index.

:: Wednesday April 2

On Wednesday, ASOS will report half year results. The online clothing retailer has faced stiff competition from other web-based companies like the recently-floated Boohoo which also targets people in their 20s.

:: Thursday April 3

It will be the Chancellor's chance to be grilled on Thursday. George Osborne will give evidence at Treasury Committee on this year's Budget. 

:: Friday April  4

On Friday, the U.S. will release its employment figures. It is expected that the unemployment situation will improve as the market shakes off the effects of severe winter weather. 

Missing something? Tweet your business stories to @SkyNKTweets

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RBS Raids Swiss Giant For New Finance Chief

By Mark Kleinman, City Editor

The taxpayer-backed Royal Bank of Scotland (RBS) is close to luring one of the architects of its £45.5bn taxpayer bail-out to become its new finance chief.

Sky News can exclusively reveal that Ewen Stevenson, who works for Credit Suisse, is in advanced negotiations about joining RBS at a critical time for the bank.

Mr Stevenson's appointment as RBS's finance director is subject to approval by the Prudential Regulation Authority (PRA), which insiders said on Saturday was expected within days.

His arrival at the bank, which is 81%-owned by UK taxpayers, will end a search that began last autumn when Nathan Bostock, the current finance director, resigned after just ten weeks in the role.

Mr Stevenson has been co-head of investment banking for Europe, the Middle East and Africa at Credit Suisse since 2012.

Ewen Stevenson currently works for Credit Suisse

Prior to that he ran the Zurich-based bank's global financial institutions group, and in 2008 he helped to draw up the rescue recapitalisations of RBS and Lloyds Banking Group undertaken by the then Labour government.

Assuming his appointment is confirmed, Mr Stevenson would complete an all-New Zealander executive line-up at the top of RBS following Ross McEwan's installation as chief executive late last year.

A source close to the situation confirmed that talks about Mr Stevenson's appointment were at an advanced stage, although they insisted that other candidates remained in the frame.

The new finance chief will have one of the fullest in-trays in British banking.

RBS, which lost more than £8bn last year, is expected to remain in the red for several more years as Mr McEwan and his team reshape the once-global business.

Under plans announced last month, RBS will refocus on UK personal and small business customers, with operations in dozens of overseas markets likely to be sold or closed.

Tens of thousands of jobs will be shed, while Mr McEwan has pledged to abolish teaser rates on banking products in an effort to win back customers' trust.

Chief among the challenges facing Mr Stevenson will be improving RBS's capital position in order to meet tough new standards imposed by regulators.

RBS's US retail bank, Citizens, this week failed a US stress test, potentially delaying its flotation or sale.

The PRA will conduct its own exercise later this year, with some analysts forecasting that RBS may need to raise further capital as it accelerates the run-off of billions of pounds of toxic assets.

Mr Stevenson's arrival at RBS will reunite him with his former Credit Suisse colleague, James Leigh-Pemberton, who now runs UK Financial Investments, the Treasury agency which manages taxpayers' stake in the bank.

Mr Stevenson's proposed pay deal at RBS will also attract attention, although he is likely to be substantially less well-rewarded in his new role than in his current berth.

RBS and Credit Suisse both declined to comment on Saturday.

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