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

The European Central Bank (ECB) has told eight unnamed banks to shift staff out of London, saying it has identified 56 groups of traders who should be doing their jobs from within the EU following an investigation into whether the institutions are seeking to dodge post-Brexit rules. An ECB exercise known as “desk mapping” found that the banks, which all have headquarters outside the EU, haven’t boosted sufficient local capabilities to manage their business in the region, people familiar with the process said, adding that part of the reason for the staff shortfall is a reluctance among senior executives to move from London to cities including Dublin, Frankfurt and Paris. The ECB’s review included US lenders such as Bank of America, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley, and also Barclays, HSBC and UBS, the people said. It is noted that the number of professionals leaving the City post-Brexit has been much smaller than initially predicted. EY estimates that around 7,000 roles have moved since 2016, far fewer than the 200,000 job losses that were forecast before the Brexit vote. 

 

The Daily Telegraph

The Times

Audit industry trade bodies the ICAEW and ACCA say they would welcome reform that saw money raised through fines against auditors given to the UK government in order to fund Britain’s regulatory bodies. The comments come following criticism of the fact that the ICAEW is set to receive the £14.4m fine KPMG was issued over misconduct during its audit of collapsed construction contractor Carillion. An ICAEW spokesperson said it does not believe “any of the professional bodies would object to being removed entirely from the funding process,” as it said it is open to plans for “all fines in future going to HM Treasury.” 

 

City AM

The Financial Conduct Authority (FCA) is set to use new powers to allow it to revoke businesses’ permits to carry out regulated activity quicker, clamping down on firms using regulatory approvals to deceive consumers. The FCA is now able to cancel or change a firm’s permission if it has not taken appropriate action 28 days after receiving a warning. Previously it could take three months or longer to cancel a firm’s permission. The City watchdog is said to be concerned that companies are using permissions to convince consumers they are buying regulated products that are covered by the Financial Service Compensation Scheme when they are not. Mark Steward, executive director of enforcement and market oversight at the FCA, said: “These new powers will enable us to take quicker action to cancel permissions that are not used or needed.”

 

City AM

The US Securities and Exchange Commission is forcing Wall Street banks to launch a systemic search of more than 100 personal mobile phones belonging to top traders and dealmakers in the largest-ever investigation into how pervasively investment bank employees use unauthorised messaging platforms to chat with each other. Goldman Sachs, Morgan Stanley, HSBC and Credit Suisse have all said that they are fielding US inquiries into messaging apps, though it's not clear whether all are now accessing phones, notes Bloomberg.

 

Bloomberg

The Church of England’s pension board has warned that the system of executive pay is “broken.” Adam Matthews, the Church’s chief responsible investment officer, has raised concerns over “excessive pay” at large companies in a post on LinkedIn, saying there is a “need to recognise that fundamentally the executive pay system we have isn’t working.” He said that this is “particularly egregious” at a time when staff at many companies will be struggling with the growing costs of living. Mr Matthews also pointed to “major increases in executive pay in consumer-facing companies such as Next where the workforce are not accredited as being on a living wage.” Mr Matthews said he would be inviting chairs of boards and remuneration committees, and meeting with other fund managers, to discuss reforms. Despite a number of firms coming in for criticism over executive pay, Mr Matthews said there was rarely widespread backlash from investors, writing: “There are occasional rebellions of shareholders, but then attention diverts and we all waste our time trying to decipher ever complicated justifications for excessive pay.”

 

The Guardian

An appeals court in France has confirmed a charge of complicity in crimes against humanity against French cement group Lafarge - now part of the Swiss building materials conglomerate Holcim - over alleged payoffs to ISIL (ISIS) and other armed groups during the war in Syria. The court’s decision paves the way for an eventual trial, and rights activists hope the case will serve as a precedent for the prosecution of multinational companies accused of ignoring “terrorist” operations in return for continuing to operate in conflict zones. The appeals court sided with prosecutors who said Lafarge had “financed, via its subsidiaries, Islamic State [ISIL] operations with several millions of euros in full awareness of its activities.”

 

Aljazeera

France 24

The Australian government is being urged to intervene in Irish telco Digicel’s tax dispute with the Papua New Guinea (PNG) government in a last ditch attempt to sell its Pacific assets to Telstra. The shock $130m tax imposed on Digicel by PNG’s parliament in late March has put the Telstra deal in doubt. A recently lodged legal claim in the Supreme Court of PNG will argue that the legislation the PNG government is relying on to tax the company is unconstitutional as it was designed purely to target Digicel. Sources familiar with the matter said Digicel was escalating the matter to the International Arbitration Centre in Singapore in addition to filing documents in court. Digicel also wants the Australian government to make representations to the PNG government.

 

Sydney Morning Herald

Google is facing a High Court lawsuit over its use of confidential medical records belonging to 1.6m individuals in the UK. The tech giant’s AI arm, DeepMind, received the data in 2015 from the Royal Free NHS Trust in London for the purpose of testing a smartphone app called Streams. It has previously been reported that the deal was found to be illegal by the UK’s Information Commissioner's Office. Now, a representative action alleges that Google and DeepMind "obtained and used a substantial number of confidential medical records without patients' knowledge or consent."

 

Sky News

City A.M.

Kristalina Georgieva, managing director of the International Monetary Fund, has warned finance leaders to prepare for multiple inflationary shocks. Pointing to pressure on energy and food prices from Russia’s war in Ukraine, supply chain disruption and issues caused by China’s Covid policies, she said: “I think what we need to start getting more comfortable with is, that may not be the last shock.” Amid concern over a global economic downturn, Ms Georgieva said it is becoming harder for central banks to bring down inflation without causing recessions.

 

The Guardian

Consumer confidence has dipped to a record low, with GFK's confidence index dropping two points to -40 in May, a point lower than the previous record of -39 set in July 2008. GfK director Joe Staton said: "This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown . . . The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.”

 

Financial Times

The Sun

National Grid chief executive John Pettigrew has warned that a windfall tax on North Sea oil and gas producers would hit investment in renewables and harm customers. He said: “A windfall tax is something that I see as a deterrent for investment,” suggesting that for firms making investments that support climate change targets “having a stable regulatory and policy environment is massively important,” and adding “The benefits of that stable environment is you are able to raise capital privately, and therefore not put pressure on the public purse at the lowest cost possible, which flows through to customers.”

 

Evening Standard

The Guardian

Ulster Bank has said it will close nine branches across Northern Ireland, with the closures to start in September through to mid-October. A spokesperson for Ulster Bank says more customers are moving to online and mobile banking, noting that all closing branches are within one mile of a free-to-use cash machine.

 

BBC News

KPMG has warned some of Britain’s biggest companies that they face increases in their audit fees, with listed audit clients told that the cost of scrutinising their accounts will rise by up to 20% next year. In a letter from its head of audit Catherine Burnet, KPMG said cost pressures driven by revised accounting standards meant that audits were becoming more heavily resourced. She pointed to “a number of additional upward cost drivers” which the firm estimates will add between 5% and 20% to base audit costs, “as well as significant inflationary pressures in relation to staffing costs and recruitment." In the letter, Ms Burnet said audit quality remains KPMG’s top priority, adding: “We've made good progress supported by our record levels of investment but there is still more to do."

 

Sky News

City AM

Several major UK fossil fuel projects have been approved since the Cop26 climate summit concluded six months ago, while around 50 schemes are thought to be in the pipeline between now and 2025. Analysis shows that three separate schemes have received some form of approval from government bodies since the summit in Glasgow. Tessa Khan, director of climate campaign group Uplift, said: “In just six months the UK has gone from touting itself as a climate leader to championing fossil fuels, the very thing that is driving the climate emergency . . . It beggars belief.”

 

The Guardian

Cruise-line operator Carnival’s ethics and compliance chief, Peter Anderson, who was hired by the company in 2019 following legal troubles precipitated by environmental violations, has resigned. He will be succeeded by Richard Brilliant, who is currently Carnival’s chief audit officer. The decision to appoint Mr. Anderson was part of a $20m probation violation settlement made in 2019. A person with knowledge of the matter said the decision made by Mr. Anderson was a personal one not related to the company.

 

Wall Street Journal