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

The Bank of England has raised concerns about the significant role foreign hedge funds play in financing UK government borrowing. In its Financial Stability Report, the Bank noted that hedge funds borrowed nearly £100bn against UK bonds, or gilts, last month, marking a record high. The Bank warned that this concentration of borrowing increases market vulnerabilities and the risk of disorderly selling. "Relatively high use of leverage by a small number of firms taking crowded positions increases vulnerabilities and the risk of a disorderly unwind as well as a jump to illiquidity in core UK markets," the Bank said. The BoE also said share prices in the UK are close to the "most stretched" they have been since the 2008 global financial crisis, while equity valuations in the US are reminiscent of those before the dotcom bubble burst due to the high valuation of AI firms.

 

The Daily Telegraph

Daily Mail

The Bank of England's Financial Stability Report (FSR) reveals that cyber-attacks are now viewed as a top risk to the UK's financial system. Andrew Bailey, the Bank's Governor, said: "If you look at the league table of risks post the financial crisis and asked the question, what risk has come up the league table most sharply in that period, I'm afraid that cyber would be up there for me, right at the top." The report also noted that heightened global political tensions and advancements in artificial intelligence contribute to the increasing risk landscape. Cyber-attacks have already impacted major firms and the broader UK economy.

 

The Independent UK

Former EU chief diplomat Federica Mogherini and Stefano Sannino, a senior EEAS official, have been arrested during an anti-fraud investigation. Belgian police conducted raids at the European External Action Service and the College of Europe, where Mogherini currently serves. The investigation focuses on potential fraud linked to the EU Diplomatic Academy's training programme for junior diplomats, which was awarded to the College of Europe. The European Public Prosecutor's Office (EPPO) suspects that confidential procurement information may have been improperly shared. The EPPO has lifted diplomatic immunity for the investigation, which is ongoing.

 

Financial Times

The Daily Telegraph

Several German companies are withdrawing from the business association Die Familienunternehmer after its decision to engage with the far-right Alternative for Germany (AfD) party. The association's president, Marie-Christine Ostermann, said that dialogue is essential to challenge the AfD's policies. However, backlash from members has been significant, with companies including Rossmann and Vorwerk announcing their exits from the association. Verdi union leader Frank Werneke has warned of historical parallels, and urged businesses to distance themselves from right-wing extremism.

 

Deutsche Welle (EN)

Norway's $2trn wealth fund has announced its intention to support a shareholder proposal at Microsoft's annual general meeting advocating for a report on the human rights risks associated with the company's operations in countries with significant human rights concerns. Additionally, the fund, which is Microsoft's eighth-largest shareholder with a 1.35% stake, plans to vote against the re-election of CEO Satya Nadella as chair of the board, advocating for a compensation structure that includes shares locked for five to ten years. The fund emphasised the importance of addressing "material sustainability risks" and has a history of opposing executive pay structures deemed excessive.

 

Reuters

The Bank of England has reduced the capital requirements for banks from 14% to 13% of risk-weighted assets. The change aims to provide banks with greater confidence to lend to UK households and businesses. The Financial Policy Committee (FPC) said the decision reflects the current resilience of the UK banking system. The FPC noted that UK banks have less risk on their balance sheets compared to 2016 and generally maintain capital above required levels. 

 

Sky News

Financial Times

The Guardian

Daily Mail

Spain is battling to maintain its pork exports after the country’s first outbreak of African swine fever in 30 years prompted several countries to limit purchases from Europe’s biggest pig meat producer. Japan and Mexico have suspended all imports of pork and pork products, while China has introduced an embargo on products from the Barcelona region. The disease has led to strict measures across the European Union, and is currently present in Poland, Germany, Italy, Czechia, Slovakia, Estonia, Romania, Croatia, Hungary, Bulgaria, Greece, Latvia, and Lithuania.

 

Spanish News Today

Financial Times

Germany's consumers are feeling at their least confident so far this year, according the the HDE retail association, whose consumer barometer has fallen to 95.2 points, from 95.6 in November. The group attributed the decline to persistent economic uncertainty, adding that 2025 appears to be "a lost year that offers no hope of an imminent economic recovery".

 

Reuters

Blackstone, Apollo and KKR have agreed to participate in a Bank of England stress test of how the fast-growing private credit market would fare in a major crisis, sources say.

 

Financial Times

French lawmakers have voted in favour of a motion to nationalise the French operations of ArcelorMittal, Europe's largest steel producer. The proposal, backed by the far-left La France Insoumise party, is largely symbolic and faces government opposition. ArcelorMittal employs around 15,000 people in France and has struggled with weak demand and competition from cheaper imports. Unions view the vote as a partial victory for raising awareness about job cuts. Finance Minister Roland Lescure said the motion would not resolve the underlying issues affecting the steel industry.

 

Luxembourg Times

The UK's Financial Conduct Authority (FCA) plans to regulate Environmental, Social and Governance (ESG) ratings providers amid concerns over transparency and conflicts of interest. The FCA's proposals aim to ensure agencies disclose their methodologies and manage conflicts. The move comes amid a broader government push for deregulation, yet the FCA estimates it could yield £500m in net benefits over the next decade. A recent survey indicated that 95% of investors support the FCA's initiative. The consultation process will conclude in March next year.

 

Reuters

The Daily Telegraph

City AM

Stellantis CEO Antonio Filosa has endorsed Germany's initiative to relax EU car emissions regulations, saying that such changes are crucial for revitalising the continent's struggling automotive sector. With the European Commission set to reveal a supportive package for the industry on December 10, Filosa noted the importance of flexibility regarding plug-in hybrids and combustion engines amidst challenges including slow electric vehicle adoption. Filosa and Stellantis Chairman John Elkann highlighted the pressing need for regulatory modifications to prevent an “irreversible decline” in the European car industry.

 

Reuters

India’s telecoms ministry has said Apple, Samsung, Xiaomi, and other smartphone manufacturers must ensure that new handsets come installed with a government cybersecurity app, raising concerns about privacy. The Sanchar Saathi app would give Indian authorities access to the phone's call log, memory, and camera. For devices already in the supply chain, manufacturers should push the app to phones via software updates. Apar Gupta, director of the Internet Freedom Foundation, described the app as "disproportionate, legally fragile, and structurally hostile to user privacy and autonomy”. Apple has reportedly indicated that it will resist the mandate, while others, including Samsung, are still reviewing the order.

 

Business Standard

Financial Times

Reuters