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

A joint statement from the UK Treasury and the Financial Conduct Authority has laid out plans for an overhaul of the UK’s criminal sanctions regime for insider dealing and market manipulation. The reforms will be implemented as part of broader work to “repeal and replace” EU rules that were still in place post-Brexit, known as the Future Regulatory Framework (FRF) review. “As part of the FRF programme, the government intends to repeal the Market Abuse Regulation, the civil market abuse regime, and replace it with UK-specific legislation. We will set out a timetable for this in due course,” the statement said. Commenting on the move, Simon Morris, a financial services partner at the law firm CMS, said: “The EU has criminalised most serious market abuse while the UK lags with a 30-year-old regime no longer fit for purpose.”

 

The Times

IT Risk and Compliance Statistics for 2023

Want to know what over 1,000 compliance and risk professionals shared about their pain points, budgets, staffing, best practices, and much more? Download Hyperproof’s report to get an in-depth look at how companies are responding to the ever-evolving compliance landscape.

Download Report

 

One of the City’s biggest investors is preparing for a post-Brexit investment “big bang.” FTSE 100 life insurer Phoenix Group has put together a team of analysts and specialists to examine what projects it can invest in once the UK relaxes EU-era rules in the insurance industry. Chancellor Jeremy Hunt last year confirmed that the Government will overhaul Solvency 2 rules which dictate how much cash insurers must hold on their balance sheets and where they can invest, with officials set to deliver what have been dubbed ‘Big Bang 2.0’ reforms. A Phoenix spokesman said it is working closely with the Bank of England’s Prudential Regulation Authority, industry peers and the Treasury “to ensure that Solvency 2 changes allow us to invest quickly and safely in the type of projects that will best serve society and support government ambitions to boost productivity, level up the country and support the transition to net zero.”

 

The Daily Telegraph

The head of the International Monetary Fund (IMF) has warned that the global economy faces increased financial stability risks amid turmoil in the banking industry. Kristalina Georgieva, managing director of the IMF, said: “The rapid transition from a prolonged period of low interest rates to much higher rates necessary to fight inflation inevitably generates stresses and vulnerabilities, as we have seen in recent developments in the banking sector.” Her comments come amid concern over the global banking industry following the failure of Silicon Valley Bank and UBS’ rescue of rival Credit Suisse. Ms Georgieva said policymakers have acted decisively in response to financial stability risks, adding that while actions by central banks “have eased market stresses to some extent . . . uncertainty is high and that underscores the need for vigilance.” Ms Georgieva also said that uncertainties in the world economy remained “exceptionally high,” adding that the outlook for the global economy over the medium-term is likely to “remain weak.”

 

CNBC

The Daily Telegraph

The Guardian

Office for Budget Responsibility (OBR) chair Richard Hughes has warned that real living standards may not improve until the “late 2020s.” He told the BBC’s Sunday with Laura Kuenssberg that the country is facing the “biggest real drop in living standards on record,” although he added: “But we do expect, as we get past this year and we go into the next three or four years, that real income starts to recover.” Mr Hughes, who highlighted the challenges in forecasting economic changes, also said there was a “huge amount of uncertainty around the outlook for inflation.” He also warned that the impact of Brexit on the economy is of the same “magnitude” as the pandemic and energy price crisis, saying GDP will be 4% smaller than if the country had stayed in the EU.

 

BBC News

The Times

Germany’s chancellor Olaf Scholz attempted to reassure markets on Friday after the cost of Deutsche Bank’s 5-year credit default swaps, used to insure against the risk of it not paying debts, jumped to a four-year high. Shares in the lender fell as much as 14% before closing down 8.5% in Frankfurt - a five-month low. Concerns were raised about Deutsche’s exposure to US commercial real estate lending, where the bank has $16.8bn outstanding, and its large derivatives book. But Scholz said there was no reason to be concerned, adding that Deutsche “has fundamentally modernised and reorganised its business and is a very profitable bank.” Concerns over the banking sector continue to swirl following Credit Suisse’s collapse. Shares in Commerzbank and Société Générale also fell on Friday, by 5% and 6%, respectively. Fidelity International’s Salman Ahmed says: “There is a trust deficit in the market,” explaining that the tightening in monetary policy by central bankers over the past year was “starting to shake some of those foundations of the banks, in ways that were unexpected.”

 

Financial Times

The Daily Telegraph

The Times

The Guardian

The US Justice Department is probing a number of banks, including Credit Suisse and UBS, for helping Russian oligarchs evade sanctions. Subpoenas demanding information from individual bankers were sent before the crisis that engulfed Credit Suisse and its takeover by UBS. It is noted that Credit Suisse looked after as much as $60bn for Russian clients at its peak, generating hundreds of millions of dollars in revenue each year. Separately, Switzerland’s finance minister has said that without the state-brokered takeover of Credit Suisse by rival UBS, there may have been a new global financial crisis. Finance minister Karin Keller-Stutter said Credit Suisse could not have survived without the £2.65bn deal, adding that the collapse of the lender “would have sent other banks into the abyss.” She added that it was “clear to everyone” that a restructuring or liquidation of Credit Suisse "would trigger an international upheaval in the financial markets.”

 

Bloomberg

Politico

A California court has ruled that experts can testify in a case alleging that GSK’s old blockbuster heartburn drug Zantac caused cancer, in a blow for the British pharmaceutical company. GSK launched Ranitidine, marketed as Zantac, in the 1980s and later sold the rights to the product in America to other drug companies including Pfizer and Sanofi. Analysts at Citigroup, GSK’s joint house broker, said any settlement is likely to be very modest at less than $5bn. “We anticipate the stock to react very favourably, assuming GSK/plaintiffs look to settle pre-July,” they added.

 

The Times

HSBC will give its shareholders a vote on a proposal by Hong Kong investors who are calling on the bank to conduct a strategic overhaul, including a spin-off of the Asian business. The vote was requested by Ken Lui, an investor who runs a group campaigning for a spin-off of the lender's Asian arm. The bank’s chairman, Mark Tucker, has urged shareholders to vote against the plans at the annual shareholder meeting on May 5. HSBC has dismissed the break-up plan and in the notice to shareholders set out the case against changing the bank’s structure. “Over the years [the bank has] evaluated radical structural reforms for the potential to create shareholder value,” it said, adding that as recently as H2 2022 it had “considered and evaluated” such reforms. It concluded that all the options would “destroy value,” incur “significant one-off costs” and would “result not only in a material loss of value for shareholders but also lower dividends.”

 

The Sunday Times

The Guardian

The UK’s Competition and Markets Authority (CMA) has provisionally dropped concerns that Microsoft's proposed takeover of Activision Blizzard would damage the UK console gaming market. Last month, the regulator warned the £56.7bn deal could result in higher prices, fewer choices or less innovation for UK gamers. However, the CMA said its latest findings now indicate the "transaction will not result in a substantial lessening of competition in relation to console gaming in the UK."

 

Sky News

Bloomberg

City AM

London Evening Standard

New EU rules are set to reduce greenwashing by increasing scrutiny of advertising and marketing. Under the proposals, companies will have to back up their claims with data and scientific evidence if they say they are carbon neutral or greener. Mathew Forde, partner at the law firm Lewis Silkin, says that while amendments to the EU’s unfair commercial practices directive could have been tougher, they will make it harder for large corporations to make unsubstantiated claims about emissions.

 

The Times

China is set to strengthen regulations on the certified public accounting sector, deputy finance minister Zhu Zhongming has told Deloitte’s global council chair, Shu Yawei. The move comes after Chinese officials suspended the operations of Deloitte's Beijing office for three months and imposed a $30.9m fine over lapses in the firm's auditing work of China Huarong Asset Management. In a statement, the finance ministry noted that China supports Deloitte and other global accounting firms in operating legally in the nation, adding that they will be treated equally with domestic accountants.

 

Bloomberg

Reuters

The US Securities and Exchange Commission has raised concerns with UK regulators over Rokos Capital Management after the UK-based hedge fund was forced to pay out large sums to its banks to meet margin calls.

 

Financial Times

Analysis by ManpowerGroup shows that around 80% of UK companies have reported difficulty filling jobs. This is the highest percentage since 2006 and marks an increase on the 35% recorded in pre-pandemic 2019. Michael Stull, director at ManpowerGroup UK, said: “Talent shortages are always an area of concern for employers, but the real step change in our data can be seen post 2019.” He added that employers were "acutely aware of the growing scarcity of key skills, so they're holding on to and trying to stockpile business-critical talent. Just in time hiring does not work anymore, just in case hiring is more the mantra." Meanwhile, KPMG expects the UK unemployment rate to widen to 4.1% this year, from 3.7% in 2022. Yael Selfin, chief economist at KPMG, has flagged skills shortages and slowing workforce participation as two structural issues that “dominate the longer-term risks to the UK outlook.”

 

The Times

The state aid granted to Tui Group by the German government during the pandemic will be repaid by the travel group from a €1.8bn equity issue, the Times reports, noting that the German state will make a profit of more than €600m on the aid provided. CEO Sebastian Ebel said Tui would emerge with “a good balance sheet structure again” by reducing interest costs and creating a solid basis for the future.

 

The Times

Bloomberg’s Parmy Olson writes that Twitter, TikTok and Facebook will struggle to keep up with a deluge of AI-generated images that are spearheading a new misinformation crisis and which puts the platforms in unprecedented territory. Last October, WhatsApp users in Brazil were flooded with misinformation about the integrity of their presidential election, leading many to riot in support of defeated ex-president Jair Bolsonaro. When Olson asked Twitter why it hadn’t properly labelled recent fake Donald Trump and Emmanuel Macron images as they went viral, the company responded with a poop emoji, its new auto reply for media requests.

 

Bloomberg