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European Edition
12th October 2021
Brussels eyes new rules to tighten grip on branches of non-EU banks
The European Commission is preparing to grant regulators permission to force foreign banks to turn their European branches into subsidiaries, as part of moves to implement Basel III standards. The change is expected to only apply to large branches with at least €30bn worth of assets. Barney Reynolds, head of financial services at Shearman & Sterling, argued that the latest discussions were "all part of an ongoing attempt to grab business through regulation" and could backfire. "It's hard to think such an approach will work, since the money will look for a home that does not seek to control it to the degree the EU would wish," he added. "Also, subsidiaries are embroiled in underwriting the Eurozone's massive risks, whereas branches are not. Ultimately, these steps are likely to be self-defeating."
EU and UK need to work together on finance
Catherine McGuinness, Chair of the Policy & Resources Committee at the City of London Corporation, says in City AM that it is time for the EU and the UK for move on from the trials of Brexit and establish a new “Entente Cordiale” and develop a new, close partnership between the City and Europe, “particularly when it comes to financial and professional services.” McGuinness goes on to say that a “key area where we need to cooperate is sustainable finance. With less than one month to go until the COP26 summit in Glasgow, the financial sector is working to support the transition to net zero and ensure it is resilient to the risks of climate change.” The City of London Corporation and Green Finance Institute are hosting a Summit at Cop26 to mobilise private finance and McGuinness calls for greater cross-sector and cross-border collaboration, particularly on ESG disclosure and making it easier for private capital to invest in climate change mitigation and resilience.
Sustainable investment ‘rebooting’ Europe’s private markets, research finds
Changing regulation and increasing client demand could see ESG private market assets hit between €775.7bn and €1.2tn by 2025, up from €253bn in 2020, according to research by PwC.
Bank issues warning over debt-fuelled takeovers
The Bank of England’s latest Financial Stability report points to increased risk within leveraged loan markets, with banks loosening conditions as demand grows – a result of private equity firms snapping up undervalued British companies. The Bank’s report said: “Risks in leveraged loan markets globally continue to build. These risks can affect UK financial stability through the direct impact on banks and the indirect impact of losses spreading through other parts of the global financial system.” However, the Bank said that the UK's core banking system was “resilient” and could handle a severe downturn.
EU Council adopts public Country-by-Country Reporting directive
The "public Country-by-Country Reporting (CbCR) directive" was adopted by the EU Council on 28th September 2021 under qualified majority voting, more than five years after it was first tabled as part of the European Commission’s action plan for a fairer corporate tax system. The provisional agreement by the EU Council now requires formal approval by the European Parliament.
Call for mandatory disclosure of net-zero plans
Companies including  BT, Kingfisher, Tesco, Aviva and Santander have written to the Chancellor and the Business Secretary ahead of the climate Cop26 summit in Glasgow demanding the Government make the disclosure of net-zero plans mandatory for large companies, with a clear time line for rolling out this policy by 2025.
Credit Suisse delays publishing Greensill failings report
Credit Suisse has delayed publishing a report by Deloitte and Swiss law firm Walder Wyss detailing its failings around the collapse of $10bn of investment funds it ran with Greensill Capital. Insiders suggests the bank is concerned that releasing the report could harm attempts to make insurance claims on losses. Credit Suisse says the raid of its HQ by Swiss police last week is not directed at the bank, but sources fear the probe could be widened.
Evergrande crisis puts PwC role in spotlight
Tabby Kinder predicts in the FT that PwC, the auditor for Chinese property developer Evergrande, may face the wrath of the Beijing if the company’s problems worsen.
British bank customers most at risk of fraud
Figures from HSBC show bank customers in the UK are at higher risk of being targeted by fraudsters than people elsewhere in the world. Despite the bank doing less than 20% of its business is in this country, more than 80% of fraud losses suffered by personal customers at the international lender are in the UK. Data from the Financial Conduct Authority last week showed banks and other regulated firms were employing 17,403 staff in the UK alone to prevent financial crime, costing them £1.1bn every year.
Ex-Tesco boss called in to sort out supply chain crisis
Boris Johnson has appointed former Tesco chief executive Sir David Lewis as a supply chain adviser. His remit will be to fix both the immediate crisis facing a number of British industries and prevent future chaos. Mr Johnson said: “There are currently global supply issues which we are working with industry to mitigate and Dave brings a wealth of experience which will help us continue to protect our businesses and supply chains.” Sir David will be in the role until the end of the year.
Banks prepare £7bn dividend bonanza
Senior bankers are in talks with the Bank of England about releasing cash set aside for bad loans in time for their quarterly earnings report in around two weeks, according to the Mail on Sunday. Lloyds Banking Group, HSBC, Barclays, NatWest and Standard Chartered are set to report pre-tax profits totalling £33bn for 2021, paving the way for an estimated £7bn in dividend payouts.
Lloyds Banking Group set to take on HL
Lloyds Banking Group is plotting to take on Hargreaves Lansdown with a £100bn personal pensions and investment arm. Lloyds’ wealth and insurance boss Antonio Lorenzo said the bank wants to build its own version of the Hargreaves platform, which lets investors buy funds and shares inside Isas or self-invested personal pensions. He explained: “We have only around 3% of the direct-to-consumer pensions and investments market. Every year, more than £10bn is moved from Lloyds to personal pension providers. Our ambition is that in three to five years, we want to grow to more than 10%.”
Virgin Atlantic hunts new chairman ahead of IPO
Virgin Atlantic is working with headhunters at Korn Ferry on a search for new directors as it prepares to float for the first time since it launched in 1984. Sir Richard Branson's flagship company is also looking for a replacement for chairman Peter Norris who has been in post for nearly a decade. The appointments are efforts to ensure that a robust corporate governance framework is in place if it does pursue an IPO in London.

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