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Daily News Roundup: Monday, 14th March 2022

Posted: 14th March 2022

BANKING

HSBC urged to exit Russia

HSBC, which has about 200 staff in Russia, is under pressure to close its business in the country after several MPs on the Treasury select committee called on the FTSE 100 bank to follow other western businesses and withdraw. HSBC said: “We do not have any retail operations, customers or branches in Russia,” adding that it is “focused on helping our multinational corporate clients… manage the financial and operational changes they now need to make.” Customers are also pushing for HSBC to cut its ties with Russian oil and gas businesses with over 1,700 writing to the bank in protest.

Slack verification enables fake bank scammers

The Times investigates how hundreds of fake banks can be registered at prestigious London addresses with Companies House and then scam the public. People are convinced of their legitimacy because these “banks” post their certificate of incorporation on their website and used it to lure victims. But none of the information supplied at the formation of the company is verified. The paper urges readers not to trust the Companies House register but to use the Financial Conduct Authority’s register instead and check its warning list.

Banks told to provide information on oligarchs under sanctions

The Financial Conduct Authority has told banks to share information about how the Russian oligarchs they may previously have served are moving money around the world to dodge restrictions.

PRIVATE EQUITY

BlackRock funds hit by $17bn in losses on Russian exposure

BlackRock has been forced to writedown the value of its Russian securities holdings to the tune of roughly $17bn because of the attack on Ukraine. BlackRock had about $18.2bn in Russian securities assets for clients at the end of January, but their value had slumped to about $1bn by the last day of February.

INTERNATIONAL

IMF says Russian default “not systematically relevant”

The International Monetary Fund has said that sanctions imposed on Russia were already having a “severe” impact on its economy and would trigger a deep recession there this year. The fund’s managing director, Kristalina Georgieva, also said that a Russian default on its debts was no longer “improbable” but contagion from such an event was unlikely as the exposure was “not systematically relevant”. However, the knock-on effects for countries reliant on imports of wheat and other commodities from Russia could be dramatic, Georgieva added. Separately, Moscow has said it is within its rights to pay international bondholders in roubles rather than dollars. The assertion comes ahead of a scheduled $117m interest payment due on Wednesday. Meanwhile, the US has warned China not to assist Russia after Moscow said it was counting on Beijing to help it withstand the blow to its economy from sanctions.

Deutsche Bank reverses course, backs out of Russia

Deutsche Bank has shifted its position on Russia after intense pressure to exit the country over Vladimir Putin’s attack on Ukraine. On Friday, the bank said it was winding down its operations in Russia and that there would be no new business there. On Thursday,  CEO Christian Sewing said that withdrawing completely from Russia would "go against our values" and leave “clients who cannot exit Russia overnight” without support. Separately, a report from Deutsche Bank warned that cutting Russia off from Swift completely would “complicate trade and amplify jitters” as well as “precipitate the expansion of rival messaging networks and payment methods that circumvent sanctions”. Berlin has long resisted forcing Russia out of Swift fearing it would be left unable to pay for Russian gas.

UBS’ gender pay gap is twice the UK average

UBS has revealed that its mean pay gap for base pay came in at 29% for 2021, with the pay gap for bonuses rising to 56%. An internal report shows the bank’s gender pay gap was almost double the UK average last year with UBS blaming the disparity on a lack of women in senior roles. It added: "Our pay gap will only be narrowed by increasing the number of women in leadership and higher-paying roles and a continued focus on creating and leveraging the opportunities to do this whilst maintaining our culture of meritocracy and pay for performance."

Seven Russian lenders disconnected from Swift

Seven Russian banks have now been blocked from the Swift messaging system, although Gazprombank and Sberbank remain connected because EU countries need them to buy oil and gas from Russia. There are alternative payment systems that have been developed by Russia and China and some analysts predict the sanctions will prompt other nations to consider alternatives to Swift as they seek to reduce their vulnerability to restrictions imposed by western powers.

DoJ censures Deutsche Bank for late flagging of greenwashing claims

Deutsche Bank violated the terms of a deferred prosecution agreement made with the US Department of Justice last year by failing to flag a whistleblower complaint about greenwashing allegations at its asset manager DWS in a timely manner. The violation means the DoJ will now extend the stay of a special monitor until February 2023.

JPMorgan accelerates senior relocations from Hong Kong to Shanghai

Plans by JPMorgan to relocate some of its top investment bankers in Hong Kong to mainland China have been accelerated as strict pandemic restrictions continue to frustrate travel from the territory.

US to target banks and crypto exchanges that aid sanctioned Russian oligarchs

A task force launched by the US Department of Justice will target banks, cryptocurrency exchanges and other financial institutions that serve sanctioned Russians, the FT reports.

AVIATION

Billions in losses could be written-off by aircraft lessors

Vladmir Putin’s threat to seize 500 foreign-owned planes could cost Lloyd's of London $10bn. Brokers have been expecting that policies will be triggered under “Hull War and Allied Perils” clauses, which protect the holder against the fallout from war.

FINANCIAL SERVICES

Vadera under fire over messy succession process

The Times reports that the chairwoman of the Prudential, Shriti Vadera, is coming under pressure after plans to replace departing CEO Mike Wells failed to produce a successor. The group will be left with an acting CEO in the form of the finance director Mark FitzPatrick when Wells retires later this month. FitzPatrick, has also said he wants to leave the company. Vadera fended off bullying claims last year, but an independent inquiry held by QC Aileen McColgan cleared Vadera of any misconduct. A source close to the Pru board put complaints about bullying down to a core of old-school men who “did not like having a woman shaking the place up.”

LME stirs anger by halting and unwinding nickel trades

Traders are considering legal action against the London Metal Exchange after it shut down its nickel market and unwound thousands of trades amid a sharp rise in the price of nickel. One fund manager accused the LME of reversing trades to “save your favoured cronies”. In a statement on Friday, the LME defended its decision saying the market had become disorderly, with prices not reflecting the physical market. It also denied that parent company Hong Kong Exchanges and Clearing had influenced its decision. The exchange is in discussions with the FCA and the PRA, according to the FT.

Fraudulent insurance claims soar to cover cost of living rise

LV= has reported a vast surge in fraudulent insurance claims with the company’s Matt Crabtree putting the rise was down to growing financial pressures on households. “Sadly, this is leading to an increase in motivation for certain individuals to stage an accident or exaggerate an insurance claim,” he said. The rise in fake claims has prompted the Association of British Insurers to issue a warning to policyholders about exaggerating claims, saying they would find themselves blacklisted from certain providers in future and could ultimately face prosecution.

Goldman Sachs seeks stake in Nucleus

Goldman Sachs is battling to buy a stake in Nucleus, one of Britain's biggest platforms for financial advisers. Sky News understands that one of Goldman’s private equity funds is among four suitors for a stake in Nucleus that will value the business at about £700m. City sources said that the other bidders were Centerbridge Partners, GTCR and HPS. Nucleus is the UK's fifth-largest platform for financial advisers, behind the likes of Quilter and Aegon.

Bank of England calls on crypto firms to impose sanctions

The Bank of England and the Financial Conduct Authority have called on crypto firms to ensure sanctions are enforced amid the conflict between Russia and Ukraine. The financial regulators said they are collaborating with international partners amid concerns digital assets provide people with a means of bypassing punitive economic measures.

Revolut executive leaves for crypto start-up

Alan Chang, the chief revenue officer at Revolut, is leaving the British fintech to pursue a new crypto venture called Fuse Supply Limited. Chang is seeking to raise $100m in financing for the businesses by offering future access to tokens to early stage backers.

LEISURE & HOSPITALITY

Pubs, hotels and restaurants offer to help refugees

Hospitality bosses have joined retailers and other business in offering assistance to Ukrainian refugees. Kate Nicholls, chief executive of UK Hospitality, said she has been “inundated with offers of help and support” from hotels with spare rooms and restaurants looking to provide food parcels. Ms Nicholls said hospitality operators could “kill two birds with one stone” as many roles in the sector come with accommodation. The arrival of people seeking temporary work could also help relieve severe staffing shortages, she added. “If we can provide meaningful jobs to support them while they're here, we would be very happy to do so.”

MANUFACTURING

Manufacturers call for Chancellor to act as price rises hit record high

Ongoing inflationary pressures have led manufacturers to increase prices at record levels, according to a report by Make UK. The study showed prices for UK exports increased for the fourth successive quarter, with prices likely to rise further because of the conflict in Ukraine. The poll of nearly 300 firms also found nearly one in 10 believed increases in energy and raw materials prices were a threat to their business. Stephen Phipson, Make UK's CEO, said: "Companies are facing eyewatering increases in costs, which are becoming a matter of survival for many. While some of the increases are driven globally, the Government cannot use this as a shield from the fact some are self-imposed and, added together, are now forming a perfect storm for companies.”

MEDIA & ENTERTAINMENT

EU and UK open antitrust probe into Google and Meta over online ads

The European Commission and the UK’s Competition and Markets Authority are investigating a deal between Google and Facebook-owner Meta in relation to online advertising. Regulators suspect an agreement between the two companies known as “Jedi Blue” locked out competing services. Andrea Coscelli, CMA chief executive, said: “We’re concerned that Google may have teamed up with Meta to put obstacles in the way of competitors who provide important online display advertising services to publishers.”

Pearson rejected £7bn takeover bid from Apollo

Shares in UK education publisher Pearson soared 18% on Friday following news the group had rejected a two takeover bids from private equity group Apollo. The approaches, at 800p in November and then at 854.2p on Monday, “significantly undervalued the company and its future prospects”, Pearson said.

RETAIL

Morrisons CFO steps down ahead of refinancing

The CFO of Morrisons, Michael Gleeson, has stepped down just months after the supermarket group was taken over by private equity firm Clayton, Dubilier and Rice. Gleeson’s departure also come ahead of a major refinancing. Gleeson said in a statement on Friday that as the takeover was complete it was “a good time to take on a fresh challenge.”

SPORT

Chelsea’s bank accounts frozen

Barclays temporarily suspended Chelsea FC's bank account on Friday after the Government sanctioned owner Roman Abramovich. “The licence allows the club to continue with day-to-day activities, but the banks don’t have the risk appetite for it,” a source said. “They’ve frozen some of the corporate credit cards. It’s put a lot more pressure on the club.”

ECONOMY

UK economy rebounds but Ukraine war clouds outlook

Figures from the Office for National Statistics show the UK economy grew by a better than expected 0.8% in January, compared with a 0.2% contraction in December, as the effects of the Omicron Covid variant began to ease. This took the three-month-on-three-month growth rate to 1.1%, also ahead of expectations. ONS director of economic statistics Darren Morgan said: "All sectors grew in January with some industries that were hit particularly hard in December now performing well.” Following the release of the figures, the Chancellor said: "We have provided unprecedented support throughout the pandemic which has put our economy in a strong position to deal with current cost-of-living challenges.” But economists said the figures had been pushed into the rear-view mirror by the conflict in Ukraine, with Suren Thiru at the British Chambers of Commerce contending that Russia’s invasion had increased the risk of a recession in the UK.

Bank expected to raise interest rates again

The Bank of England is expected to increase the base rate from 0.5% to 0.75% on Thursday in a bid to bring inflation back under control. However, raising rates could derail a fragile economic recovery just as the world contends with the war in Ukraine. George Buckley, an economist at Nomura bank, said he expected a rate rise this week and again in May, August, November and February next year – taking the benchmark to 1.75%.

OTHER

New EU law could ban Bitcoin and Ethereum

The European Commission has proposed legislation that could ban crypto assets that rely on an energy intensive mining process known as proof-of-work. The draft law states that crypto assets in the EU “shall be subject to minimum environmental sustainability standards” with all digital assets traded in the EU required to “ensure compliance”. Ian Taylor the chief executive of industry body Crypto UK, said the legislation could have a pervasive impact on crypto with Bitcoin, Ethereum, Decentralized Finance and NFTs facing an “existential threat.” However, Erik Thedéen, the vice-chair of Europe’s securities and markets authority, said the solution is to shift to a proof-of-stake consensus mechanism, which Ethereum already has plans to do, as this would save vast amounts of energy.

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