Risk Channel delivers the latest, most relevant and useful business intelligence to key decision makers and influencers, each weekday morning.

Central banks have been advised by the Bank for International Settlements (BIS) to embrace the benefits of artificial intelligence (AI) while cautioning against using it for setting interest rates. In its first major report on AI, the BIS emphasized the need for policymakers to use AI's power to monitor real-time data and enhance their inflation-predicting abilities. The report also highlighted the potential risks associated with AI, such as cyber attacks and financial vulnerabilities. The BIS called for central banks to foster a community of practice to share experiences, best practices, and data. The use of AI in central banking is expected to reshape labor markets and impact productivity and economic growth. However, the BIS stressed that AI should not replace human judgment in rate-setting.

 

U.S. News

Coinbase is reportedly facing regulatory challenges over its compliance with new accounting rules that shift the accounting and disclosure for crypto to a fair-value model from a cost-less-impairment model. Before adopting the new rule, Coinbase excluded crypto impairment costs from its adjusted EBITDA reconciliation. Following the rule’s adoption, the company excluded fair-value volatility, which Olga Usvyatsky, former vice president for research at Audit Analytics, contends is also a form of tailored accounting, as it omits normal, recurring operating expenses. According to Ms. Usvyatsky, the SEC has previously challenged firms’ non-GAAP adjustments, notably sending letters to Bit Digital and MicroStrategy inquiring about similar impairment removals in financial reports.

 

CryptoSlate

Market Watch

The European Commission has ruled that Microsoft violated European Union competition rules with “possibly abusive” practices when it tied its Teams app with Office 365 and Microsoft 365. Officials said Microsoft has been “restricting competition” by bundling Teams with its business software, adding that the U.S. tech firm might have granted Teams an “undue advantage” by not giving customers a choice on whether to have it when they purchased the software.

 

Yahoo Finance

The IRS has agreed to settle a lawsuit brought by Ken Griffin, founder of the Citadel hedge fund, that accused the agency of failing to protect his confidential financial information from a contractor who stole his tax data and leaked it to ProPublica. Charles Littlejohn, a former IRS contractor, pleaded guilty to stealing and leaking information related to Mr. Griffin and other wealthy individuals, including former President Donald Trump, and was sentenced in January to five years in prison. Mr. Griffin had sought $1,000 in damages for each unauthorized disclosure of his tax return information and demanded that the IRS adopt a data security plan. However, Bloomberg cites a source close to the matter as stating that, during settlement discussions, Mr. Griffin didn’t ask for financial damages and none were given. The case is Griffin v. Internal Revenue Service, 22-cv-24023, U.S. District Court, Southern District of Florida.

 

Bloomberg

A federal judge overseeing a $30bn preliminary swipe-fees settlement between Mastercard, Visa and retailers formally rejected the deal Tuesday. The settlement, reached with U.S. merchants in March, would see a reduction in the interchange fees that retailers must pay when a customer makes a purchase using their card. U.S. District Judge Margo Brodie of the U.S. District Court of the Eastern District of New York said in a memo that she was “not likely” to grant approval to the final settlement and rejected a request for preliminary settlement approval. Visa and Mastercard will have to either renegotiate the settlement with merchants or go to trial. Brodie did not give a reason for her rejection.

 

CNN

Bloomberg

Reuters

Washington Post

Rite Aid has been ruled not responsible for over $200m in extra costs related to the sale of its pharmacy benefit manager Elixir to MedImpact Healthcare Systems. Judge Michael Kaplan stated that the sale agreement makes MedImpact accountable for the disputed liabilities, including unpaid reimbursements owed to CVS Health Corp., Walgreens Boots Alliance, and Walmart. The ruling is a boost for Rite Aid as it seeks to exit Chapter 11 bankruptcy protection. The dispute with MedImpact had threatened to derail Rite Aid's overall restructuring plan, which is up for approval at a final court hearing on Thursday.

 

Bloomberg

Reuters

As Credit Suisse fades into history following its takeover by UBS, global banks including BNP Paribas, Deutsche Bank, Citi, and Bank of America are expanding in Switzerland. The collapse of Credit Suisse has led to opportunities for foreign banks to enter the Swiss market and serve smaller companies. However, UBS, as Switzerland's biggest bank, still dominates the market and poses a challenge to these new players. The Swiss competition watchdog COMCO has expressed concerns about UBS's market strength. Despite this, foreign banks are optimistic about the potential for growth and improved services in the Swiss banking landscape. The expansion of foreign banks in Switzerland is expected to benefit both big and small companies in the long run.

 

U.S. News

A shortage of skilled labor and rising inflation are causing delays and financial challenges for liquefied natural gas (LNG) developers on the U.S. Gulf Coast. The increasing costs of labor, with wages for skilled workers rising by as much as 20% since 2021, have led to budget overruns and reduced returns for some projects. Construction at several LNG plants has been affected, including Golden Pass LNG, which experienced a $2.4bn budget overrun, and Sempra LNG, which has reduced its stake in a Texas project due to higher construction costs. The rising wages and inflationary challenges have impacted the construction industry in Louisiana, where many of the new LNG plants are being built. Despite these challenges, the U.S. remains the world's largest LNG exporter, with several projects still in development.

 

Reuters

US Logistics Solutions, a trucking company focused on delivering goods for retailers to store outlets, is shutting down after filing for bankruptcy. The closure, one of the biggest since the collapse of Yellow last year, will eliminate about 2,000 jobs and pull more than 500 trucks from the roads. US Logistics Solutions specialized in moving apparel and other retail goods from warehouses to distribution hubs and then on to stores, mostly in malls and strip malls. It provided a lower-cost service by pooling several customers’ cargo in a single trailer. A US Logistics Solutions filing Friday in the bankruptcy court in Houston listed assets of $50m-$100m and liabilities of $100m-$500m.

 

Houston Chronicle

Wall Street Journal

As Houthi rebels intensify strikes on vessels headed for the Suez Canal, global shipping prices are soaring, raising fears of product shortages and delays. The chaos in the global supply chain continues to persist, with cargo prices skyrocketing due to disturbances in the seas. Houthi rebels in Yemen have been targeting ships entering the Red Sea en route to the Suez Canal, causing ships to avoid the waterway and take longer routes. Drought in Central America has also led to limited ship traffic through the Panama Canal. Dockworkers and longshore workers in the United States and Germany have threatened strikes, further disrupting shipping. The disruptions in shipping could lead to product shortages, inflation, and economic anxiety. The cost of moving shipping containers has significantly increased, and importers are facing challenges in securing containers and space on vessels. The shipping industry's control by a few major alliances allows carriers to raise prices substantially when the system is strained. The recent increase in shipping prices is also attributed to the targeting of vessels by Houthi rebels, who have escalated their attacks. The disruptions and additional costs in shipping are causing concerns about port congestion and a surge in incoming cargo. The situation remains complex and uncertain, with no clear solution in sight.

 

New York Times

The U.S. Supreme Court has agreed to take up a case involving bankruptcy courts' authority to order the U.S. government to return allegedly fraudulent tax payments made more than two years before a company's bankruptcy filing. The case involves a 10th U.S. Circuit Court of Appeals decision allowing a bankruptcy trustee to claw back $145,000 in allegedly fraudulent tax payments made by bankrupt Utah transportation company All Resort Group. Those payments were allegedly made to cover personal tax debts of two of its executives, and the bankruptcy trustee sought to use those funds to pay other creditors. Although the disputed tax payment fell outside both the two-year federal lookbook window and the four-year window applicable under Utah law, the federal government argued that the Utah law should not be applied to a tax payment, because the government's sovereign immunity would protect it from any non-bankruptcy attempt to recoup the tax payment. The 10th Circuit decision "threatens substantial consequences" for the government's finances, and will give bankruptcy trustees "even more incentive to seek to recoup federal tax payments," according to the U.S. Solicitor General's petition. The case is United States v. Miller, U.S. Supreme Court, No. 23-824.

 

Reuters

Sen. Bernie Sanders (I-VT) and Ed Markey (D-MA) have introduced legislation to impose a 95% windfall tax on large corporations that overcharge for products. The Ending Corporate Greed Act is modeled after previous windfall profit taxes and aims to deter companies from overcharging consumers. The bill would maintain the existing corporate tax rate for companies with profits equal to or less than pre-pandemic levels, while imposing a 95% windfall tax on profits exceeding their average from 2015-2019. The tax would apply to companies with $500m or more in annual revenue and be limited to 75% of income in the current year. The legislation is seen as a response to corporations making record-breaking profits by charging high prices for essential goods. "The American people are sick and tired of being ripped-off by large corporations that continue to make record-breaking profits by charging outrageously high prices for gas, rent, food, and prescription drugs," Mr. Sanders said. "Enough is enough. We cannot continue to allow large corporations to make obscene profits by price gouging Americans in virtually every sector of our economy. If corporate CEOs and their masters on Wall Street will not end their greed, we must end it for them. It is time for Congress to enact a windfall profits tax."

 

Accounting Today

A new federal rule has been finalized to ensure that first responders can quickly identify hazardous chemicals on trains after a derailment. The rule aims to prevent situations where firefighters risk their lives without knowing the appropriate response. First responders need to know the exact hazardous materials on a train so they can access the government's official guidebook and use the right protective gear. The rule also affects the size of evacuation zones needed to protect the public. The largest freight railroads have developed an app called AskRail to provide information about train cargo, but not all firefighters have access to it. The new rule applies to smaller railroads as well, requiring them to have a plan to quickly provide cargo details to local fire departments.

 

AP News

Women in the U.S. have put aside just a third of the amount that men have saved for retirement, according to a survey by Prudential Financial. On average, men had saved $157,000 for retirement, while women had only set aside $50,000. The survey revealed that women face more challenges in saving for retirement, including inflation, housing prices, and changes in tax policies. Women were also three times more likely to prioritize providing for their families and children over saving for retirement. The survey showed that 46% of men were looking forward to retirement and had more plans, compared to only 27% of women. "The financial futures of certain cohorts – such as women – are especially precarious," observed Caroline Feeney, CEO of Prudential's U.S. Businesses.

 

U.S. News