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European Edition
26th May 2023
Three of Europe’s biggest insurers quit industry net zero initiative
French insurers Axa and Scor, and Allianz of Germany, have become the latest members of the Net Zero Insurance Alliance (NZIA) to quit. There have now been seven high-profile defections from the alliance in less than two months. Bloomberg says Axa’s departure is particularly noteworthy, as the firm had chaired the alliance, and since Munich Re quit the NZIA in late March, citing “material” legal risks, the alliance has struggled to keep other members from walking out. An emergency meeting of the alliance was held on Thursday, according to people familiar with the process. Bloomberg notes a growing anti-ESG campaign in the U.S. led by attorneys general from 23 states. The explicit targeting of NZIA led several members to conclude they were safer outside the alliance, people familiar with the deliberations said. Patrick McCully, a senior analyst at nonprofit Reclaim Finance, said that “as NZIA disintegrates before our eyes, we must ask why these huge companies with their hordes of lawyers didn’t see antitrust issues as a major obstacle when they founded the alliance.”
EU celebrates GDPR's fifth anniversary with record-breaking fine
The European Union's General Data Protection Regulation (GDPR) celebrated its fifth anniversary on Thursday. The EU marked the occasion by issuing a record-breaking fine of €1.2bn ($1.3bn) to Meta Platforms for violating the data protection rules. GDPR was hailed as a gold standard for regulating how companies use people's data, and its principles were later copied by other countries. However, Bloomberg notes the implementation of GDPR was slow, and regulators were held back by a lack of resources and procedural rules. The EU is currently negotiating new controls for AI, but it will likely take a while before the laws go into effect.
UK government acknowledges 'existential' risk of AI
The UK government has acknowledged the "existential" risk of artificial intelligence (AI) development for the first time. Prime minister Rishi Sunak and Chloe Smith, the secretary of state for science, innovation and technology, met with the CEOs of Google DeepMind, OpenAI, and Anthropic AI to discuss safety and regulation measures. “They discussed safety measures, voluntary actions that labs are considering to manage the risks, and the possible avenues for international collaboration on AI safety and regulation,” the participants said in a joint statement. “The lab leaders agreed to work with the UK government to ensure our approach responds to the speed of innovations in this technology both in the UK and around the globe . . . The PM and CEOs discussed the risks of the technology, ranging from disinformation and national security, to existential threats . . . The PM set out how the approach to AI regulation will need to keep pace with the fast-moving advances in this technology.”
UK Cyber Security Centre warns against Chinese hackers
The UK's National Cyber Security Centre has urged operators of critical national infrastructure, including energy and telecommunications networks, to prevent Chinese state-sponsored hackers from hiding on their systems. The announcement came as the Five Eyes intelligence group issued a joint notice detailing the nature of the Volt Typhoon threat and how to deal with it. Microsoft said that Volt Typhoon had been active since mid-2021 and had targeted telecommunications infrastructure in Guam, an island hosting a US military facility that is expected to play an important role in any American response to an invasion by China of Taiwan. The hackers used a “web shell” - a piece of malicious code that allows rogue actors to access a web server – as a way in to connected systems. Secureworks, a US cybersecurity company that contributed to the advisory notice, said Chinese hackers tend to share their techniques with other China-based groups and that similar techniques will be deployed against UK targets.
Mortgage rates increased after gilt yields rise on inflation data
Higher-than-expected UK inflation data pushed up gilt yields on Thursday, prompting lenders to hike rates on new mortgages. Markets were spooked by unexpectedly strong inflation data on Wednesday showing that prices rose by 8.7% last month, significantly more than the Bank of England's expectations of an 8.4% increase. Britain's borrowing costs are now the highest in the G7 for the first time since 2007, with the yield on ten-year debt up by almost 0.2 percentage points to 4.37%, putting it above Italy's rate of 4.35%. Britain's inflation rate is also the highest in the G7 and traders now expect interest rates to rise to 5.5% by the end of the year, up from 4.5% currently. Lloyds, Virgin Money and Halifax all announced small mortgage rate rises on Thursday, as did Nationwide Building Society. Gary Greenwood, a banking analyst at Shore Capital, said: “Other banks will need to follow suit if swap rates stay at their new level, which will push up the cost of borrowing for homeowners that have mortgages and so squeeze household finance.”
Germany slips into recession
German output fell by 0.3% in the first three months of this year following a contraction of 0.5% at the end of 2022, putting the country in a technical recession. High energy prices and gas shortages have weighed on growth and dragged down consumer spending. The latest figures show household consumption fell by 1.2% compared with the previous quarter while government spending dropped by 4.9%. Andreas Scheuerle, an analyst at the German asset management company DekaBank, said: “Under the weight of immense inflation, the German consumer has fallen to his [sic] knees, dragging the entire economy down with him.”
Ministers look at reshaping pensions lifeboat fund to give boost to business
The City minister has urged pension funds to embrace a “culture of risk-taking” amid fears that a reluctance to put money in the stock market is holding the economy back. Andrew Griffith spoke with the Telegraph about Treasury plans to bolster returns for savers using the industry lifeboat, the Pension Protection Fund (PPF), which currently protects people in retirement schemes when their employer goes bust. Jeremy Hunt, the Chancellor, is understood to be considering plans to hand control of underperforming schemes to the PPF which would then subsume the assets into a new superfund that can invest in a broader range of UK high growth assets.
PwC Australia leak staff told to step aside
PwC has agreed to remove staff with links to the leak and use of confidential Australian tax plans from government work until a review is completed. The Australian Treasury referred the matter to police for a criminal investigation on Wednesday. The scandal originated with PwC's former head of international tax, Peter Collins, who shared confidential information about Australia’s tax plans with other staff at the firm. Other PwC staff then used the leaked intelligence to advise 14 clients on how to sidestep new multinational tax avoidance laws in 2016. The scandal has elicited anger within the professional services community in Australia, with KPMG expressing concern about the reputational damage inflicted on the industry. KPMG CEO Andrew Yates and chair Alison Kitchen have urged their firm's workforce to act ethically and in the public interest, admitting the company had not always met expectations in the past.
Blue-chips to vote on the future of the CBI
Scores of blue-chip companies, including BP and Marks & Spencer, will be allowed to vote on the future of the Confederation of British Industry (CBI) at an extraordinary general meeting next month. The poll will be conducted on a 'one member, one vote' basis, regardless of a company's size or subscription fee. Insiders said the group was drafting proposals for a slimmed-down organisation that would inevitably result in some redundancies among its workforce. The group's director-general, Tony Danker, was sacked last month amid allegations of personal misconduct. His successor, Rain Newton-Smith, has vowed to lead the CBI's rebirth, and has said it is likely to involve changing the group's name. The scandal has also ensnared the CBI's former president, John Allan, who acknowledged making an inappropriate comment to a colleague, and has since stepped down early as chair of Tesco and Barratt Developments amid allegations about his behaviour.
CEO of biggest carbon credit certifier resigns
David Antonioli, the head of Verra, the world’s leading carbon credit certifier, is to step down next month. The move comes after an investigation found many of the Washington-based organisation’s carbon offsets, which are used by major companies for climate and biodiversity commitments, were worthless. Verra has certified more than 1bn credits through its verified carbon standard (VCS). The Guardian notes that companies such as Gucci are moving away from offsetting-based environmental claims while scientists are calling for urgent reform of the unregulated system.
Starling Bank boss steps down to avoid conflict of interest
Anne Boden, the chief executive and founder of Starling Bank, is to step down at the end of next month to avoid concerns over a possible conflict of interest related to her 4.9% ownership of the bank and her holding 18.5% of the voting rights in the group. The announcement comes as Starling reported a record six-fold increase in pre-tax profits to £195m in the year to March 2023, while revenues more than doubled to £453m. “Modern-day governance is all about the board setting the strategy and the CEO carrying it out and as a major shareholder that’s very, very difficult if you’re also the CEO,” she said, adding that UK regulators had not voiced concern about her stake in the bank.
New laws may force banks to ensure customers have access to cash
Amendments to the Financial Services and Markets Bill aim to grant the Financial Conduct Authority greater powers to ensure that High Street bank branches continue to offer free cash withdrawal and deposit services. Economic Secretary to the Treasury, Andrew Griffith, said: “The convenience and speed of digital payments opens a world of opportunity for people and businesses, but the reality is that for the foreseeable future many still depend upon the ability to withdraw or deposit cash. That is why we are bringing forward new laws that will ensure everyone has reasonable access to be able to withdraw and deposit cash for free. This is especially important for those living in rural communities, the elderly and households who rely upon physical cash to manage their finances.”
Paddy Power fined for targeting vulnerable gamblers
The Gambling Commission has fined PPB Counterparty Services, which trades as Paddy Power and Betfair, £490,000 for breaching social responsibility rules after Paddy Power sent a promotional push notification to customers who had signed up to exclude themselves from gambling, inviting them to bet on a football match. Ian Brown, chief executive of parent company Flutter in the UK and Ireland, said: "Flutter's ambition is to lead the industry in safer gambling and we apologise for this mistake."
Regulator extends audit monitoring with Scalebox
The Financial Reporting Council (FRC) has expanded its monitoring and oversight of mid-tier audit firms with the launch of the Scalebox initiative. The plan is aimed at the auditors of Public Interest Entities, which largely consist of FTSE-350 companies. The initiative is voluntary for smaller firms. The FRC's Deputy Chief Executive and Executive Director of Supervision, Sarah Rapson, said: “Today’s unveiling of the Scalebox means the FRC has another tool to use in our role as an improvement regulator and to promote competition and choice in the audit market. Through this approach to working with these firms, we hope to increase their audit capabilities and capacity as they enter the PIE audit market which will, over time, increase competition while maintaining high standards of audit quality."
Counterfeit clothing boss sentenced for fraud worth more than £150m
Two Dubai nationals have been sentenced to a combined total of 31 years in jail after masterminding a £150m fraud. Sock manufacturer Arif Patel was sentenced in his absence to 20 years behind bars, while co-accused Mohamed Jaffar Ali was also sentenced in his absence to 11 years in jail. A joint probe by HMRC and Lancashire Police found Arif Patel, formerly of Preston, and his criminal gang tried to steal £97m through VAT repayment claims on false exports of textiles and mobile phones. They also imported and sold counterfeit clothes that would have been worth at least £50m, had they been genuine.
UK crypto fraud losses jump 40%
Data provided by Action Fraud show UK losses to crypto fraud increased more than 40% over the past year, surpassing £300m for the first time.
Cazoo fights for survival
Online used-car retailer Cazoo is fighting to maintain its US listing as creditors become unnerved by the firm’s performance. The company has reported near $500m losses for two years running and its shares have slumped to close to $1 from $250 in April 2021. Cazoo has entered negotiations with bondholders over a potential restructuring of $630m in debt, but talks are at an early stage and there is “no assurance that any such discussions will progress.” The firm could be delisted if shares fall below £1 and stay there for 30 days, in which case creditors could demand it pay off its debts and interest in cash.

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