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European Edition
10th July 2024
Basel Committee tightens rules on banks outsourcing services
Board directors of banks must take ultimate responsibility for outsourced services and document how they manage the risk of outages and disruptions to customer services, according to the global Basel Committee of banking regulators. The committee proposed 12 principles for banks and regulators to apply, stressing that banks should undertake appropriate due diligence of risks before signing contracts with third parties and monitor the performance of the services. They should also maintain robust business continuity management to operate during disruptions. "Ongoing digitalisation has led to rapid adoption of innovative approaches in the banking sector," the Basel Committee said in a statement. "As a result, banks have become increasingly reliant on third parties for services that they had not previously undertaken."
BoE to probe risk transfers in insurance sector
The Bank of England (BoE) has announced that it will increase scrutiny of risks in the insurance sector, particularly in relation to bulk purchase annuities. Gareth Truran, the BoE's executive director for insurance, highlighted the changing dynamics of the insurance market due to bulk purchase annuities, which bring specific risk management challenges. Insurers have been using funded reinsurance arrangements to support their bulk purchase annuity business, which is predicted to reach around £600bn over the next decade. Truran stated that the BoE will closely monitor UK insurers' use of these transactions and will consider further measures if necessary.
Bank of Italy to publish guidelines on applying EU crypto asset rules
The Bank of Italy will soon release guidelines on how to apply the upcoming European Union regulation on crypto assets, known as Market in Crypto Asset Regulation (MiCAR). Governor Fabio Panetta stated that the guidelines aim to ensure the smooth functioning of the payment system. The EU regulation recognises electronic money tokens (EMTs) and asset-reference tokens (ARTs) as suitable means of payment. EMTs are linked to a single official currency, while ARTs depend on one or more underlying assets. Panetta stressed that EMTs, which can be issued by banks or electronic money institutions, are the only instruments that can fully preserve the public's trust.
Elliott Associates urges London court to overturn LME verdict
US-based hedge fund Elliott Associates is urging a London court to overturn a verdict supporting the London Metal Exchange's (LME) cancellation of nickel trades. The LME cancelled $12bn in nickel trades in March 2022 due to exceptional circumstances. Elliott and market maker Jane Street Global Trading brought a case demanding $472m in compensation, alleging that the LME had acted unlawfully. The High Court ruled in favour of the LME, stating that it had the right to cancel the trades. Elliott is now appealing the ruling, claiming that the LME failed to disclose important documents. The LME has previously argued that the cancellation was necessary to prevent systemic risk.
Heathrow granted injunction against potential environmental protesters
Heathrow Airport has been granted a High Court injunction against potential environmental protesters on the site. The airport's lawyers argued that it was a clear and obvious target for planned disruptive action by protesters affiliated with Just Stop Oil and other environmental campaigns. The court was told that the airport handles more than 1,300 flights and around 227,000 passengers on average daily, with the actions of potential protesters risking significant harm. Mr Justice Julian Knowles granted the injunction, which lasts for five years and will be reviewed every 12 months. This move follows similar injunctions granted to Stansted, Manchester, and East Midlands airports.
Carla Bruni charged with witness tampering and fraud
Former French first lady Carla Bruni has been charged with witness tampering and fraud offenses. The charges are related to allegations that Bruni was involved in a conspiracy to cover up the actions of her husband, former President Nicolas Sarkozy, who is accused of accepting millions from Libyan dictator Muammar Gaddafi. Bruni, who is 56 years old, is accused of being part of a £4m plan to try to keep Sarkozy from going to jail. If convicted, she could face up to ten years in jail, or up to 20 years for more serious offenses. Bruni has denied any involvement in the conspiracy. She has been released on bail.
LetterOne brings first UK national security appeal
Russian oligarch-backed investment firm LetterOne has asked a London court to rule that it was unlawfully ordered to sell regional provider Upp in December 2022. The firm, whose owners include sanctioned oligarchs Mikhail Fridman and Petr Aven, was forced to divest over concerns about its ultimate owners' vulnerability to leverage by the Russian state. The challenge marks the first under Britain's recent national security law to reach London's High Court.
GS: Blair wrong to claim AI is going to save UK economy
Goldman Sachs has challenged the notion that artificial intelligence (AI) will provide significant productivity boosts to the economy. The bank’s paper states that AI's productivity benefits will be more limited than anticipated, while its power demands will require utility companies to spend almost 40% more in the next three years. MIT economist Daron Acemoglu, who was interviewed for the study, believes that truly transformative changes won't happen quickly and may not occur within the next 10 years. Jim Covello, head of global equity research at Goldman Sachs, believes that AI technology is exceptionally expensive and not designed to solve complex problems. If important use cases for AI don't become more apparent in the next 12-18 months, investor enthusiasm may fade. Meanwhile, the Tony Blair Institute's report on AI's potential in the public sector has already been criticised for basing its argument on answers from Chat GPT.
Campaigners prepare new pilot project for four-day working week
Campaigners for a four-day working week are launching a new pilot project to explore flexible working options. The project, which will start in November, aims to present its findings to the government in 2025. The campaign for a four-day working week, without a loss of pay, has been gaining momentum since the Covid lockdowns. The pilot project will also examine other flexible working policies, such as shorter working weeks and flexible start and finish times. The project will be run by the UK's 4 Day Week Campaign and the consultancy Timewise, with support from academics at the University of Cambridge, Boston College, and the Autonomy Institute. The campaign hopes that a Labour government will be more receptive to changing working practices. The pilot project has already attracted the support of businesses, including Welsh social landlord Bron Afon Community Housing. Advocates of the four-day working week argue that it can improve productivity and staff retention while reducing worker absences. The South Cambridgeshire trial found positive results, with improved performance in several areas of council work. The campaign believes that the traditional five-day working week is outdated and in need of an update.
Hiring slump continues, Page Group warns
One of Britain's biggest recruiters, Page Group, has warned that the hiring market is not improving and may even be getting worse. The company experienced a slower June than expected, with weak confidence among employers and candidates worldwide. Page Group had anticipated an upturn in the market before summer, but now believes hiring may not pick up until next year. As a result, the company expects its annual operating profits to be around £60m, a third less than previously guided.
Dyson to cut 1,000 UK jobs in global restructure
The vacuum cleaner and air filter maker Dyson is cutting about 1,000 jobs in the UK as part of a global restructure, reducing its British workforce by more than a quarter. Dyson's CEO, Hanno Kirner, stated that the company operates in increasingly fierce and competitive global markets and needs to be agile. The job cuts are part of the company's moves to reduce its 15,000-strong global workforce. Dyson, known for its bagless vacuum cleaner, hand-dryers, and bladeless fans, has 3,500 UK employees. The company will continue to conduct research, development, and design in the UK.
First Group boss to receive £800k bonus despite train cancellations
The CEO of First Group, Graham Sutherland, is set to receive an £800,000 bonus, nearly double his salary, despite the company's train cancellations. Over the past year, First Group's three rail companies have cancelled tens of thousands of trains. Sutherland's performance targets included diversity and environmental, social, and governance concerns. However, train cancellations have increased by 19.8% compared to the year before the pandemic. First Group defended the bonus, stating that it was the fifth-best performing company in the FTSE 250 and had recorded profits of £200m. The company also highlighted its investments in electric buses and infrastructure.
Thames Water chief takes £195k bonus in first 3 months on the job
The boss of Thames Water, Chris Weston, has received a £195,000 bonus for his first three months in post, while simultaneously urging regulators to allow the utility to increase customer bills by almost 60%. Campaigners have criticised the company for using its £15.2bn debt to pressure the government and regulator Ofwat into approving its plans to raise funds. Thames Water's chief financial officer, Alastair Cochran, also received a bonus of £446,000. Ofwat is investigating the bonus payments to determine if they comply with new rules on executive pay. Thames Water is seeking approval for a five-year business plan that would raise average household bills by 59% between 2025 and 2030.

Southwest appoints Rakesh Gangwa amid pressure from Elliott
Southwest Airlines has appointed Rakesh Gangwal, co-founder of InterGlobe Aviation, to its board of directors. The appointment comes as activist investor Elliott pushes for changes in Southwest's board and leadership, citing disappointing financial results. Last week, Southwest adopted a "poison pill" strategy to deter Elliott from raising its stake in the company. Elliott currently owns an 11% stake in Southwest.
BNP Paribas hires Richard Newman as managing director
BNP Paribas has hired Richard Newman as managing director of its UK-based advisory team. Newman joins from M&A boutique Perella Weinberg Partners, where he held the same position. Prior to that, he worked at Moelis & Company and Citigroup. The appointment is part of BNP Paribas' efforts to expand its private equity clientele.


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