European Union

FILE PHOTO: The logo of Swiss bank UBS is seen in St. Moritz
FILE PHOTO: The logo of Swiss bank UBS is seen in St. Moritz, Switzerland, February 10, 2017. REUTERS/Stefano Rellandini/File Photo

March 19, 2019

By Huw Jones

LONDON (Reuters) – Britain’s markets watchdog said on Tuesday it had fined Swiss bank UBS a record 27.6 million pounds for failing to report 136 million transactions properly for nearly a decade in a repeat offense.

The Financial Conduct Authority (FCA) said the failings cover reports between November 2007 and May 2017.

“If firms cannot report their transactions accurately, fundamental risks arise, including the risk that market abuse may be hidden,” said Mark Steward, the FCA’s executive director of enforcement.

The FCA had already fined UBS 100,000 pounds in November 2005 for transaction reporting failings.

UBS said on Tuesday it was pleased to have resolved what it called a “legacy matter”, which is was fully provisioned for.

“Although there was never any impact on clients, investors or market users the bank has made significant investments to enhance its transaction reporting systems and controls,” UBS said in a statement.

Under European Union securities law, banks must report transactions like stock and bond trades in a timely and accurate way so that regulators can spot any suspicious moves quickly.

The FCA said UBS failed to ensure it made proper reports on 86.67 million transactions that were required to be notified to the regulator. It also wrongly reported 49.1 million transactions to the FCA that did not require reporting.

By agreeing to a speedy settlement, UBS qualified for a 30 percent discount, thereby avoiding a bigger fine of 39.4 million pounds.

UBS is the 13th financial firm to be fined for transaction reporting failures under EU rules that came into force in 2007.

(Reporting by Huw Jones, editing by Sinead Cruise and Emelia Sithole-Matarise)

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U.S. and EU flags are pictured during the visit of Vice President Pence to the European Commission headquarters in Brussels
FILE PHOTO: U.S. and European Union flags are pictured during the visit of Vice President Mike Pence to the European Commission headquarters in Brussels, Belgium February 20, 2017. REUTERS/Francois Lenoir

March 19, 2019

BRUSSELS (Reuters) – European Commission Vice President Jyrki Katainen said on Tuesday that Washington’s “selfish” approach to trade was not sustainable, but it was too early to say that EU-U.S. trade talks were doomed to fail.

The Trump administration has imposed stiff tariffs on U.S. imports of steel and aluminum and set off a trade war with China in a bid to redress what it sees as unfavorable terms that contribute to a U.S. trade deficit of over half a trillion dollars a year.

The Commission, which negotiates trade agreements on behalf of the 28-nation European Union, has been in talks with U.S. authorities since last July, seeking to clinch a deal on industrial goods trade.

EU governments are now discussing the details of a negotiating mandate for the Commission, while Washington has until mid-May to decide whether to make good on President Donald Trump’s threat to impose tariffs on imports of European cars.

“It is too early to say that our trade discussions are doomed to fail,” Katainen told a regular news briefing.

“There are discussions going on on several levels and … we can end up having some sort of an agreement with the U.S. on trade, but let’s not go deeper than this,” he said, adding that the scope of negotiations had to be clear and that a deal would require a lot of good will and political capital on both sides.

Asked about a reform of the World Trade Organization (WTO), Katainen said it was problematic and that attempts to get it done were like pushing a rope.

“Japan, China and the EU are willing to reform the WTO, the U.S. has not been that interested, but they are willing to cooperate,” he said.

“Even though the U.S. authorities may think that selfishness is better than cooperation, it is not a sustainable way of thinking. We need better, rules-based trade in the future where the international community sets the rules,” he said.

U.S. Trade Representative Robert Lighthizer told Congress last week that the WTO was using an “out of date” playbook despite dramatic changes including the rise of China and the evolution of the internet.

He said Washington was nonetheless working “diligently” to negotiate new WTO rules to address these problems.

(Reporting By Jan Strupczewski; Editing by Kevin Liffey)

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FILE PHOTO: British and EU flags flutter outside the Houses of Parliament in London
FILE PHOTO: British and EU flags flutter outside the Houses of Parliament in London, Britain January 17, 2019. REUTERS/Clodagh Kilcoyne

March 19, 2019

By Thomas Escritt and Gabriela Baczynska

BRUSSELS (Reuters) – European Union governments are exasperated by British dithering over quitting the bloc but have little appetite for pushing it out on schedule next week without a divorce deal, senior figures said on Tuesday.

EU ministers in Brussels to prepare a summit with British Prime Minister Theresa May on Thursday voiced frustration after the speaker of parliament threw up a new obstacle for her plan to get her Brexit deal ratified before the March 29 deadline.

“Our patience as the European Union is being sorely tested at the moment,” German Europe minister Michael Roth told reporters. “Dear friends in London, please deliver. The clock is ticking.”

But Roth also echoed comments in Berlin by Chancellor Angela Merkel, the EU’s pre-eminent leader, who said she would “fight to the last minute” until midnight (2300 GMT) on March 29 to ensure an orderly exit for the EU’s second-ranked economy.

He said Germany’s main aim was to avoid a no-deal Brexit, which would disrupt business across the continent.

However, after two defeats for the Withdrawal Agreement that May negotiated with the EU, and her difficulty in trying to get it through parliament on a third vote even before the speaker ruled that it must be substantially changed, it is not clear how May can avert this without asking fellow leaders for more time.

ALL DEPENDS ON MAY

Leaders expect to discuss such an extension at the two-day summit starting on Thursday afternoon. But if May has yet to make a concrete proposal on her next move then, then the summit can do little more than outline possible steps — such as a readiness to give her a couple of months, or maybe longer.

“If there is no move from London, the leaders can also decide to wait,” said Belgian Foreign Minister Didier Reynders. “It really depends on what May will say at the summit.”

Diplomats said member states were still discussing options for extension — possibly only for two to three months, if May persuades them she can clinch a deal at home, or for much longer if May accepts that radical reworking is needed. But these would come with conditions and might not be agreed until next week.

Merkel said there was “far too much in flux” to forecast the outcome of the summit, but her foreign minister, Heiko Maas, told reporters in Finland: “If more time is needed, it’s always better to do another round than a no-deal Brexit.”

EU diplomats say it is highly probable that leaders will unanimously support some sort of extension rather than see Britain lurch out of the bloc in 10 days’ time — even though some governments are starting to argue for ending the uncertainty and trusting to arrangements already put in place to mitigate the effects of a sudden, immediate exit.

Aides to French President Emmanuel Macron, a powerful voice on the Council alongside Merkel, say the onus is on Britain to say what it would do with more time.

“This uncertainty is unacceptable,” his EU affairs minister Nathalie Loiseau said in Brussels on Tuesday.

“Grant an extension? What for? Time is not a solution, it’s a method — if there’s an objective and a strategy. And it has to come from London.”

(Writing by Alastair Macdonald; @macdonaldrtr; Editing by Kevin Liffey)

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Saudi Arabia's King Salman attends Arab league and EU summit, in Sharm el-Sheikh
FILE PHOTO: Saudi Arabia’s King Salman attends a summit between Arab league and European Union member states, in the Red Sea resort of Sharm el-Sheikh, Egypt, February 24, 2019. REUTERS/Mohamed Abd El Ghany

March 19, 2019

RIYADH (Reuters) – Saudi Arabia’s King Salman has launched four entertainment projects in the capital Riyadh, together worth 86 billion riyals ($23 billion), state television reported on Tuesday.

The projects include a park, sports track and an art center.

The King also ordered that one of the capital’s main roads should be named after crown prince Mohammed bin Salman.

(Reporting by Marwa Rashad; Editing by Catherine Evans)

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German Chancellor Angela Merkel gives a speech at the annual Global Solutions Summit in Berlin
German Chancellor Angela Merkel gives a speech at the annual Global Solutions Summit in Berlin, Germany, March 19, 2019. REUTERS/Fabrizio Bensch

March 19, 2019

BERLIN (Reuters) – German Chancellor Angela Merkel said on Tuesday she would fight for an orderly Brexit right up until Britain’s planned departure from the European Union on March 29.

Merkel, asked whether she was ready to offer British Prime Minister Theresa May a new Brexit deal, said she “noted with interest” a ruling by the speaker of parliament that May must change her twice-defeated divorce deal to put it to a third vote.

“Now, we will see what Theresa May says to us, what her wishes are – we will try to respond to those,” Merkel added, speaking at a conference in Berlin.

“We will follow very closely how the British government reacts to what was said yesterday in parliament,” she added. “As to how deal with the situation, I can’t assess how it will be (at an EU summit) on Thursday – there is far too much in flux.”

In a move that added to the sense of crisis in London and exasperation in European capitals just days before the March 29 exit date, Speaker John Bercow shocked May’s government on Monday by ruling it could not put the same Brexit deal to another vote unless it was substantially different.

“I will fight until the last minute of the time to March 29 for an orderly exit,” Merkel said. “We haven’t got a lot of time for that, but still some days.”

Asked if she would be prepared to grant Britain a delay to Brexit, Merkel replied that she wanted to have very good relations with Britain even after Brexit.

(Writing by Paul Carrel; Editing by Michelle Martin)

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The British union flag and the EU flag are seen flying near the Houses of Parliament, in London, Britain
The British union flag and the EU flag are seen flying near the Houses of Parliament, in London, Britain, March 18, 2019. REUTERS/Toby Melville

March 19, 2019

By Guy Faulconbridge

LONDON (Reuters) – The United Kingdom’s exit from the European Union is uncertain nearly three years after the 2016 Brexit vote.

Most diplomats and investors think the United Kingdom faces three main options: leaving with a divorce deal, throwing the question back to the people or exiting without a deal.

Graphic on no-deal Brexit probabilities from major banks: https://tmsnrt.rs/2UIhlyz

Following are the main scenarios:

1) BREXIT WITH A DEAL – May gets her deal approved at a third attempt and the United Kingdom leaves in an orderly fashion after a modest delay.

May’s divorce treaty, the product of more than two years of negotiations with the EU, was defeated by 149 votes on March 12 and by 230 votes on Jan. 15.

She had been intending to put the deal to another vote in parliament as early as this week, but the speaker ruled on Monday that she could not do so unless the deal was re-submitted in fundamentally different form. [nL8N2153SV]

Unless May can find a way around Speaker John Bercow’s ruling – such as adding an addendum or starting a new session of parliament – she will have to ask the EU to delay Brexit to avoid a no-deal exit on March 29.

Brexit Secretary Steve Barclay on Tuesday played down the possibility of cutting the parliamentary session short in order to start a new one.

Because May must now spice any deal with additional legal and procedural innovation, Bercow’s ruling means she is likely to get just one more chance to put the deal to a vote.

She had warned lawmakers that unless they approved her divorce deal, Britain’s exit could face a long delay which many Brexiteers fear would mean Britain may never leave.

May could discuss a delay and seek to get last-minute concessions at a March 21-22 EU summit, though with such chaos in London a crunch decision on Brexit might be delayed until the following week.[nL8N2154G1]

The EU has repeatedly said the Withdrawal Agreement is the only deal on the table and May’s spokesman said Britain would not be seeking to renegotiate the most contentious part – the Irish border plan.

If May is looking for a legal fix, though, she could seek a change to the accompanying Political Declaration.

Sources in Brussels said on Monday that Britain could ask for a Brexit delay even after the summit, suggesting that the decisive moment for Brexit might still be some days ahead.

One possible way out for May would be a Brexit delay until the end of 2019, with an option to leave earlier should her deal get passed. Ultimately, May might have to offer a date for her own resignation to win enough Conservative votes for her deal.

To get her deal through parliament, May must win over at least 75 lawmakers: dozens of rebels in her own Conservative Party, some Labour lawmakers, and the Northern Irish Democratic Unionist Party (DUP), which props up her minority government.

Jacob Rees-Mogg, chairman of the European Research Group of eurosceptics in Britain’s House of Commons, signaled he could fall in behind the deal. [nL8N2152DJ]

Many banks and investors still say her deal could be struck and approved, and cite previous EU crises such as the Greek debt crisis, where solutions were found at the eleventh hour.

“I think MPs (lawmakers) will see sense and approve the Meaningful Vote before March 29,” said Matthew Elliott, the head of the 2016 campaign for leaving the European Union, told Reuters after Bercow’s ruling.

“The most likely outcome at this juncture is the deal going through,” Elliott said. “When it becomes apparent that the only extension on offer from the EU is long, tortuous and with lots of conditions, I suspect enough MPs will get behind the deal for it to pass.”

If May’s deal fails, or if another vote on the same deal is prevented, another option is that parliament at some point takes control of Brexit and lawmakers seek a closer relationship with the EU, staying in the EU customs union.

Lawmakers could seek indicative votes on a way forward and there might be a majority for a softer Brexit than May’s deal. To avoid that, May could call a snap election, though her party does not want one.

Another option, being pushed by some lawmakers is a referendum on May’s Brexit deal, though such a vote, were it ever called, would effectively become a referendum on EU membership.

2) BREXIT REFERENDUM – May’s deal fails and a long delay allows the campaign for another referendum to gain momentum.

It is far from clear how the United Kingdom would vote if given another chance.

An often chaotic set of votes in parliament last week has shown that none of the alternatives to May’s deal – such as leaving with no deal, a referendum or allowing parliament to decide how to leave – can muster a majority among lawmakers yet.

In the June 23, 2016 referendum, 17.4 million voters, or 51.9 percent, backed leaving the EU while 16.1 million, or 48.1 percent, backed staying.

While many surveys ahead of the vote incorrectly predicted that the United Kingdom would vote to stay in the club it joined in 1973, polls now suggest no great desire for a second referendum and indicate that many voters, fatigued by the political squabbling, would be happy to leave without a deal.

Corbyn, who voted against membership in 1975 and gave only reluctant backing to the 2016 campaign to remain in the EU, has given ambiguous backing for another referendum, saying he would push for one alongside a national election.

When asked if he would vote to remain in the EU in a possible future referendum, Corbyn said on Sunday: “It depends what the choice is in front of us.”

At the highest levels of government, there are worries that a second referendum would exacerbate the deep divisions exposed by the 2016 referendum, alienate millions of pro-Brexit voters and stoke support for the far-right.

Already, many supporters of Brexit, and even some lawmakers, say the elite has sabotaged the EU divorce and is trying to subvert the will of the people.

It is far from clear how the United Kingdom would vote and even if it did vote to remain, Brexit supporters might demand a third and decisive vote.

A new party backed by Nigel Farage, the insurgent who helped shove Britain towards the EU exit, has a message for the country’s leaders: The foundations of the political system will explode if Brexit is betrayed.

3) NO-DEAL EXIT – The chaos in London is such that parliament cannot find a way to approve May’s deal or find another divorce deal option, and after one or more delays, the EU says it will extend no longer. The United Kingdom then leaves without a deal.

Lawmakers on Wednesday voted 321 to 278 in favor of a motion that ruled out a potentially disorderly “no-deal” Brexit under any circumstances.

While the approved motion has no legal force and ultimately may not prevent a no-deal exit, it carries considerable political force.

Still, as the March 29 exit date is set in law, the default is to leave on that date unless May agrees a delay or parliament changes the law.

“You either have a deal, you have no deal, or you have no Brexit,” said Brexit Secretary Steve Barclay.

While an extension would avoid a no-deal exit on March 29, the potential for a no-deal Brexit would remain if the British parliament was unable to approve a deal.

And the European Union’s 27 other members must unanimously approve a delay to Brexit.

Barclay has said Britain should not be afraid of leaving without a deal if it cannot get a divorce deal approved.

No-deal means there would be no transition so the exit would be abrupt, the nightmare scenario for international businesses and the dream of hard Brexiteers who want a decisive split.

Britain is a member of the World Trade Organization so tariffs and other terms governing its trade with the EU would be set under WTO rules.

(Editing by Anna Willard and Giles Elgood)

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Italian Prime Minister Giuseppe Conte and Deputy Prime Minister Matteo Salvini present plans on how the 500th anniversary of Renaissance master Leonardo da Vinci's death will be marked in Italy, in Rome
FILE PHOTO: Italian Prime Minister Giuseppe Conte presents plans on how the 500th anniversary of Renaissance master Leonardo da Vinci’s death will be marked in Italy, in Rome, Italy March 13, 2019. REUTERS/Yara Nardi

March 19, 2019

ROME (Reuters) – Italian Prime Minister Giuseppe Conte said on Tuesday that commercial and economic deals he will seal with China have no implications for Italy’s geo-political position, in a bid to reassure the European Union and the United States.

Conte told parliament that a Memorandum of Understanding to be signed with President Xi Jinping hooking Italy up to China’s Belt and Road infrastructure initiative “do not remotely put into doubt our euro-Atlantic alliance”.

The United States has warned Italy against signing the MOU on what it calls a Chinese “vanity project”, but Conte, speaking ahead of an upcoming EU summit, left no doubt that the deal would go ahead.

The MOU “is fully in line with the strategy of the EU and in fact it promotes it as no other member state has done so far in its dealings with Beijing,” he said.

(Reporting by Giuseppe Conte, writing by Gavin Jones; editing by Agnieszka Flak)

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Container cranes are pictured at the Port of Singapore
FILE PHOTO: Container cranes are pictured at the Port of Singapore, June 10, 2018. REUTERS/Feline Lim

March 19, 2019

By Jonathan Saul and Nina Chestney

LONDON (Reuters) – More ports around the world are banning ships from using a fuel cleaning system that pumps waste water into the sea, one of the cheapest options for meeting new environmental shipping rules.

The growing number of destinations imposing stricter regulations than those set by the International Maritime Organization (IMO) are expected to be a costly headache for cruise and shipping firms as they face tough market conditions and slowing world trade. They might have to pay for new equipment and extra types of fuel and adjust their routes.

Singapore, China and Fujairah in the United Arab Emirates have already banned the use of the cleaning systems, called open loop scrubbers, from the start of next year when the new IMO rules come into force.

Reuters has learned that individual ports in Finland, Lithuania, Ireland and Russia, have all banned or restricted such equipment, according to interviews with officials and reviews of documents by Reuters. One British port has occasionally imposed restrictions.

Norway is also working on open loop scrubber bans around its world heritage fjords, an official with the climate and environment ministry told Reuters. A ban on all types of scrubbers is also proposed, the official added.

The IMO rules will prohibit ships from using fuels with sulfur content above 0.5 percent, unless they are equipped with exhaust gas cleaning systems. The open loop scrubbers wash out the sulfur and some industry experts believe they are the cheapest way to meet the new global rules.

Companies that invested in open loop scrubbers will be unable to use them while sailing through those port waters. They also fear the IMO rules could change again and ban open loop scrubbers altogether.

The world’s top cruise operator Carnival Corporation has invested over $500 million to deploy the devices.

Carnival’s Mike Kaczmarek, senior vice president for marine technology and refit with oversight of the group’s scrubbers program, said the port moves were “very troubling”.

“The more ports that participate in this, the greater the (economic) impact,” he said.

“A lot of people out there…in good faith have made significant investments.”

Ships with open loop scrubbers docking or sailing through those ports would need to store waste in tanks until it could be discharged elsewhere or avoid the ports.

The other option is to use a scrubber with a “closed loop”, which stores the waste until it can be treated on land. There are also hybrid scrubbers with a loop that can be open or closed.

Ship owners could also choose another energy source such as low sulfur fuel or liquefied natural gas (LNG). Some experts say there will be enough low sulfur fuel available to avoid fitting scrubbers.

Data from Norwegian risk management and certification company DNV GL shows there will be a total of 2,693 ships running with scrubbers by the end of 2019 – based on current orders – and over 80 percent of them will be open loop devices, compared with 15 percent using hybrid scrubbers and 2 percent opting for closed loop scrubbers.

REGULATORY UNCERTAINTY

Initial research to date into the environmental impact of open loop scrubbers has produced a range of results. The ports and authorities that have banned them have acted in anticipation of studies that conclusively show the discharge is harmful, environmental groups say.

International regulation often lags local action and the IMO rules were agreed in 2016 after years of tense discussions.

An official with Sweden’s Gothenburg port said it recommended shipowners in their waters not to use open loop scrubbers as a precautionary principle to “avoid discharges of scrubber wash water in coastal waters and port areas”.

Businesses are waiting to see if the IMO rules will change.

“What is terrible for business is uncertainty in regulation and changes which are not broadcast well in advance,” said Hamish Norton, president of dry bulk shipping group Star Bulk Carriers, among the biggest investors in scrubbers.

Jurisdictions that have not imposed restrictions are also watching closely.

The IMO encouraged member states in February to research the impact of scrubbers on the environment. An IMO spokeswoman said it was up to countries to make any proposal to tighten scrubber regulation, which would need consensus approval by its 174 member states.

The 28 European Union countries submitted a paper to the IMO which said the use of open loop scrubbers was “expected to lead to a degradation of the marine environment due to the toxicity of water discharges”. It said it wanted to see “harmonization of rules and guidance”.

A separate paper submitted to the IMO, commissioned by Panama – the world’s top ship registration state – and conducted by the Massachusetts Institute of Technology, said more scientific investigation was needed.

THE FRONT PAGE TEST

A number of jurisdictions without bans, including Gibraltar, South Korea and Australia said they were investigating.

“We will study to find out how harmful it is to oceans and then consider what actions we can take,” said an official with South Korea’s Ministry of Oceans and Fisheries.

“If the IMO sets out a guideline on this, we will comply.”

Others are pushing back. Japan’s Ministry of Land, Infrastructure, Transport and Tourism, said it concluded in research last year that there was little impact on the marine environment from scrubber water discharges.

Carnival said a study it commissioned concluded that scrubbers were safe and discharges were over 90 percent lower than maximum allowable levels in various waters.

Nevertheless, many in the industry expect the rules to change.

Ivar Hansson Myklebust, chief executive with Hoegh Autoliners, said at a recent Marine Money conference the vehicle transporter was not ordering any scrubbers.

“The (open loop) scrubbers have a hard time passing the front page test taking pollutants from the air and dumping it into the sea,” he said.

(Additional reporting by Gary McWilliams in Houston, Gederts Gelzis in Riga, Andrius Sytas in Vilnius, Rod Nickel in Winnipeg, Roslan Khasawneh in Singapore, Esha Vaish in Stockholm, Jane Chung in Seoul, Yuka Obayashi in Tokyo, Gus Trompiz in Paris, Gleb Stolyarov in Moscow and Anne Kauranen in Helsinki; editing by Anna Willard)

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FILE PHOTO: Aerial view of containers at a loading terminal in the port of Hamburg
FILE PHOTO: Aerial view of containers at a loading terminal in the port of Hamburg, Germany August 1, 2018. REUTERS/Fabian Bimmer

March 19, 2019

BERLIN (Reuters) – A panel of advisers to the German government slashed its growth forecast for this year to 0.8 percent and warned risks related to Britain’s departure from the European Union, trade disputes and a sharper than expected slowdown in China remained high.

The group that advises the German government on economic policy had in November forecast that Europe’s largest economy would expand by 1.5 percent this year.

The panel said on Tuesday economic growth had slowed significantly, partly due to problems in the chemical and auto sectors and warned that a spiral of protectionist measures had the potential to push the economy into recession.

But Christoph Schmidt, one of the advisers, said: “The German economic boom is over but a recession is not currently expected due to the robust domestic economy.”

The group predicted the economy would grow by 1.7 percent in 2020.

(Reporting by Michelle Martin; Editing by Madeline Chambers)

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The German share price index DAX graph at the stock exchange in Frankfurt
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, March 12, 2019. REUTERS/Staff

March 19, 2019

LONDON (Reuters) – Fund managers have named bearish bets in European equities as the “most crowded” trade for the first time, replacing emerging markets, according to Bank of America Merrill Lynch’s March survey released on Tuesday.

Investors have shunned European stocks for some time, betting the market would be weaker compared with the United States and other regions as euro-zone economic growth slows and Britain’s chaotic exit from the European Union raises worries about disruption to its economy.

A slowdown in China, the world’s No. 2 economy, topped the list of biggest tail risks, ousting the trade war, which had been at the forefront of investor concerns for the previous nine months, the survey showed.

BAML’s March survey – conducted between March 8-14, with 239 panelists managing $664 billion in total – also showed investor risk appetite continued to fall, with global equity allocations remaining at September 2016 lows.

(Reporting by Josephine Mason, Editing by Helen Reid)

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