Spain’s Economy Minister Nadia Calvino arrives for the closing session of the New Global Financial Pact Summit, Friday, June 23, 2023 in Paris, France. Lewis Joly/Pool via REUTERS/File Photo Acquire Licensing Rights
BRUSSELS/MADRID, Dec 8 (Reuters) – EU finance ministers on Friday picked Spanish Deputy Prime Minister Nadia Calvino to become the next head of the European Investment Bank in a boost for Spain’s clout within the bloc.
If confirmed by the EIB’s board, she would start at the European Union’s financial arm and world’s largest public development bank on Jan. 1, the EIB said in a statement.
Europe’s antitrust chief Margrethe Vestager said minutes earlier that she had withdrawn her candidacy.
“I am grateful and honored to get the support of my fellow finance ministers,” Calvino said, adding that the EIB’s role was set to grow in importance as it funded the green transition and provided financial support to rebuild Ukraine.
The 55-year-old mother of four, a staunch defender of women’s rights, will replace German economist Werner Hoyer, 72, becoming the first woman and first Spaniard to lead the EIB.
Josep Borrell, another Spaniard, has been the EU’s top diplomat since late 2019.
“We are convinced that Nadia Calvino has all the qualities needed to manage the world’s biggest multilateral bank, channelling much-needed financing to businesses, and supporting investment to boost Europe’s competitiveness and sustainable growth,” said the EIB’s Belgian Chairman Vincent Van Peteghem.
Under Hoyer’s stewardship since 2012, the EIB has increased its capital and lending for clean energy and security investments in Europe and financed the development of COVID-19 vaccines.
Soft-spoken and typically measured in public appearances, Calvino has been the economy minister, a post that in Spain encompasses many aspects of public finances, since June 2018, when Pedro Sanchez, a Socialist, first became prime minister.
Widely seen as a technocrat, she is a career civil servant and not a member of Sanchez’s party.
Spain has put Calvino forward for several top jobs since 2019, including chair of the Eurogroup meeting of euro zone finance ministers and head of the International Monetary Fund, a position that eventually went to Bulgaria’s Kristalina Georgieva.
Calvino spearheaded Spain’s economic response to the pandemic with an unprecedented 200-billion euro package in 2020 and has managed the implementation of the European Union’s pandemic relief package.
After holding senior posts in Spain’s Economy Ministry, she went to the European Commission in 2006, and in 2014 was appointed the Commission’s director-general for the budget. She has been the chair of the IMF steering committee since December 2021.
Reporting by Charlotte Van Campenhout in Brussels, Andrei Khalip and Belen Carreno in Madrid; Editing by Kirsten Donovan
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The Danish central bank, also known as Danish Nationalbank, is seen in Copenhagen, January 22, 2015. REUTERS/Fabian Bimmer/File Photo Acquire Licensing Rights
COPENHAGEN, Nov 28 (Reuters) – Denmark’s central bank said on Tuesday that the risk of further price drops in the commercial property market could be accelerated by Swedish real estate firms selling out of their Danish portfolios, which could hurt banks.
Swedish property firms struggling to refinance their debt amid rising interest rates have begun selling their portfolios, which could have a spillover effect on the Danish property market by pushing down prices, the central bank said.
“Due to the low level of transactions, a price correction related to divestment by the Swedish firms at this point in time would have a relatively great effect,” the central bank said in a financial stability report on Tuesday, adding that the largest Swedish firms have properties in Denmark worth 99 billion Danish crowns ($14.5 billion).
Any heavy divestment by Swedish firms would come amid a sharp drop in the number of commercial real estate deals in Denmark this year, which according to the central bank indicates that prices have not yet adjusted to the new interest rate level.
The central bank warned that as commercial real estate prices fall, the collateral pledged by property firms for loans may not be sufficient to cover their full exposure to banks.
“This may lead to losses for the institutions in the case of default of the loans,” the bank said.
Lending by Danish credit institutions to real estate firms has increased in recent years, amounting to 537 billion crowns or around 38% of their exposure to companies.
The central bank also said Danish real estate firms do not face the same refinancing risks as their Swedish counterparts, because they mostly are financed by mortgage loans with long maturities.
($1 = 6.8090 Danish crowns)
Reporting by Louise Rasmussen and Anna Ringstrom, editing by Louise Rasmussen and Kim Coghill
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Nov 13 (Reuters) – The cyber hack of Industrial and Commercial Bank of China’s U.S. broker-dealer was so extensive on Wednesday, even the corporate email stopped working and forced employees to switch to Google mail, according to two people familiar with the situation.
The blackout left the brokerage temporarily owing BNY Mellon BK.N $9 billion, an amount many times larger than its net capital, a measure of resources at hand to promptly satisfy claims.
Those details and what happened next, some of which are reported here for the first time, show how the ransomware attack pushed the firm owned by China’s largest bank close to the brink. And they serve as a wakeup call for the financial sector and raise some concerns about the resilience of the $26 trillion Treasury market.
ICBC’s (601398.SS) New York-based unit, called ICBC Financial Services, got a cash injection from its Chinese parent to help pay back BNY, and it manually processed trades with the custody bank’s help, Reuters reported on Friday.
ICBC told market participants on an industry call on Friday afternoon that it was working with a cybersecurity firm, called MoxFive, to set up secure systems that would allow it to resume normal business on Wall Street, according to the sources. But ICBC expected that process to take at least until Monday, they said.
In the interim, the firm had asked its clients to temporarily suspend business and clear trades elsewhere, the sources said. Other market participants, meanwhile, looked through their own books to see whether they had any exposure and sought to reroute trades, one of the sources said.
ICBC Financial Services could not be reached for comment. ICBC did not respond to a request for comment.
On a notice on its website, the brokerage said it has been “progressing its recovery efforts with the support of its professional team of information security experts.” It said it had cleared Treasury trades executed on Wednesday and repo financing trades done on Thursday.
Moxfive executives did not respond to requests for comment.
The ransomware attack, claimed by cybercrime gang Lockbit, comes at a time of heightened worries about the resiliency of the Treasury market, which is essential to the plumbing of global finance. After upheavals there – most recently during the pandemic in March 2020 – threatened financial stability, U.S. authorities launched a broad review of its functioning.
While market participants and officials have said the impact of the ICBC hack on Treasury market functioning was limited, the full extent of it is not yet understood. There is some debate, for example, about whether it had affected a major auction of Treasury bonds on Thursday.
Nevertheless, market participants said the attack is likely to add a new aspect to the regulatory review, as it brings cyber threats into sharper focus. It could also boost a Securities and Exchange Commission’s push to have more Treasury trades go through central clearing, where a third-party acts as a seller to every buyer, and buyer to every seller.
Darrell Duffie, a Stanford finance professor who has studied the market in depth and consults with regulators, said other firms in ICBC’s situation might not have enough capital readily available to meet a large shortfall and default.
“Any default that could follow an event like this, if not centrally cleared, could propagate into a chain reaction of default events,” Duffie said. “This hack makes even more evident the important financial stability benefits of broader central clearing.”
The hack is likely to become a key topic of conversation at a major Treasury market conference on Nov. 16.
MID-SIZE BROKER
ICBC Financial Services is not huge by Wall Street’s standards. The company had about $24.5 billion in assets as of June 30, with $480.7 million of net capital, according to financial information posted on its website. It also had credit lines from affiliates of $450 million as well as the ability to borrow overnight funds from an affiliate.
It mainly offers settlement and financing services for fixed-income securities, such as repurchase agreement (repo), where assets such as Treasuries are used as collateral to raise short-term cash.
It told market participants on Friday’s call that its clients include four independent brokers and half a dozen algorithmic traders, according to the sources. Reuters could not learn the identity of its clients.
One of the sources described the business as mid-sized, explaining that “the biggest players in Treasuries are not clearing at a firm like that.”
Even so, the attack that paralyzed its systems threw a wrench in the market’s gears when word of the hack spread through Wall Street. One of the sources said some market participants scrambled to sort out whether they had any exposure and rerouted their trades to other firms.
$9 BLN OVERDRAFT
When ICBC’s trades got stuck, it became BNY Mellon’s issue, too, since it is the sole settlement agent for Treasury securities. The bank played a crucial role in helping sort through the mess, deploying a manual process to clear trades one by one, the market participants said.
ICBC’s inability to access its systems meant securities from the Chinese firm’s repo trades were getting delivered to BNY for settlement, but no cash was coming in from the broker-dealer, one of the sources said.
That effectively meant BNY was loaning ICBC the cash, secured by Treasuries, according to the source. That’s when ICBC’s parent injected capital into the unit, allowing BNY to be paid, the source said.
ICBC told market participants on the call, which was organized by the industry group SIFMA, that the transfer had been more than what they expected was needed for current trading volumes, the source said.
SIFMA declined to comment.
Once the firm gets its new system up and running, others on the Street are likely to do their own review to make sure it is safe, which might add time for the business to return to normal, the sources said.
ICBC told market participants Friday that they were also hoping to have a secondary email system set up soon.
Reporting by Paritosh Bansal; editing by Edward Tobin
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An eagle tops the U.S. Federal Reserve building’s facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst/File Photo Acquire Licensing Rights
WASHINGTON, Oct 20 (Reuters) – The chance for persistent inflation to keep interest rates higher and potential losses in the commercial real estate market are among the top concerns of respondents to a Federal Reserve survey on financial stability, the U.S. central bank said on Friday.
The latest version of the central bank’s semiannual report found that three-quarters of survey respondents cited those two issues as prominent near-term risks. Concerns over bank stability following the failure of three large firms this spring were cited by roughly half, similar to levels seen in the May version of the report.
Economic weakness in China had grown in the Fed’s semiannual survey, cited by 44% of those surveyed as a top risk, compared to just 12% in May. But the war between Russia and Ukraine slipped to the 11th-most cited concern by respondents, after it was cited as the top financial stability concern one year ago.
The Fed noted that its survey of looming risks was closed in early October, before war broke out between Israel and the Palestinian enclave of Gaza.
Overall, the Fed identified several vulnerabilities within the financial system, including historically high asset valuations, including in equities and real estate. Specifically, the Fed found that commercial real estate valuations remain elevated, even as prices have declined amid high office vacancies.
The Fed cautioned that if the economy were to slow unexpectedly, generally high leverage levels could strain or even sink some businesses. It specifically noted a correction in office property valuations alongside a mild recession could lead to “significant losses for a range of financial institutions with sizable exposures, including some regional and community banks and insurance companies.”
While the overall banking system remained sound, the Fed said some banks were still grappling with “sizable” declines in the fair value of some assets as interest rates rapidly increased. Large levels of unrealized losses were a major contributor to the stresses faced by banks, including Silicon Valley Bank, that failed this spring.
The Fed said banks overall have large levels of liquidity, and deposit outflows and volatility have abated since the spring. However, some firms are still facing funding pressures, as some depositors have left and banks have had to pay more to retain depositors or acquire other funding.
The Fed also found home prices increased from already high levels seen in May, although it noted that credit conditions for borrowers is “considerably tighter” than what was seen leading up to the subprime mortgage crisis of 2007-2009.
In fact, banks reported to the Fed that lending standards were now on the tighter end of historical norms for all loan categories.
The report found that household and business debt burdens remained moderate, despite the uptick in interest rates. It warned, however, that borrowers with low credit scores were beginning to show some signs of stress in various types of consumer debt, such as credit cards and auto loans.
Reporting by Pete Schroeder; Editing by Leslie Adler and Andrea Ricci
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A construction site is seen at a residential area in Tokyo, Japan, August 21, 2016. REUTERS/Kim Kyung-Hoon/File photo Acquire Licensing Rights
TOKYO, Oct 20 (Reuters) – Japan’s property market is showing signs of overheating because of an inflow of foreign money and growing investments by major real estate developers, the central bank warned on Friday.
The findings come as the bank kept interest rates ultra-low for decades to reflate a fragile economy and prop up inflation, prompting warnings from some analysts that its massive money printing was sowing the seeds of a future asset bubble.
Real estate-related loans have kept growing, mainly to fund demand by foreign investors, the Bank of Japan said in a quarterly report on the financial system.
In a heat map of economy sectors which are running hot, the ratio of investment by real estate firms to gross domestic product (GDP) turned “red”, a signal that the property market was overheating, the central bank said.
“The increase in real estate firms’ investment has been accelerated by urban redevelopment projects by major real estate developers,” it added.
“In some limited commercial areas in central Tokyo, transactions in the higher price range have been increasing,” it said, adding that developments in the real estate transaction market “continue to warrant close monitoring”.
On Japan’s banking system, the report said it remained stable on the whole. But it called for vigilance by financial institutions against the risk of a prolonged period of stress as global central banks continue to tighten monetary policy.
“From a long-term perspective, if banks’ core profitability were to stagnate and capital accumulation were to stall, financial intermediation could be impaired due to a decline in loss-absorbing capacity,” the BOJ said.
Japanese banks could also face risks from the rising possibility of interest rates remaining high overseas, it added.
For now, Japanese financial institutions’ credit risk from foreign loans remain low, despite tightening global financial conditions, thanks in part to their efforts to rebalance their portfolios, the bank said in its report.
But credit costs could rise abruptly, particularly for loans to Asia, if overseas interest rates stay higher for longer, it warned.
The global banking industry was thrown into turmoil this year by the collapse of several U.S. lenders, among them Silicon Valley Bank, due in part to the impact of aggressive interest rate hikes by the U.S. Federal Reserve.
Reporting by Leika Kihara; Editing by Kim Coghill and Clarence Fernandez
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The Central Bank of Ireland (gold building) is seen in Dublin, Ireland August 30, 2023. REUTERS/Clodagh Kilcoyne/File Photo Acquire Licensing Rights
DUBLIN, Oct 5 (Reuters) – Ireland’s central bank said on Thursday that investment firms and credit institutions engaged in securities markets activity had failed to adequately monitor how staff communicate while working from home, raising the risk of market abuse.
The regulator warned in March of the risk of abuse-related conduct arising from the use of unmonitored, unauthorised or unencrypted telephone and electronic communication devices when employees are working remotely or as part of a hybrid model.
Ireland is a major centre for the fund management industry, a regional hub for a number of international banks and has a domestic financial sector, all of which are regulated by the central bank.
The bank said a recent assessment found that none of the firms included had made amendments to recording of telephone and electronic policies or procedures despite moving from a largely in-office environment during and after COVID-19 lockdowns.
Monitoring and testing conducted by firms did not meet the central bank’s expectations while the small number of breaches of policies identified by firms indicated that their monitoring is not working effectively, the regulator added.
The assessment did identify that some firms exhibited good practices in ensuring that all telephone and electronic communications are recorded and retention periods are set in accordance with EU requirements.
The central bank said it expected that firms would continue to focus on improving their safeguards and that the assessment results should be brought to the attention of all board members, senior management and relevant staff by year-end.
Reporting by Padraic Halpin; Editing by Susan Fenton
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A pedestrian walks past the Bank of England in the City of London, Britain, September 25, 2023. REUTERS/Hollie Adams/file photo Acquire Licensing Rights
LONDON, Sept 28 (Reuters) – The Bank of England on Thursday set out a reform of capital rules for insurers to “unlock tens of billions of pounds” for investments in the economy.
The Solvency II rules were inherited from the European Union and their reform is seen by the insurance industry and by lawmakers who supported Britain’s exit from the bloc as a “Brexit dividend” to unlock billions of pounds of investment.
The so-called matching adjustment seeks to ensure that assets held by insurers generate enough cash to cover future payouts on policies and pensions.
Investing in an asset that generates cash at the right time allows an insurers to cut back on capital requirements, subject to a discount.
“We propose to adjust regulations to reflect the decisions made by the government about the level of financial resilience that should be required of insurance companies,” Bank of England Deputy Governor Sam Woods said in a statement.
“These proposals aim to promote policyholder protection while enabling the annuity sector to meet its commitments to the government to increase investment in the UK economy.”
The government overrode the BoE to insist on a less onerous discount to free up billions of pounds to invest in infrastructure and help transition to a net-zero economy.
The BoE said the limit it has proposed, along with other proposed reforms, would not stop insurers from meeting their stated commitments for “unlocking tens of billions of pounds for potential investments at implementation”.
The BoE said it planned to publish final policy and rules on the matching adjustment during the second quarter of next year, with an effective date of 30 June 2024.
All other changes related to the Solvency II review would take effect on 31 December 2024, it said.
Reporting by Huw Jones and Muvija M; Editing by William Schomberg
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People walk along the beach on the Suffolk coast as the Sizewell B nuclear power station can be seen on the horizon, near Southwold, Britain, January 31, 2019. REUTERS/Russell Boyce Acquire Licensing Rights
LONDON, Sept 18 (Reuters) – Britain on Monday opened the search for private investment in the Sizewell C nuclear project, inviting potential investors to register their interest.
The building of the plant by French energy giant EDF in southeast England, capable of producing around 3.2 gigawatts of electricity or enough to power around 6 million homes, was approved in July 2022.
“The government, the Sizewell C Company and EDF, the project’s lead developer, are looking for companies with substantial experience in the delivery of major infrastructure projects,” a statement from the Department for Energy Security and Net Zero said.
The British government announced last year that it would support Sizewell C with around 700 million pounds ($895 million) while taking a 50% stake during its development phase.
“The launch of the formal equity raise opens another exciting phase for the project, following a positive response from investors during market testing,” said Sizewell C Company Joint Managing Director, Julia Pyke.
Reporting by Kylie MacLellan, writing by William James
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Workers walk out of a construction site of residential buildings by Chinese developer Country Garden, in Tianjin, China August 18, 2023. REUTERS/Tingshu Wang//File Photo Acquire Licensing Rights
BEIJING, Sept 8 (Reuters) – Nanjing has eliminated curbs on home buying, the first big Chinese city to do so, as policymakers scramble to arrest a deepening crisis in the massive property sector, which is is weighing on the world’s second-biggest economy.
China’s authorities in recent weeks have rolled out a series of measures, such as easing borrowing rules, to support the debt-riddled property sector, which accounts for one-quarter of China’s economic activity, but analysts say the steps are unlikely to reverse the slide.
Reuters reported last week that cities such as Beijing, Shanghai and Shenzhen could ease housing curbs as part of a months-long effort by regulators including the housing ministry, central bank and financial regulator.
China’s property sector has been on a downward spiral since 2021, when the government took steps to stop developers from accumulating debt. The latest blow has been major developer Country Garden’s struggle to avoid defaulting on domestic and offshore debt, as fears grow that the crisis could spread to the financial sector and derail a sputtering economic recovery.
Nanjing, among China’s 10 biggest cities, said in a notice late on Thursday it would let people buy flats without proof of eligibility in four districts, easing its last restrictions on home purchases.
Other municipalities are likely to follow the city of 9.5 million in relaxing all restrictions, said Yan Yuejin, director of E-house China Research and Development Institution, who could not recall any major city having done so previously.
Nanjing’s move indicates property easing will continue, playing an important role in stimulating home-buying and changing expectations in the sector, Yan said.
Many smaller locales have eased home-purchase curbs over the past two years, but major cities – traditional targets of speculative buying – had held off.
China’s new home prices will likely not rise this year, a recent Reuters poll found. Nanjing’s new home prices fell for a third consecutive month in July from the previous month, while resale home prices were down for the 15th month from year-earlier levels.
Nanjing also cut the maximum down payments for first home purchases to 20% from 30% for commercial mortgages, state broadcaster CCTV said on Thursday, compared to 30% to 35% in most major cities.
Reporting by Liangping Gao and Ryan Woo; Editing by William Mallard
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REUTERS/Chip East (UNITED STATES – Tags: CRIME LAW)
Aug 7 (Reuters) – A lawsuit accusing a group of California landowners of conspiring to inflate the price of their land by hundreds of millions of dollars will “drastically expand” the reach of federal antitrust law if it is not dismissed, attorneys for the property holders told a U.S. judge.
In a filing in Sacramento federal court, lawyers for the landowners in northern California on Friday urged U.S. District Judge Troy Nunley to reject “speculative” and “vague” allegations from agricultural land buyer Flannery Associates.
Flannery, seeking more than $510 million in damages for alleged price-fixing, in May sued various family land trusts and estates over the sale of properties in the Jepson Prairie and Montezuma Hills area of Solano County between San Francisco and Sacramento.
The defense lawyers said some of the land-owning families have farmed in the area for more than 100 years.
The area is home to utility-scale commercial wind farms, environmental conservation projects and energy infrastructure, the complaint said.
Flannery’s lawyers at Skadden, Arps, Slate, Meagher & Flom alleged lost profits from land it did not buy and from overcharges for properties it did purchase.
Some defendants have begun settling claims, court records show, while others seek dismissal of claims.
Barnes Family Ranch Associates, Lambie Ranch Associates and Kirby Hill Associates agreed to settle with Flannery. The settlement, according to a filing, includes the purchase and sale of certain properties and will be finalized by mid-October.
An attorney for Flannery did not immediately respond to a request for comment.
Several lawyers on Friday’s joint court filing did not immediately respond to a similar request.
In their bid to dismiss Flannery’s lawsuit, property owners argued a key U.S. antitrust law, the Sherman Act, “was not intended to prevent local landowners from discussing with their neighbors negotiations with prospective purchasers or property prices.”
“Flannery’s complaint is a square peg in the round hole of antitrust law,” the defense lawyers said.
In another filing, the lawyers questioned Flannery’s motivations. “What legitimate commercial purpose requires such massive, concentrated property ownership within Solano County? Flannery will not say,” the attorneys said.
Lawyers for Flannery last month said text messages and emails would establish a price-fixing conspiracy. Flannery also hit back at the defendants for resorting to “rumor, innuendo, and conjecture about Flannery and its motives.”
Nunley is set to consider whether to dismiss the lawsuit at a hearing on Aug. 24.
The case is Flannery Associates LLC v. Barnes Family Ranch Associates LLC, U.S. District Court, Eastern District of California, No. 2:23-cv-00927-TLN-AC.
Read more:
California landowners are sued for $510 million over ‘inflated’ real-estate prices
Reporting by Mike Scarcella; editing by Leigh Jones
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