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Citigroup has conducted a confidential analysis that reveals potential loan losses of billions of dollars if efforts to combat climate change accelerate. The analysis, prepared by the bank, shows that if the world were to achieve net-zero greenhouse gas emissions by 2050, Citigroup could suffer $10.3bn in loan losses over 10 years. The losses would primarily impact borrowers in the oil, gas, and real estate sectors. While the estimated hit to Citigroup's loan book is relatively small compared to its $730bn wholesale loan book, it highlights the challenges faced by banks in managing their loan book exposure amid the transition away from fossil fuels. The analysis also found that severe hurricanes could trigger losses to Citigroup's loan portfolio, although the impact would be limited. The Federal Reserve has yet to publish aggregated findings on the climate exposure of major U.S. banks. Citigroup's analysis is based on assumptions and uncertainties, and achieving the net-zero target by 2050 would require significant policy changes.

 

Reuters

Peloton has announced the departure of chief executive Barry McCarthy, along with a restructuring that will see around 15% of its global workforce, or 400 employees, lose their jobs. The company plans to continue to close retail showrooms and make changes to its international sales plan, with the aim of reducing annual run-rate expenses by more than $200m by the end of fiscal 2025. Mr McCarthy, meanwhile, will be replaced on an interim basis by chair Karen Boone and director Chris Bruzzo. “This restructuring will position Peloton for sustained, positive free cash flow, while enabling the company to continue to invest in software, hardware and content innovation, improvements to its member support experience, and optimizations to marketing efforts to scale the business," the company said. The announcements came as Peloton announced third-quarter results. Sales in the three months to March 31st fell 4% to $718m, and it reported a net loss of $167.3m, or 45 cents per share, compared with a loss of $275.9m a year earlier.

 

USA Today

CNBC

New York Times

Wall Street Journal

The Federal Communications Commission (FCC) is moving to prevent Huawei Technologies, ZTE and other foreign companies deemed to pose U.S. national security concerns from certifying wireless equipment. The new proposal, which will be voted on later this month, would permanently prohibit Huawei and other entities on an FCC list of companies posing national security risks “from playing any role in the equipment authorization program while also providing the FCC and its national security partners the necessary tools to safeguard this important process,” the agency said. FCC chairwoman Jessica Rosenworcel said in a statement the agency “must ensure that our equipment authorization program and those entrusted with administering it can rise to the challenge posed by persistent and ever-changing security and supply chain threats.”

 

South China Morning Post

A Justice Department investigation is looking into TD Bank's internal controls for money laundering. The probe focuses on how Chinese crime groups and drug traffickers used the Canadian lender to launder money from U.S. fentanyl sales. TD Bank is also facing three other anti-money-laundering investigations in the U.S. and has set aside $450m to resolve one of them. The bank has been fined $6.7m by a Canadian banking regulator for failing to file suspicious activity reports and document risks related to money laundering. TD's expansion plans have been stalled due to concerns over its anti-money-laundering practices. The investigation into TD's practices is led by the U.S. Attorney's Office in New Jersey and stems from a criminal case involving the laundering of at least $653m in proceeds from illicit narcotics. Chinese money-brokers that Mexican cartels use to launder their proceeds have made extensive use of the U.S. banking system. The Treasury Department's Financial Crimes Enforcement Network has warned financial institutions about the threat posed by these networks. TD Bank says it is cooperating with law-enforcement officials and regulators and strengthening its anti-money-laundering program.

 

Wall Street Journal

A federal judge in New York has dismissed a proposed class action lawsuit filed against the American Bar Association by two members who feared that their data was exposed in a March 2023 data breach. The plaintiffs failed to specify what security measures the ABA should have taken besides hashing and salting passwords. The claims for breach of implied contract and deceptive practices in New York failed because there are no factual allegations suggesting that the ABA's use of hashed and salted passwords fell below industry standards. The deceptive practices claim under Texas law failed because the plaintiffs failed to plead which deceptive practices were allegedly violated by the ABA. The ABA's privacy policy does not promise immediate notification of a breach, and the consumer protection claims on behalf of class members must be dismissed. "No reasonable consumer would be misled to think otherwise," the judge ruled.

 

Bloomberg Law

ABA Journal

Reuters

Google has filed a request to a U.S. judge to reject the sweeping changes to its Play Store proposed by Epic Games. The filing comes after Epic Games convinced a jury last year that Google unlawfully stifled competition with its controls over app downloads and in-app transactions. Google argues that Epic's proposal would make it nearly impossible for the company to compete. Epic Games had asked the judge to force Google to make it easier for users to download apps from other sources and to allow developers more flexibility in offering and charging for purchases. A hearing on the proposed injunction is scheduled for May 23rd.

 

US News and World Report

A utility owned by Warren Buffett's Berkshire Hathaway is facing $30bn in new claims for causing Oregon wildfires in 2020, which is nearly four times the maximum loss it had projected. One thousand victims have filed claims against the PacifiCorp utility, seeking up to $5m for actual losses and up to $25m for non-economic losses. This comes after a jury ordered PacifiCorp to pay $90m to 17 claimants for gross negligence. PacifiCorp has already paid $735m to settle wildfire claims. Berkshire Hathaway Energy, the parent company of PacifiCorp, has not yet responded to the claims. The federal government is also seeking nearly $1bn from PacifiCorp to cover wildfire costs. Berkshire Hathaway bought PacifiCorp for $5.1bn in 2006.

 

U.S. News

Joshua Dean, a 45-year-old former quality auditor for Boeing supplier Spirit AeroSystems, has died suddenly after suffering from a fast spreading infection. Spirit AeroSystems builds the bulk of the 737 Max for Boeing. Dean claimed to have found a serious manufacturing issue with the Max in October 2022, but said nothing was done by management after he flagged the issues. He is the second Boeing whistleblower to be found dead this year. John Barnett was found in a car park following a suspected suicide in March. He had been giving evidence in a lawsuit against the U.S. planemaker at the time of his death. Attorneys for Mr Dean said aviation companies should encourage and incentivize workers who raise concerns over quality and safety issues.

 

CBS News

The Times

Teen apparel retailer rue21 has filed for Chapter 11 bankruptcy protection for the third time. The company plans to shut down its 540 stores and sell its intellectual property. Despite attempts to sell the business, rue21 was unable to find a buyer willing to pay more than the value of liquidating its inventory. Gordon Brothers has been hired to assist with the store closing sales. The Pennsylvania-based retailer, which focuses on affordable fashion for teens and young adults, previously filed for bankruptcy in 2003 and 2017. rue21 has approximately 4,900 employees and $194.4m in debt. The company has struggled after emerging from its previous bankruptcy, facing challenges from the shift to online shopping accelerated by the COVID-19 pandemic.

 

Bloomberg

Reuters

Wall Street Journal

Interest rates set to remain elevated could lead to more substantial goodwill impairments, as companies like Walgreens, Lumen Technologies, Truist Financial, and Verizon Communications grapple with the increased cost of capital. These companies have already reported significant impairments over the past year, driven by acquisitions made during periods of lower interest rates, now re-evaluated under the current higher rates. This financial strain is exacerbated by persistent inflation, complicating the Federal Reserve's capacity to cut rates. As companies adjust to these economic shifts, the total impairments have reached a notable high, reflecting the ongoing challenges within the corporate sector.

 

Wall Street Journal

In a groundbreaking experiment, researchers have tested the capabilities of artificial intelligence (AI) by subjecting top AI models to the Certified Public Accountant (CPA) exam. The study, titled "Can LLMs Pass the CPA Exam? Evaluating Large Language Model Performance on the Certified Public Accountant test," provides a comprehensive assessment of AI's potential in the accounting profession. The research team evaluated the performance of AI models such as Google Gemini, ChatGPT-4, Claude, Mixtral, and Llama-2b on multiple-choice questions from the Becker CPA exam preparation suite. While some AI models showed promise, human accountants are not likely to be replaced as AI struggles with complex, open-ended questions. ChatGPT-4 excelled in financial reporting and regulation, while Claude Opus performed well in auditing. Llama-2b underperformed, indicating the need for further development. Lead author Will Zacher emphasizes that AI tools may handle routine accounting tasks, but skilled human accountants are still necessary for interpretation and strategic guidance. The AI models were tested on all sections of the CPA exam, with a passing score of 75% as the criterion for success.

 

CPA Practice Advisor

In 2023, the IRS collected over $100bn in compliance-related fines, with businesses, including law firms, facing hefty penalties for mishandling income tax affairs. To mitigate these risks and streamline financial management, law firms are increasingly turning to a variety of technological tools. Document Scanning and Conversion Solutions like DocuClipper enhance the accuracy and accessibility of financial documents, creating digital audit trails and ensuring data security to protect sensitive information. Financial Monitoring Software scrutinizes transactions for anomalies and generates comprehensive reports, essential for audits and compliance checks. Risk Assessment Tools automate risk scoring, provide continuous monitoring, and integrate with compliance databases to ensure law firms stay updated on regulatory requirements. Advanced Auditing Software automates compliance checks, performs in-depth historical data analyses, and offers customizable reporting functions tailored to a law firm’s needs. Additionally, Time Tracking Software ensures accurate and ethical billing practices by maintaining detailed time entries, automating billing cycles, and integrating with accounting systems, all crucial for maintaining transparency and compliance with billing regulations. By adopting these integrated technological solutions, law firms can significantly enhance their financial compliance strategies, avoiding fines and protecting their reputation in the process.

 

Lawyer Monthly Magazine

The IFRS Foundation's International Sustainability Standards Board (ISSB) has released the IFRS Sustainability Disclosure Taxonomy (ISSB Taxonomy), a digital tool that allows investors to analyze sustainability-related financial disclosures based on the ISSB's recently published sustainability and climate-related reporting standards. The new Taxonomy will enable investors to search, extract, and compare sustainability-related financial disclosures, providing a global baseline of standards. The ISSB launched its inaugural general sustainability (IFRS 1) and climate (IFRS 2) reporting standards in June 2023, with the aim of establishing consistent disclosure requirements for sustainability risks and opportunities. The ISSB Taxonomy is designed to be consistent with the IFRS Accounting Taxonomy, allowing companies to provide a holistic reporting package to investors. ISSB Chair Emmanuel Faber emphasized the importance of the Taxonomy in supporting capital market transparency and efficiency. The ISSB's new IFRS Sustainability Disclosure Taxonomy can be accessed through their website.

 

ESG Today

Three major retailers, Amazon, Walmart, and Target, have removed weighted infant sleepwear from their shelves due to growing safety concerns. The American Academy of Pediatrics and other experts have warned about the potential dangers of these products, which include swaddles and sleep sacks with added weight. Sen. Richard Blumenthal (D-CN) has called for an investigation into two top weighted infant sleepwear companies, Dreamland Baby and Nested Bean, over allegations of deceptive marketing claims. The retailers' actions have been praised by Richard Trumka, a commissioner with the Consumer Product Safety Commission. The use of weighted infant sleepwear has been criticised for potentially harming babies' developing bodies and impeding their ability to breathe.

 

NPR / National Public Radio