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10 Per Cent Depreciation Notification Process For Private Banking UK Clients Only

Following feedback from our clients and in light of recent communications from the UK regulator, the FCA, we are changing our depreciation notification process.

PBUK: Your Investments - Depreciation Notice

Under our regulatory obligations we provide you with a depreciation notice when the overall value of your Discretionary Portfolio, as evaluated at the beginning of your Portfolio reporting period, depreciates by 10% and thereafter at multiples of 10 per cent.

We also inform you when the overall value of your leveraged financial instrument and/or contingent liability transaction (eg. FX Options) depreciates by 10 per cent from its initial value and thereafter at multiples of 10 per cent.

This is so that you are aware of the impact of market conditions on the value of your investment holdings with us.

COVID-19: important changes to our depreciation notification process: following feedback from our clients and in light of recent communications from the UK regulator, the Financial Conduct Authority (FCA), we are changing our depreciation notification process.  

Due to the current COVID-19 volatile market environment some clients are receiving multiple 10 per cent depreciation notices within a short period of time. To address the impact felt by clients we are reducing the number of notices we issue. 

For the remainder of this reporting period (September to December 2020) if your investments experience a 10 per cent depreciation you will only receive one notification.  We are instead providing general updates on current market conditions on this webpage. We hope you will find these updates useful and recommend you regularly check this webpage for new information. If you would like to discuss the implications of the updates for your own investments, would like further detailed market information or have any other questions you can contact your Relationship Manager or Investment Counsellor.

This change will reduce the volume of depreciations notices you receive. We will contact you again if your relevant investments experience a 10 per cent depreciation during the next reporting period (January to March 2021). 

In line with the FCA’s communication, the above revised arrangements are temporary and will remain in place until 30th March 2021.  Subject to the FCA’s communications, following the temporary period, we will resume contacting you directly at each 10 per cent depreciation of your relevant investments’ value rather than only at the first quarterly depreciation notice. We will continue to review FCA communications and where appropriate update you of any further changes to the process.  

Market Conditions

After a year dominated by the response to the COVID-19 virus, financial markets have begun to focus on the expected economic recovery. For financial markets, the nadir was reached in late March 2020 as severe restrictions on social movement and business closures led to historic falls in economic activity and fears of mass insolvencies and job losses. 

The turning point came when the policy makers approved a combination of fiscal and monetary stimulus measures aimed at protecting jobs and flooding the market with ample liquidity. As investor sentiment returned, companies that were best placed to weather the new, social restricted environment found that their share prices quickly rebounded, with some technology names seeing a surge in earnings on the back of more digital consumption. As the lockdown measures began to make an impact on the virus, the easing of restrictions precipitated a swift economic recovery that lasted into the summer of 2020. This has led to a recovery in some of the sectors that were the most vulnerable to the virus. However, as the 2020 winter months approached another surge in virus cases led to a further round of lockdowns. By this time, government support, ultra-low rates and less onerous lockdown measures meant that markets were not put off course. When in November 2020 it become apparent that there would be a number of effective vaccines, and that the US election had not provided the potential shock that some investors had priced in, markets continued with a broadening recovery. 

Heading into 2021, the market still faces some political risks, such as the type of trading relationship the UK will have with the EU, and this may lead to some further volatility. Despite these risks, we expect a Covid-19 vaccine roll-out and sustained low rates will lead to a continued economic recovery which should further support the markets that have yet to fully recover from this year’s unprecedented shock.    

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