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European Edition
12th December 2024
 
THE HOT STORY
Banks exit Lending Standards Board
HSBC and Lloyds Banking Group have announced their withdrawal from the Lending Standards Board (LSB), a self-regulatory body established to improve lending practices following the 2008 financial crisis. The decision, alongside Santander UK's earlier exit, raises concerns about the future of the LSB, which has already had to reduce its workforce significantly. An LSB spokesperson said: "As a result of this withdrawal, many of these banks' SME customers will not be protected by the oversight of either the LSB or FCA," highlighting the potential risks for small and medium enterprises. The banks argue that their membership is no longer necessary due to overlapping regulatory standards, including those from the Financial Conduct Authority.
REGULATION
New EU rules to boost the security of connected devices
The European Union has implemented the Cyber Resilience Act (CRA), which mandates that product manufacturers enhance the security of connected devices, including smartwatches and internet-connected toys. Although compliance deadlines extend to December 11, 2027, the law aims to address rising hacking risks associated with these devices. The CRA imposes cybersecurity requirements throughout the product lifecycle, compelling manufacturers to ensure their products meet legal standards to access the EU market. Devices compliant with the CRA can display the EU's CE mark, signaling enhanced security to consumers. The EU intends to "rebalance responsibility" for cybersecurity towards manufacturers, with penalties for non-compliance potentially reaching 2.5% of global annual turnover, or €15m.
Klarna fined $50m and reprimanded by Swedish regulator
Sweden's Financial Supervisory Authority has fined Klarna Bank SKr500m ($46m) for violating anti-money laundering rules. Klarna, which got its banking licence in 2017, said the regulator's decision followed a routine review of its compliance with regulations and did not relate to actual cases of money laundering. "We have maintained constructive dialogue throughout this process which is part of our commitment to a robust and secure financial environment," a Klarna spokesperson said.
CORPORATE
NYPD warns about threats to executives
A bulletin issued by the New York Police Department underscores the heightened risk environment for corporate executives in the wake of last week's killing of United Healthcare CEO Brian Thompson. The bulletin was published on the day that Luigi Mangione, the man accused of shooting dead Thompson in New York, appeared in court in Pennsylvania and was charged with murder. Multiple "Wanted" signs featuring corporate executives have been posted throughout Manhattan and users on social media continue to celebrate Thompson's death, according to the bulletin. Mangione's action has the "capability to inspire a variety of extremists and grievance-driven malicious actors to violence," the NYPD said, as it encouraged companies to increase precautions and security for executives.
LEGAL
Legal funding crisis looms in London
The government's inaction on the Supreme Court's Paccar ruling is jeopardising litigation funding in London, warn backers and lawyers. A recent settlement in a class action against Mastercard, led by Walter Merricks, the former financial ombudsman, has raised concerns due to its low value, potentially offering only £4 to each of the 46m claimants. Critics, including Kenny Henderson from law firm CMS, argue that "the settlement figure will mean a payout of only a few pounds to consumers, as opposed to the tens of millions that lawyers will receive." Merricks has defended the settlement, saying it is essential for collective action where individual losses are minimal. However, the uncertainty from the Paccar ruling is said to be hindering claims and harming access to justice, and Neil Purslow of the International Legal Finance Association warns that the delay is damaging London's status as a global legal hub.
Lenders can challenge car finance ruling
Close Brothers and FirstRand have been granted permission by the Supreme Court to appeal a landmark ruling on motor finance commission payments that has left firms fearing a potential £30bn compensation bill. The Court of Appeal ruled in October that paying “secret” commission to car dealers – without disclosing the sum and terms of that commission to borrowers – was unlawful. The Financial Conduct Authority (FCA) had written to the Supreme Court seeking a rapid response to the firms' request, adding that it may yet intervene in the case “to share our expertise to assist the court on the substantive appeal.”
Shell settles lawsuit against Greenpeace
Shell has settled a lawsuit it brought against Greenpeace after the environmental group's activists last year boarded an oil production vessel near the Canary Islands to protest against oil drilling, travelling on it as far as Norway. Greenpeace said it had agreed to pay £300,000 ($382,650) to the Royal National Lifeboat Institute (RNLI), a charity that runs a search and rescue service. The group also said it would stop protesting for a period at four Shell sites in the northern North Sea. Greenpeace previously said Shell was seeking up to $2.1m.
New Scottish law could jail polluters
Proposals for the Ecocide Prevention Bill, spearheaded by Monica Lennon, have gained significant support from MSPs, paving the way for its introduction in the Scottish Parliament next year. This legislation aims to impose severe penalties, including up to 20 years in prison, on executives responsible for major environmental damage, marking Scotland as the first part of the UK to adopt such a law. The bill seeks to establish ecocide as a crime, focusing on corporate accountability for actions that lead to widespread ecological harm.
UK fintech Stenn collapsed after Russia money-laundering case drew scrutiny
UK fintech Stenn collapsed into administration after a reference to the company in a US criminal indictment about a Russian money-laundering scheme prompted lenders to begin probing potentially suspicious transactions.
ECONOMY
Business leaders warn Reeves about the impact of her Budget tax rises
Senior corporate leaders have warned Rachel Reeves that companies are facing major uncertainty due to her tax-raising Budget. The executives used a roundtable meeting with the Chancellor organised by the British Chambers of Commerce (BCC) to warn that the economic backdrop was extremely challenging. Speaking after the meeting, Martha Lane Fox, president of the BCC and chairman of the Business Council, said: "There's no hiding the reality that the Budget was tough for business. Millions of firms are now facing a raft of increased costs in the coming months. Higher bills will impact investment and recruitment. Our latest forecast also suggests the ripples will be felt across the wider economy."
NFU chief 'cannot rule out' food shortages if farmers strike
Tom Bradshaw, president of the National Farmers' Union, has raised the alarm about potential food shortages if farmers strike in response to government policies, telling Sky News: "I can’t rule it out.” Thousands of demonstrators, including farmers and supporters, gathered outside Downing Street yesterday to protest Chancellor Rachel Reeves' Budget. The changes, which include a 20% inheritance tax on agricultural properties valued above £1m and the accelerated removal of EU-era subsidies in favour of environmental payments, have sparked fears about the viability of farming businesses and food security.
STRATEGY
HSBC aims for $3bn cost cuts
HSBC is hoping to achieve at least $3bn in cost savings as part of its largest restructuring in a decade, led by new CEO Georges Elhedery. The overhaul aims to reorganise the bank into four divisions, focusing on Eastern and Western markets, and is expected to result in job cuts affecting over 40% of HSBC's top 175 managers. Elhedery, who took over from Noel Quinn in September, is implementing the changes to streamline operations and reduce costs amid tightening profit margins due to central bank rate cuts. Analysts estimate HSBC's expenses will reach around $32.6bn this year, meaning the $3bn savings would reduce costs by approximately 10%.
WORKFORCE
NICs hike brings Christmas bonus woes
The Chancellor’s decision to increase the National Insurance burden for companies has led many employers to cut Christmas bonuses for staff, the Telegraph reports. According to a study carried out by Robert Walters, of the workers who typically receive an end-of-year bonus, 45% will receive nothing in December or January, according to a survey of 500 employers, a jump from 32% in 2023, and 30% the year before. A third of employers attributed bonus cuts to reduced profit margins, while a quarter cited economic uncertainty and inflation. Robert Salter, director at tax firm Blick Rothenberg, said: “Some firms haven’t changed anything yet, as the rises haven’t kicked in yet – and they want to reward workers who have had a good year. But some companies have struggled anyway, and [ . . . ] are cutting bonuses, because if they get it wrong, they may have to make redundancies – and they would much rather cut bonuses where they can.”
CORPORATE GOVERNANCE
CEOs should be paid like football stars
Michael Spencer, the founder of ICAP, argues that London-listed firms should offer CEO salaries comparable to top footballers to attract talent. He said: “We don't mind paying our footballers . . . But if the CEO of BP or HSBC earns £20m a year . . . everyone jumps up and down saying this is an outrage.” Currently, FTSE 100 CEOs earn a median of £4.1m, significantly less than their S&P 500 counterparts, who earn around $16m. Spencer, alongside London Stock Exchange boss Julia Hoggett, is advocating for a discussion on executive pay to enhance the competitiveness of UK markets, which are hindered by costs including stamp duty on transactions.
FRAUD
Hundreds targeted in timeshare fraud
Investigators are probing a suspected multimillion-pound timeshare fraud involving 19 companies across the UK, with hundreds of victims potentially affected. The Serious Fraud Office (SFO) has arrested five individuals linked to the scam, which reportedly operated from January 2018 to September 2024. Emma Luxton, interim chief operating officer at the SFO, highlighted that "this type of investment fraud is on the rise," and it particularly affects elderly and vulnerable individuals.


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