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

The Treasury is poised to initiate the search for new chief executives for the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) as speculation mounts that Nikhil Rathi will not seek a second term at the FCA. Rathi's tenure has been marked by tensions with the government, particularly regarding enforcement and economic growth. Meanwhile, Sam Woods, the PRA's chief, is set to step down by mid-2026. Chancellor Rachel Reeves is expected to announce changes to the regulators' remits, with the aim of enhancing Britain's competitiveness. However, this move may face criticism over potential risks to the financial system's safety. A Treasury spokesperson confirmed that the recruitment process for new leaders will be outlined in due course, saying: "The current CEO of the Financial Conduct Authority has a term running until 30 September 2025." The potential vacancies are already generating speculation in the City about possible successors.

 

Sky News

NatWest has prohibited employees from using messaging apps like WhatsApp, Skype, and Facebook Messenger for work-related communications. The decision follows a clampdown by US regulators, which has resulted in over $2.5bn in fines for various banks due to breaches of record-keeping rules. A NatWest spokesman said: "Like many organisations, we only permit the use of approved channels for communicating about business matters." The Financial Conduct Authority in the UK is also examining the policies of financial firms regarding unmonitored communications, highlighting the growing concern over the use of encrypted messaging platforms in the industry.

 

The Times

French Industry Minister Marc Ferracci has told France Inter radio that factory closures in France are expected to affect "thousands of jobs" in the weeks and months ahead. "Several sectors are in a worrying situation," he said in the interview, identifying the chemical, automotive, and metallurgy sectors. Ferracci said such difficulties are largely due to "very strong international competition . . . not always very fair because it is very subsidised in China and the United States". Michelin has just announced it is to cut around 1,250 jobs with the closure of two French factories. French retailer Auchan is planning to cut 2,389 jobs in various departments, the company said last week.

 

Reuters

Anglo American has announced the closure of its Scarborough office at Resolution House as part of a broader cost-cutting strategy, resulting in significant job losses. The company anticipates an additional 450 job cuts at the Woodsmith Mine by mid-next year, following over 100 job losses earlier this summer. The capital investment for the Woodsmith project will be slashed from £800m to £160m next year.

 

Yorkshire Post

Direct Line is set to cut approximately 550 jobs, representing 5% of its workforce, as part of a cost-cutting strategy under new CEO Adam Winslow. The company has faced challenges, including a decline in its customer base and a drop in gross written premiums from £1.1bn to £705.1m year-on-year. Winslow stated that the turnaround is in the "early stages" and that it typically takes "12 months for activity to earn through." The insurer has also been grappling with rising claims costs and competitive market conditions, which have led to profit warnings and a significant drop in share price. Winslow believes that government scrutiny on rising motor insurance prices could be beneficial, as many inflation-driving factors cannot be resolved by insurers alone.

 

Financial Times

The Times

The Daily Telegraph

The Guardian

The Labour government is set to publish a radical pledge to cut emissions by 81% compared with 1990 levels by 2035. The Guardian reports that the goal, expected to be unveiled at the COP29 climate summit today, would be achieved by decarbonising the power sector and through a huge expansion of offshore wind, as well as through investments in carbon capture and storage and nuclear energy. Meanwhile, the FT reports that a deal to launch multibillion-dollar carbon markets governed by UN rules on emissions has been agreed at COP29. Some view this as a "rare bright spot of co-operation and progress emerging from COP29" but others suggested the agreement had bypassed proper scrutiny.

 

Financial Times

The Times

The Guardian

The Financial Reporting Council (FRC) has initiated a consultation on significant updates to the UK Stewardship Code, aiming to redefine stewardship with a focus on creating long-term “sustainable value” for clients. This marks the first time the Code includes dedicated principles for various service providers, such as proxy advisers and investment consultants, to enhance reporting on stewardship activities. Richard Moriarty, CEO of the FRC, said: “Our proposals reflect extensive stakeholder engagement the FRC has undertaken during 2024 and aim to reduce unnecessary reporting burden while ensuring savers and pensioners can better understand how their money is being managed on their behalf to create long-term sustainable value.” However, some commentators expressed concerns that the new definition may dilute the focus on sustainability. Lindsey Stewart, director of investment stewardship research and policy at Morningstar Sustainalytics, said it was interesting to see the FRC's definition of stewardship shift to “sustainable value” focused on clients and beneficiaries, dropping explicit references to “the environment and society.” But FRC chief Richard Moriarty denied that the changes suggest that investors should abandon their duty to the environment. He told City AM: “It's a conscious change. But I will challenge the observation that it's a dilution, far from it. I think this is an enhancement.”

 

Portfolio Adviser

Responsible Investor

The Times

City AM

Jonathan Reynolds, the Business Secretary, has said he takes "ultimate responsibility" for ensuring full, fair, and prompt redress for subpostmasters affected by the Horizon scandal. He highlighted that the Post Office's "corporate culture" is central to the issues at hand, asserting the need for significant changes to its business model. Reynolds noted a "significant increase in the pace at which compensation has been paid" since the general election, with compensation levels rising by roughly a third in the last four months. He acknowledged the ongoing dissatisfaction with the current situation but emphasised efforts to expedite compensation without compromising fairness. Reynolds also expressed the importance of understanding the underlying governance issues within the Post Office to prevent future injustices, saying: "The scale of this scandal cannot be separated out from the business model and the governance structure of the Post Office." More than 900 subpostmasters were prosecuted due to faulty Horizon software, with many still awaiting compensation.

 

Evening Standard

The ongoing scandal regarding motor finance commissions has compelled BMW to allocate over £70m for potential customer compensation. BMW Financial Services (GB) Limited acknowledged "considerable uncertainty" regarding its ultimate liability in its latest accounts. The Financial Conduct Authority's inquiry into historic discretionary commissions, dating back to 2007, has intensified scrutiny on the industry. Notably, Lloyds Banking Group has earmarked £450m, while FirstRand has set aside £127.4m. The ruling has implications beyond discretionary commissions, affecting all commissions that were not fully disclosed to consumers.

 

The Times

Telefónica has agreed to pay $85m to resolve a US investigation into an alleged scheme to bribe officials in Venezuela to obtain preferential access to US dollars. The agreement charges a subsidiary of the Spanish telecom company with conspiring to violate the Foreign Corrupt Practices Act. The settlement marks the second time a Telefónica subsidiary has been fined for violating the statute, which prohibits companies from bribing foreign officials to secure a business advantage.

 

Wall Street Journal

Revolut is embroiled in a potential legal dispute with crowdfunding platform Republic Europe over the sale of shares by early investors. The conflict escalated when Revolut attempted to block a deal where Jamba Europe, backed by HOF Capital, aimed to purchase 10,047.8 shares for approximately £4.5m at a significant discount. Republic claims that Revolut's recent changes to its articles of association were specifically designed to hinder this transaction, saying: “Having taken legal advice, we believe that both the process and substance of the change were contrary to applicable law and are invalid.”

 

City AM

The Financial Conduct Authority (FCA) has imposed a £1.1m fine and banned Leigh Mackey, a director of Inspire Insurance Services, for misleading the regulator and misusing client funds. Mackey, who was responsible for the insurance broker, admitted to using premiums meant for insurers to cover operating costs and personal expenses, resulting in an estimated debt of over £660,000. However, the liquidator's estimates suggest a shortfall exceeding £2.2m. Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “Mackey helped himself to insurer funds to prop up his business and personal finances.”  

 

City AM

The number of British businesses facing insolvency has surged, with 1,022 companies filing for insolvency last week, marking a 64% increase compared to the same period last year. The rise follows the Chancellor's recent decision to reduce tax breaks, specifically the business asset disposal relief, which previously allowed entrepreneurs to benefit from a lower capital gains tax rate of 10% on gains up to £1m. Starting from April 6, 2025, this rate will increase to 14%, and further to 18% from April 6, 2026.

 

The Daily Telegraph

British companies will get back some £700m after the ECJ overruled a European Commission determination that a British tax exemption for corporate groups using overseas financing companies amounted to illegal state aid.

 

Financial Times

Attempts to stop some of the world’s biggest companies shifting profits across borders to avoid paying tax are “in peril” following Donald Trump’s US presidential election win, experts say.

 

Financial Times

Chinese scientists have developed the first fully automated AI-powered robot lifeguard designed to operate without human intervention. Stationed permanently at a riverside in Luohe city, the robot employs artificial intelligence, big data, and advanced navigation technologies to monitor a designated water area 24/7. It uses an algorithm to detect drowning incidents and is equipped with a life-saving buoy and a rescue arm to assist victims. “Although an early warning platform for drowning accidents has been installed in some of China's waters, the timeliness, accuracy and coverage of these existing methods are insufficient, and emergency rescue operations are mainly manual, with delayed actions and a lack of rescue equipment,” the Hefei Institute said when announcing the project.

 

South China Morning Post