Accounting & Business – news – October 2013
International
“Demand growing” for integrated reporting
PwC reports growing demand for integrated reporting from investors and companies. “Stakeholders are increasingly considering internal and external non-financial factors, such as resource scarcity or demographic shifts, when assessing companies’ long-term prospects,” says PwC in the firm’s latest ‘Points of View’. It adds: “Companies that have embarked on the integrated reporting journey view it as a change process that has enabled them to think differently about their businesses.“ IR has enabled companies to strengthen financial reporting across their business activities and improved internal collaboration and communication, while some have used the process to develop key performance indicators, says PwC.
PCAOB criticises KPMG and PwC
KPMG and PwC have been criticised by the US Public Companies Accounting Oversight Board for audit failures. The criticisms were contained in the latest releases of audit inspection reports. PwC’s failures included insufficient checks on revenue accuracy and on stock and other asset valuations, reflecting failures by the firm to obtain sufficient evidence to justify audit opinions. KPMG’s failures included insufficiently rigorous evaluations of the impact of control deficiencies and insufficient evidence of revenues in a number of audits.
Tweedie inducted into ‘Accounting Hall of Fame’
Sir David Tweedie has been inducted into ‘The Accounting Hall of Fame’. He was presented with his award at the American Accounting Annual Meeting in Anahelm in California by Robert Herz, the former chairman of the FASB and himself a member of the Hall of Fame. The citation recognised Sir David’s role in the development of accounting standards first in the United Kingdom and then with the IASB.
Practitioners ‘should advise SMEs on FX policy’
Many practitioners are overlooking opportunities to help clients manage their foreign exchange risk exposure, according to an ACCA report. Less than a quarter of SMPs play an active role in helping SME clients manage foreign exchange risks. An international survey of 1,350 SMPs found 71% had SME clients with international activities. Fluctuating exchange rates can cost SMEs money, so it makes sense for them to seek advice from financial advisors in managing that risk, said ACCA’s senior economic analyst Emmanouil Schizas.
UK PLC told to drop Hong Kong auditor
A UK PLC, Early Equity, has been instructed by its financial regulator to drop its Hong Kong based auditor. The UK’s Financial Reporting Council told Early Equity that while the Hong Kong audit firm Clement Chan is authorised to audit companies that are incorporated outside the UK and listed in the UK, it is not authorised to audit public companies such as Early Equity that are incorporated in the UK. Clement Chan immediately resigned and was replaced by Haysmacintyre.
Rise in international placements for professionals
There will be a 50% rise in global relocations of accountants and other professionals in the next decade, as companies move towards more flexibility in locations as they search for growth, according to PwC research. Future trends will include more movement from East to West, long-distance commuting, virtual mobility and project-based assignments, says PwC. “Many companies are facing the reality that they don’t have the right talent in the right places to fulfil their global growth ambitions,” explains Carol Stubbings, international assignment services leader at PwC in the UK.
Amazon takes New York State to Supreme Court
Amazon has petitioned the Supreme Court to quash a move by New York State to require Amazon to collect an online sales tax on New York citizens buying goods from Amazon’s website. The demand by New York State reflects growing concern by local governments and city center retailers that online retailers have an unfair advantage by avoiding bricks and mortar taxes. Amazon declined to comment.
UK
Baker Tilly acquires RSM Tenon
RSM Tenon has been acquired by Baker Tilly. The parent RSM Tenon business entered administration after breaching banking covenants and Lloyds Banking Group declined to grant a covenant waiver. Baker Tilly bought the profitable parts of RSM Tenon from administrator Deloitte without taking on any historic debts. Laurence Longe, Baker Tilly’s national managing partner, said: “Baker Tilly and RSM Tenon are businesses of a comparable scale operating in similar markets across the UK and internationally, and so combining our strengths and skills will provide us with new opportunities for growth, as well as further strengthening and expanding our offering to the market.” RSM Tenon was the seventh largest accountancy firm in the UK, with about 2,500 employees in 38 offices.
SFO prosecutes Olympus
The Serious Fraud Office has begun criminal proceedings against Olympus and its UK subsidiary, the Gyrus Group. The two companies have been charged with making statements to auditors that were misleading, false or deceptive. Olympus faces one charge and the Gyrus Group faces four charges. An enquiry was initiated by the SFO after allegations were made by former Olympus CEO, Michael Woodford. Olympus has already been prosecuted in Japan, leading to suspended sentences for three senior executives. The alleged fraud relates to the accounting of the acquisition of Gyrus by Olympus.
Deloitte fined £14m
Deloitte has been fined £14m and given a “severe reprimand” for breaches of professional standards regarding its role as advisors to the MG Rover Group. Former Deloitte partner Maghsoud Einollahi has been excluded from the profession for three years. The FRC has now published its final report of the disciplinary hearing, which its executive director for conduct, Paul George, urged all members of the profession to read.
FRC supports integrated reporting
The FRC is calling for greater use of integrated reporting. It made the call in its consultation on guidance on strategic reporting. Melanie McLaren, the FRC’s executive director for codes and standards, said that investors want information to be clearer, more forward looking and more closely related to companies’ business model. “Along with our project on establishing a framework for disclosure, the guidance is aimed at ‘cutting clutter’ and improving relevance of corporate reporting to investors,” she said. “In drafting the guidance we have borne in mind developments in integrated thinking and reporting.”
PwC grows revenues by 3%
PwC has grown revenues in the UK by 3% to £2.7bn for the year ending June. Revenues grew by 1% in the assurance practice, 3% in the tax practice and 9% in consulting, while remaining flat in M&A. Profit rose to £740m, up from £727m in 2012.
Deloitte grows revenues by 8%
Deloitte increased revenues in the UK by 8% to £2.5bn in the year ending May. Revenues grew by 14% in its consulting practice, 12% in audit, 6% in tax and 1% in corporate finance. Profit distribution to partners rose slightly, from £569 in 2012 to £571m in 2013. The firm is creating 1,750 vacancies for school leavers, students and graduates, after recruiting over 3,000 people in the last year.
Vodafone settles HMRC tax dispute
Vodafone has paid £1.25bn to HMRC to settle an outstanding disagreement regarding in which jurisdiction royalties should be declared. The settlement involved Vodafone recovering £67m that had been paid in tax on the royalties to the Irish Revenue service. Vodafone has reportedly also agreed with HMRC that it is not liable for capital gains tax on the £84bn sale of its 45% stake in the US Verizon service. HMRC said it was unable to comment on confidential client matters. Vodafone did not respond to enquiries.
Robson Rhodes fined £1m over iSoft audit
Robson Rhodes has been fined £225,000 and ordered to contribute £750,000 towards the costs of the Accounting and Actuarial Discipline Board tribunal into its audit of iSoft. Former iSoft financial controller Ian Storey was reprimanded and fined £15,000, ordered to pay costs of £20,000 and excluded from his ICAEW membership for at least eight years. Robson Rhodes’ auditor Glyn Williams was reprimanded and fined £15,000. The Tribunal’s hearings took place in 2010 and 2011, but the findings were not published while criminal proceedings were taking place. These have now been abandoned.
EY loses Fullers audit
EY has been replaced as auditor of the pub chain Fullers, following a competitive tender. Grant Thornton has been appointed in its place. Meanwhile, Standard Chartered has decided to put its audit out to tender: KPMG is currently the auditor.
Former Chantrey Vellacott partner jailed
A former Chantrey Vellacott partner has been imprisoned for three years for theft. Garry Hacker was struck off from the ICAEW in 2011, following a disciplinary tribunal. He had been an insolvency practitioner for the firm and stole £235,000 from creditors. He is now bankrupt and was unable to repay the money, which was spent supporting three families and four children. A spokesman for the firm said that the fraud had been detected internally and creditors recompensed for losses. He added: “We, of course, reviewed our internal processes when this was detected three years ago and further checks have been introduced subsequently.”
Nair & Co bought by private equity
Accountancy firm Nair & Co has been acquired by private equity investor HgCapital. Nair & Co has 450 employees, is headquartered in Bristol and has offices in India, the US, Singapore, Japan and China. It specialises in support for high growth young businesses that are seeking to expand into international markets. HgCapital said that accountancy and administrative services were a target sector for its investments. Private equity firms have expressed a strong interested at buying into the legal services sector in recent years, but with limited success.
FRC recruits from PwC
PwC’s director of its financial services assurance practice Marian Williams has been appointed by the FRC as its codes and services director. Angus Bogle becomes director of investor engagement, joining from Fidelities International, where he was head of equities. He has recently been assisting the Association of British Insurers in a review of equity investments.
Kieran Poynter takes F&C chair
Kieran Poynter has been appointed non-executive chair of F&C Asset Management. He is former chairman and senior partner at PwC and has been an F&C board member since 2009. He is also a director of Nomura, International Consolidated Airlines Group – which owns BA and Iberia – and British American Tobacco.
HMRC conducts RTI impact survey
HMRC has launched an online survey of employers, requesting information on the impact of Real Time Information. Employers and their agents are asked to complete an online survey about their experience of the obligation to report PAYE information ‘on or before’ employees are paid. The information will be used to assess the impact of the reporting changes and whether these need to be amended. Employers who have missed two deadlines for filing RTI information are being contacted by HMRC by post to remind them of their obligations.
‘Brain drain’ causes accountancy shortage
There is a ‘brain drain’ of accountants and other finance professionals, leading to a skills shortage, according to the Association of Professional Staffing Companies. It reports a “spectacular rebound” in demand for accountants and other professionals, which has “risen exponentially” and is likely to lead to a sustained recovery in the market for these skills. Research by APSCo member Randstad concludes that the UK faces a shortfall of 10,200 qualified accountants by 2050 due to skills shortages, an ageing workforce and the Government’s restrictive migration policy.
Public sector seeks more accountants
Demand for accountants and finance professionals in the NHS, local government, housing and charity sectors has doubled in the last year, according to the latest Badenoch & Clark Professional Talent Spotlight. The survey found demand in the NHS had been spurred by next year’s deadline for remaining NHS trusts to achieve foundation trust status, which requires them to meet rigorous criteria of financial sustainability. There is also strong demand from charities, which are placing greater value on strategic management capability and change management skills.
Growing demand for accountants in Australia
British accountants are in strong demand in Australia and employers will pay for relocation costs, according to the Emigration Group, a migrant advisory service. The highest demand is in the major cities, Sydney, Melbourne and Brisbane, and ranges from accountants who are newly qualified to those with experience. Accountants who can grow practices and attract clients will be most attractive to Australian employers.
HMRC launches dispute service
HMRC has launched its Alternative Dispute Resolution service to enable small firms and individuals resolve disputes with HMRC without having to go to Tribunal. ADR uses independent facilitators to resolve disputes. The adoption of the new service follows a successful two year trial and consultation with professional bodies. Richard Summersgill, HMRC’s director of local compliance, said: “We know that taxpayers like the speed and flexibility of Alternative Dispute Resolution and evidence has shown that by using the simple service, many disputes can be significantly shortened and resolved without recourse to Tribunal.”
Accountants ‘favour security over pay’
Most freelance accountants regard job security as more important than pay, according to a survey of the profession. The survey found that 63% of those asked favoured long term assignments, down 2% in the last year and up 5% over the last two years. Only 37% regarded pay as more important. The survey also found that accountants are increasing optimistic that they will find new assignments when one is completed. The research was conducted for the Giant Group, which supports accountants taking on freelance assignments.
Politics
EU asks if tax rules breached
The European Commission has requested information from Ireland, Luxembourg and the Netherlands to consider whether they breached EU laws with their corporate tax rules and collection practices, according to the Financial Times. The Commission is reportedly interested in whether arrangements with multinationals such as Apple, Amazon and Starbucks represent unfair tax competition between member countries. The FT quotes the Commission as saying “At the moment we are simply gathering information on tax rulings”. When contacted by Accounting & Business the Commission declined to comment, but did not challenge the accuracy of the report.
Tax rhetoric ‘putting off UK investment’
Criticisms from the Public Accounts Committee of large companies for paying little in corporate tax are deterring foreign direct investors, says David Sproul, Deloitte UK’s senior partner and chief executive. Some companies advised by the firm have put on hold plans to invest in the UK, fearful that tax policy and legislation will change. “They look at the PAC, they look at some of the media, and interpret that as lack of certainty,” he said.
Advisors face £1m fines
Tax advisors will be fined up to £1m for failing to co-operate with investigations into tax avoidance schemes under proposals put out for consultation by the Treasury. “High risk” promoters face additional fines of £10,000 for each day they fail to co-operate. The proposals are part of a package of greater powers for HMRC, which will require prior notice of tax avoidance schemes. The primary objective is to deter tax avoidance schemes, said the Treasury.
£1.7bn in bonuses deferred
Some £1.7bn in bonuses was deferred from the last tax year to avoid the former 50 pence top rate of income tax, according to the Financial Times. The claim was made after Office for National Statistics figures revealed £4.2bn in bonuses was paid in the current tax year, a £1.7bn increase over the 2012/13 year. The FT calculates this cost the Exchequer £85m in tax, of which £35m related to bonuses in the financial services sector.
Anti fraud measures ‘saved £6.5bn’
Stronger measures to tackle fraud and errors saved the Government £6.5bn since the last General Election, claims Cabinet Office minister Francis Maud. The Government accepts that there is still a heavy burden from fraud and error, in particular through the tax and benefits system. The Government believes this costs more than £31bn a year, or £500 per person. A priority is to reduce fraud through improved data sharing between departments.
RoW
GT ex partner stole $4m
A former partner of Grant Thornton in the US has admitted stealing $4m of client funds between 2004 and last year. Craig Haber pleaded guilty in a New York court hearing and agreed to restitution of up to $4.34m. Haber had been a partner in Grant Thornton’s Manhattan offices from 1993 to 2012, but only left the firm in July this year. The court was told that contrary to the firm’s policy, Haber instructed clients to mail checks directly to him. He deposited these in an account that he controlled. Haber is to be sentenced in a later hearing, scheduled for December. A spokeswoman for the firm said: “Grant Thornton is pleased that the authorities have resolved this matter swiftly.”
African economy ‘will double in size’
Africa’s economy will double in size to $4trn by 2025, according to a report from KPMG, which says that Africa is emerging as the next driver of the global economy. KPMG argues that exporters and investors must recognise the continent’s significant country-by-country differences and not adopt common approaches to all of Africa’s states. Demographic change must be factored into operations – the continent already has a population of over one billion. “Close to three quarters of African people will be living in African cities by 2050,” says De Buys Scott, KPMG’s head of global infrastructure and projects group in Africa. “African cities and megacities already have a larger population than all of Europe.”
Companies ‘may keep leases off balance sheet’
Companies are likely to renegotiate leases to keep them off their balance sheets, predicts Fitch Ratings. New IFRS standards will put leases on balance sheets if their terms are over 12 months, which Fitch agrees will improve financial reporting transparency. But the agency believes that many leases will be restructured to avoid balance sheet inclusion. Approaches likely to be adopted may include the use of short term leases, or the replacement of leases with service contracts.
FEE urges Euro Parliament to support IASB
The Federation of European Accountants, FEE, has urged the European Parliament to demonstrate stronger support for the IASB. In a letter to the Parliament’s Committee on Economic and Monetary Affairs, FEE said: “It is highly regrettable that the debate on global financial reporting standards and the body that Europe has entrusted to set these standards (the IASB) is often compromised by matters that are only loosely related to the issue or are based on ill informed and unsubstantiated arguments, promoted by a small but vocal minority. This is detrimental to a constructive dialogue and thus is not in the public interest.”
ACCA and PwC promote IFRS in Nigeria
ACCA is collaborating with PwC in Nigeria to support capacity building on IFRS. “Both ACCA and PwC share common professional values, global presence, ethics and governance,” said ACCA chief executive Helen Brand. “This perhaps explains the desire to collaborate on key initiatives, such as capacity building in IFRS, which are currently being adopted in Nigeria.” ACCA and PwC, in co-operation with the IASB, are to hold a series of joint events on IFRS for SMEs.
World Bank supports Pakistan
Pakistan has been promised the support of the World Bank as it struggles with a severe economic and fiscal crisis. In July the newly elected government of Nawaz Sharif adopted a harsh austerity budget that aims to increase federal revenues by 9.8%, including through the imposition of VAT. Living standards in Pakistan have already been badly eroded by a 42% decline in value of the Rupee against the Dollar. The government aims to cut its budget deficit from 5.2% to 4% in one year. The World Bank is to provide $1.5bn of support to assist with economic stabilisation and the adoption of structural reforms.
Digital currencies face controls
Bitcoin and other digital currencies may become subject to strong regulation and investigations into their operations. In the US, the Senate’s Homeland Security Committee is investigating potential threats posed by virtual currencies. Meanwhile, the New York Department of Financial Services is considering regulating digital currencies. Concern about virtual currencies has grown since the Costa Rican based Liberty Reserve service was closed down amid allegations that it was being used for laundering profits from drugs trades and child pornography and for tax evasion.
FAF to review stock option accounting
The Financial Accounting Foundation is to review the accounting of stock option expenses and to consider the impact of the FASB standard, FAS157, on stock option accounting. This was adopted in 2004. The focus will be to determine whether the standard achieved its objective of accurately portraying the economic value of compensation through stock based arrangements.
Russian oligarchs take majority ownership of Cypriot banks
Tough haircuts on Cypriot banks have left Russian oligarchs holding majority ownership of several, including the Bank of Cyprus, according to an investigation by the New York Times. The report quotes Cypriot president Nicos Anastasiades as saying that while European Union policy makers wanted to impose losses on wealthy Russians, the restructuring they had insisted upon had unintended consequences. “They wanted to throw out the Russians, but in the end they delivered our main bank to the Russians,” he said. The report argued that this leaves Russian oligarchs in a strong position to influence the island’s economy. The Bank of Cyprus did not respond to a request for comment.
Schauble predicts new Greece bail-out
Greece will need to a third bail-out to enable it to emerge from its financial crisis, Germany’s finance minister in the last government, Wolfgang Schäuble, suggested during campaigning for last month’s elections. “There will have to be another programme in Greece,” he said, otherwise the country would be unable to service its burden of debts. The International Monetary Fund believes that Greece requires an additional €11bn to meet its debt obligations in the period until 2015.
KfW is ‘world’s safest bank’
KfW of Germany is the world’s safest bank, according to analysis conducted by Global Finance magazine. All of the top ten banks are European. The evaluation was conducted using long-term credit ratings issued by Moody’s, Standard & Poor’s and Fitch, along with total asset valuations of the 500 largest banks worldwide. The second safest bank is Bank Nederlandse Gemeenten of the Netherlands, followed by Zürcher Kantonalbank of Switzerland and Landwirtschaftliche Rentenbank of Germany. Rabobank of the Netherlands was listed as the world’s safest commercial bank. The highest rated non-European bank was the TD Bank Group of Canada.
1 in 3 eurozone companies ‘unprepared for SEPA’
One in three companies operating in the eurozone is unprepared for SEPA, the Single Euro Payment Area, according to a report from PwC. SEPA begins operation in February. A study of 150 companies in the eurozone found that many are unready for the transition, with companies typically underestimating the scale of challenge needed to comply. Few companies have a back-up plan if they are not ready on time.
PwC strengthens consulting network in Pacific Rim
PwC’s consulting practices in the Pacific Rim region have formed a new joint venture to strengthen cross-border operations. The agreement involves practices in South East Asia, New Zealand, Australia and United States, which have together created a new South East Asia consulting practice. PwC partner Derek Kidley will lead the practice, based in Singapore. “South East Asia is one of the fastest growing regions in the world and there is significant demand for specialist consulting expertise and support,” he said.
KPMG China opens 14th office
KPMG China has opened a new office in Chongqing, its fourteenth in the country. Chongqing is China’s third largest city, with a population of over 30 million people and is the world’s fastest growing urban centre. KPMG said that many of its global clients now have operations in the city, which has benefited from a strong inflow from foreign investment in recent years. The firm expects Chongqing’s manufacturing economy to grow further in the near future.
PwC appoints new China partners
PwC has appointed 32 new partners in China, Hong Kong, Singapore and Taiwan. Thirteen of these will be based in mainland China, eight in Hong Kong, six in Singapore and five in Taiwan. Seventeen new partners are in the assurance practice, eight in tax and seven in advisory. Thirteen of the new partners are women. PwC China, Hong Kong, Singapore and Taiwan operate on a collaborative basis, which now involves 690 partners.
Mazars launches in Ghana
Mazars has launched in Ghana, following a merger with local firm E.T. Akonor and Co. Mazars now operates in 71 countries and is the seventh largest accountancy firm in Africa. Mazars is a member of the Praxity alliance of independent accountancy firms, which has recently expanded with several new member firms joining. In Germany, HWM has affiliated; ENOR from Iceland has joined; El-Wafa in Palestine has become a member; and in the UK, Brand Finance has affiliated.
Deloitte forms strategic alliance with Vertex
Deloitte in the United States has entered into a strategic alliance with tax software providers Vertex. The arrangement will provide synergies with Deloitte’s tax and data management solutions, the firm says. Deloitte is recognised as a preferred associate of Vertex under the arrangement. Integration of technology with tax advice differentiates Deloitte from its competitors, argues the firm.
Carr, Riggs and Ingram expands
US accountancy firm Carr, Riggs & Ingram, CRI, has expanded through two new mergers. It is the 28th largest accountancy firm in the US, is one of the fastest growing and is based in the Southern states. The most recent merger is with Atlanta firm Laney, Boteler and Killinger, which now operates under the CRI name. North Carolina firm Pittard, Perry & Crone merged with CRI a few weeks previously and will also operate as part of CRI. The enlarged firm now has 19 offices.
Deloitte enables ME firms recover EU VAT
Deloitte has launched a new service for Middle East clients to recover VAT paid in the European Union. The service relies on custom-made proprietary technology, called ‘RevaticSmart’. “This technology acquisition, combined with Deloitte’s local indirect tax expertise, presents a unique opportunity for our clients in the Middle East to reduce hidden VAT costs”, said Nauman Ahmed, Deloitte Middle East tax practice leader.
Ireland
EU asks if tax rules breached
The European Commission has requested information from Ireland, Luxembourg and the Netherlands to consider whether they breached EU laws with their corporate tax rules and collection practices, according to the Financial Times. The Commission is reportedly interested in whether arrangements with multinationals such as Apple, Amazon and Starbucks represent unfair tax competition between member countries. The FT quotes the Commission as saying “At the moment we are simply gathering information on tax rulings”. When contacted by Accounting & Business the Commission declined to comment, but did not challenge the accuracy of the report.
Late payment ‘strangling small firms’
Late payment is “strangling” the SME sector, with average payments taking 62 days, according to a survey conducted by the Small Firms Association. Some 70% of companies are suffering late payment against credit terms, an increase of 2% in the last year. One in four companies is unaware that since March this year they are allowed by law to automatically charge interest on late paid bills.
Ryanair profit warning
Profits at Ryanair fell by 21% in the first quarter to €78m, despite passenger growth of 3%. The airline warned that full year profits would be at the bottom end of previous projections of €570m to €600m. The airline reported that unit costs rose by 4%, mostly because of a 6% increase in fuel costs. Market conditions remain tough because of the recession, government austerity programmes, high fuel costs and “excessive” government taxes, which driving down passenger demand and profits, said the airline.
Noonan and Hamilton meet to discuss banks
Michael Noonan has met his Northern Ireland counterpart Simon Hamilton for the first time since Hamilton’s appointment as finance minister in July. They discussed cross-border approaches that might improve bank lending. Hamilton said: “I want to put a renewed focus on access to finance and banking issues. Too many businesses are still having difficulties in accessing finance. This is restricting their ability to access working capital, or the finance needed to exploit new business opportunities and jeopardising economic recovery in Northern Ireland.”
Repak CEO goes after Grant Thornton investigation
Repak, the industry funded recycling agency, has dismissed its chief executive Andrew Hetherington following an investigation into the organisation’s accounts. In a statement Repak confirmed that it had terminated Hetherington’s contract. It added: “The Board has now placed the matter in the hands of its lawyers and for legal reasons no further comment can be made. Repak is now in the process of seeking a new chief executive to take the organisation forward to a fresh phase of development.” Grant Thornton declined to comment. It was not possible to contact Andrew Hetherington.
Roux named new financial regulator
Cyril Roux has been appointed by the Central Bank as head of financial regulation and Deputy Governor. He was previously a senior official in France’s regulator for banks and insurers and before that was a senior official with France’s insurance regulator, which was merged with the banking regulator three years ago. Roux has also worked for the French Treasury and insurance company AXA. He takes over from Matthew Elderfield, who has been appointed by the Lloyds Banking Group as its director of conduct and compliance.
Lending continues to fall
Bank lending to businesses and households is continuing to fall. The latest figures from the Central Bank show that lending to Irish resident non-financial corporations fell by 4.8% in the year ending July 2013, with loan repayments exceeding new borrowing by €303m in July. Households repaid €513m more than they borrowed in July. There was a reduction both in mortgage borrowing and in other personal borrowing.