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European Edition
23rd September 2022
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Banks face legal risks if they don't stick to climate goals, ECB says
European Central Bank (ECB) supervisor Anneli Tuominen warns that banks face the risk of being sued if they don't stick to their climate goals or seek to "greenwash" their image. Major Wall Street lenders have threatened to leave United Nations climate envoy Mark Carney's financial alliance because they fear its strict requirements could expose them to lawsuits. Tuominen did not make any reference to Mr Carney's Glasgow Financial Alliance to Net Zero, but said banks faced risks if they don't keep climate pledges. "If banks do not meet the targets they have announced or follow the climate strategy they have communicated, they expose themselves to litigation and reputational risks," Tuominen said. She also warned against "greenwashing," observing "Banks can be accused of greenwashing if the information they disclose is misleading . . . The threat of legal cases following greenwashing must be taken seriously, and banks should take care to ensure that the information on their sustainable products is correct." Climate-related lawsuits are on the rise, according to the Network for Greening the Financial System.
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Kwarteng says tax cuts will break 'cycle of stagnation'
Kwasi Kwarteng will today announce that Britain must break the “vicious cycle of stagnation” as he outlines £50bn of tax cuts. In his mini-Budget this morning, the chancellor will present 30 measures intended to drive economic growth. These will include reversing the rise in National Insurance payments, freezing corporation tax and cutting stamp duty. The chancellor will tell the Commons that he wants to usher in a “new era focused on growth,” adding: “That is how we will deliver higher wages, greater opportunities and sufficient revenue to fund public services, now and into the future. That is how we will compete successfully with dynamic economies around the world. That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth.” Paul Johnson, the director of the Institute for Fiscal Studies, said the fiscal statement would be “the biggest tax-cutting fiscal event since Nigel Lawson's budget of 1988.”
BoE raises interest rates to 14-year high
The Bank of England has raised interest rates from 1.75% to 2.25% and indicated that Britain’s economy is now in recession. A majority of the Bank’s nine-member monetary policy committee voted to increase the key base rate by 0.5 percentage points, judging that the risks of inflationary pressures becoming entrenched outweighed the short-term dangers to the economy. The central bank had previously expected the economy to grow between July and September but it now believes it will shrink by 0.1%. The Bank's seventh rate rise in a row takes borrowing costs to their highest level since 2008. FSB chairman Martin McTague said the "eye-watering" increase was a "clear illustration of the scale of the challenge facing small businesses".
Lawyers welcome plans to boost arbitration laws
Lawyers have welcomed plans to amend the Arbitration Act 1996 with a view to boosting Britain’s position as a “leading destination” for commercial disputes. The Law Commission’s plans aim to boost the cost savings, efficiency, and confidentiality benefits that arbitration has over litigation, by strengthening the powers of arbitration tribunals and streamlining the dispute resolution process. The review comes amid concerns that the UK's position as the world’s main disputes hub is under threat, as rivals, including Singapore, increasingly solidify their position. The plans seek to boost the efficiency of the arbitration process by strengthening the powers arbitration tribunals have to throw out meritless claims and giving them new powers. The Law Commission also set out plans to force arbitrators to disclose any conflicts of interest in a bid to boost trust in the process. However, the independent commission held back from boosting the confidentiality of the arbitration process in recognition of the principles of transparency and open justice.  David Vaughan, a partner at Collyer Bristow, said the reforms could help London regain its “historical” position as “the most popular place for international arbitrations."
Boeing settles charges over Max crashes
Boeing has agreed to pay $200m to settle charges that it made “materially misleading public statements” following two fatal crashes in Indonesia and Ethiopia of its 737 Max. The company agreed to pay the sum to settle charges that it misled investors. The former Boeing chief Dennis Muilenburg agreed to pay $1m.
‘Gatekeeper’ to combat companies fraud
The UK government has announced that abuse of Britain’s corporate registry by “kleptocrats, organised criminals and terrorists” is to be confronted with the biggest changes to Companies House in 170 years. The business department’s reforms will tackle the use of UK companies as a front for crime and corruption by making Companies House a “more active gatekeeper.” The government's economic crime and transparency bill includes identity verification powers for Companies House, the ability for it to “check, challenge and decline” incorrect or fraudulent information, and upgraded investigation and enforcement powers.
FCA investigates Schroders value error
The Financial Conduct Authority (FCA) is examining the circumstances behind a valuation blunder that left a Schroders-managed investment trust quoting an exaggerated net asset value number for more than four months. Officials from the FCA who supervise Schroders, the fund manager, and Link Fund Solutions, the fund administrator, are looking into the mistake, which was caused by the failure to adjust for a £21.8m slump in the value of one of the trust’s biggest investments. The inquiry into the reasons for the error could be the prelude to a formal enforcement investigation by the chief City regulator, although it has not yet reached that stage.
FOS received most complaints about banking and credit issues
Banking and credit issues attracted the most complaints to the Financial Ombudsman Service (FOS) in the first half of this year. There were roughly 44,200 complaints regarding banking and credit, which was a small decrease from the 46,220 complaints in the second half of 2021. Credit cards and current accounts accounted for the majority of complaints in the most recent total. In the first half of this year, a little over a third (37%) of banking and credit complaints were upheld in the consumers' favour. This is a decrease from the final half of 2021, when 44% of similar complaints were upheld. Overall, the FOS said it received 72,978 complaints in the first half of this year.
Ofcom inquiry into cloud computing competition
Ofcom will launch an investigation into the dominance of Microsoft, Amazon Web Services and Google in UK cloud services. The study will examine the strength of competition in the sector.
FTX was in talks with FCA about crypto licence before watchdog’s warning
The Financial Conduct Authority’s warning against FTX came as the cryptocurrency exchange was trying to secure a UK licence, setting up fresh tensions between the regulator and offshore crypto players.
China sends regulators to Hong Kong to assist U.S. audit inspection
Beijing has sent a team of regulatory officials to Hong Kong to assist the Public Company Accounting Oversight Board (PCAOB) with onsite audit inspections involving Chinese companies, as part of a landmark deal between the two countries. A China-U.S. agreement last month allows U.S. regulators, for the first time, to inspect China-based accounting firms that audit New York-listed companies.
HSBC to stop financing thermal coal
HSBC has announced it will stop financing the expansion of thermal coal from funds it manages actively with immediate effect. The bank said last December that it would cut exposure to thermal coal financing, across all its businesses including asset management, by at least 25% by 2025 and 50% by 2030, though non-EU or non-OECD-based clients could be funded until a global phase-out by 2040. In a new 10-point plan, HSBC Asset Management said it would immediately stop investing in listings or primary debt issuance of any company engaged in thermal coal expansion. HSBC estimates that there are more than 300 companies globally with more than 10% of revenues tied to the fuel.
Lord Vaizey joins ‘risky’ cryptocurrency business
Lord Vaizey has joined a cryptocurrency exchange described by the Financial Conduct Authority (FCA) as posing a “significant risk” to British consumers. The former digital and culture minister has accepted a position on Binance’s new advisory board, an 11-strong body with members from around the world. Earlier this year, the FCA said Binance’s offer of “complex and high-risk financial products” posed a “significant risk to consumers” in the UK. Lord Vaizey said his advisory role “won’t involve me lobbying the FCA to regulate.”
Jupiter to offload stake in Starling Bank
Jupiter is understood to be finalising the sale of a stake in Starling Bank. Sky News reports that Jupiter Fund Management is in advanced talks with several existing investors in the digital lender about offloading a shareholding of about 7%. The discussions have settled on a valuation for Starling Bank of about £1.5bn, according to reports. Jupiter is expected to generate just over £100m from the sale, which is likely to be concluded within weeks but which may not ultimately comprise the asset manager's entire shareholding.
French groups swoop for depressed British assets
French buyers have snapped up a slew of British assets this week, including entrepreneur Xavier Niel buying a 2.5% stake in Vodafone, and Schneider Electric agreeing to buy Aveva for £9.5bn.
Credit Suisse to seek funding from investors
Credit Suisse is set to tap investors for fresh funding for the fourth time in seven years as it attempts a radical overhaul of its investment bank. It is understood that various scenarios are under discussion, including the most drastic option of largely exiting the US market. Reuters says it is unclear how keen investors are and interest may be dampened by the fact that the bank, which has struggled with a string of scandals, has gathered almost SFr12bn ($12.22bn) in capital since 2015 - almost equivalent to its current market value.
Bosses think workers do less from home, according to Microsoft survey
A major new survey from Microsoft shows that bosses and workers fundamentally disagree about productivity when working from home. The results of the survey show that while 87% of workers felt they worked as, or more efficiently, from home, 80% of managers disagreed. The survey questioned more than 20,000 staff across 11 countries. Microsoft CEO Satya Nadella told the BBC this tension needed to be resolved as workplaces were unlikely to ever return to pre-pandemic work habits. "We have to get past what we describe as 'productivity paranoia,' because all of the data we have shows that 80% plus of the individual people feel they're very productive - except their management thinks that they're not productive. That means there is a real disconnect in terms of the expectations and what they feel." He added that employers are having to work harder to recruit, enthuse and retain staff. That even includes Microsoft itself. "We had 70,000 people who joined Microsoft during the pandemic, they sort of saw Microsoft through the lens of the pandemic. And now when we think about the next phase, you need to re-energize them, re recruit them, help them form social connections," Mr Nadella said. Microsoft employees can work from home up to 50% of the time as standard.
TUC fears for worker rights amid review of 'retained' EU law
Trade unions warn that Liz Truss’s plans to urgently “revoke or reform” all EU law that still has effect in the UK after Brexit are risking a potential bonfire of workers’ rights. The TUC’s secretary general, Frances O’Grady, has said: “Threatening hard-won workers’ rights is the last thing the country and working people need. Holiday pay, equal pay for women and men, safe limits on working hours and parental leave are just a few of the rights underpinned by retained EU law. These are all essential – not a nice-to-have.”

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