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The Morning Risk Report: EU Sets Harshest Russian Sanctions, Targeting Oil and Insurance
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Good morning. The European Union is set to impose its toughest sanctions yet on Russia, banning imports of its oil and blocking insurers from covering its cargoes of crude, officials and diplomats say, as the West seeks to deprive Moscow of cash it needs to fund the war on Ukraine and keep its economy functioning.
The sanctions, which are expected to be completed in the coming days, are harsher than expected. The ban on insurers will cover tankers carrying Russian oil anywhere in the world. These sanctions could undercut Russia’s efforts to sell its oil in Asia. European companies insure most of the world’s oil trade.
[Continued below...]
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The embargo is a high-risk strategy for the EU, forcing the bloc to break its dependency on cheap Russian energy. It is likely to fuel inflation already running at the highest pace in decades on both sides of the Atlantic.
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From Risk & Compliance Journal
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Wells Fargo Told by Senator to Fix Its Risk-Management Practices
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Wells Fargo & Co. must fix its governance and risk-management issues, the chairman of the U.S. Senate Banking Committee said, highlighting what he called a “laundry list” of consumer abuses and compliance breakdowns.
The bank has been plagued by weaknesses in its governance and risk-management practices for nearly a decade, Sherrod Brown (D., Ohio) said in an open letter sent Tuesday to Wells Fargo Chief Executive Charles Scharf.
“It is clear that Wells Fargo still has a long way to go to fix its governance and risk management before it should be allowed to grow in size,” Sen. Brown wrote. “It is unacceptable that after years of failed attempts, nothing seems to have improved.”
A spokeswoman for Wells Fargo didn’t immediately respond to a request for comment.
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Credit Suisse, Eyeing Risk, Consolidates Wealth-Management Lending
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Credit Suisse Group AG will consolidate all its wealth management-related lending activities into a new global financing group, a move that a senior banker said would help align the Swiss investment bank’s best practices in risk management.
The new group will be headed by Lawrence Fletcher, a managing director at Credit Suisse, according to an internal memo seen by The Wall Street Journal. A spokesman confirmed the contents of the memo, which was authored by Yves-Alain Sommerhalder, a managing director at the bank.
Mr. Sommerhalder said in the memo that the bank would also set up a trading risk-management and syndication function.
“Risk management is at the core of our activities and in today’s world more so than ever,” Mr. Sommerhalder said.
–Richard Vanderford
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The headquarters of DWS, the asset management unit of Deutsche Bank, in Frankfurt on Tuesday. PHOTO: ALEX KRAUS/BLOOMBERG NEWS
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The Frankfurt offices of Deutsche Bank AG and its asset-management subsidiary DWS Group were raided by authorities on Tuesday over allegations of greenwashing in its mutual funds, adding to pressure on the lender which is already facing a U.S. probe.
Around 50 agents of the city’s public prosecutor’s office, alongside German market regulator BaFin and the federal criminal police office had been deployed Tuesday morning, a spokeswoman for Frankfurt prosecutor’s office said. The initial suspicion is of investment fraud, the spokeswoman said.
The action Tuesday adds to probes by the Securities and Exchange Commission and federal prosecutors in the U.S. into the asset manager’s claims of sustainable investing.
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The Federal Aviation Administration said it rejected a Boeing Co. request for the company to perform certain regulatory tasks on its own for the standard five-year period, keeping the U.S. aerospace giant under closer government scrutiny.
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The Supreme Court on Tuesday blocked Texas from immediately enforcing a new state law that aims to prohibit large social-media platforms from suppressing users’ posts based on the content of their speech.
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StraightPath Venture Partners LLC and the Securities and Exchange Commission have agreed to a resolution of the agency’s civil fraud charges against StraightPath and are working out details, including naming a receiver for the firm, a court document shows.
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A lawyer for the 2016 Clinton campaign, Michael Sussmann, was acquitted on a charge of lying to the FBI in September that year about his motives for bringing the bureau research allegedly linking Donald Trump to Russia, in the first test at trial of special counsel John Durham’s probe.
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Peter Navarro, a top White House official under former President Donald Trump, said FBI agents served him with a subpoena last week demanding that he testify before a grand jury this week on efforts to overturn the 2020 presidential election.
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President Biden said during a meeting with Federal Reserve Chairman Jerome Powell Tuesday that he will continue to respect the Fed's independence as it addresses inflation, which he called his administration’s top priority. PHOTO: KEVIN DIETSCH/GETTY IMAGES
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President Biden discussed steps to address high inflation at a White House meeting with Federal Reserve Chairman Jerome Powell as his administration signals growing urgency to ease rapidly rising prices that threaten the U.S. economy.
The Tuesday meeting highlighted how much the White House is relying on outside forces to help combat the highest inflation in four decades. Administration officials earlier had played down inflation worries while promoting the $1.9 trillion Covid-19 relief package in March 2021 and in seeking additional spending on healthcare, education and climate change last year.
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Cracks are appearing in the Western front against Moscow, with America’s European allies increasingly split over whether to keep shipping more powerful weapons to Ukraine, which some of them fear could prolong the conflict and increase its economic fallout.
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At the center of the disagreement—which is splitting a group of Western European powers from the U.S., U.K. and a group of mostly central and northern European nations—are diverging perceptions of the long-term threat posed by Russia and whether Ukraine can actually prevail on the battlefield.
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Inflation in the eurozone reached an annual 8.1% in May, underlining the growing cost to households of Russia’s invasion of Ukraine and of the sanctions European governments have imposed in response.
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Economic activity in China declined for a third straight month in May, though at a slower pace than in April, according to surveys of businesses and factories.
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India’s economy grew 4.1% in the fourth quarter compared with the same period last year, as rising inflation restrained a more robust recovery from its recession during the pandemic.
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After four straight days with no Covid-19 deaths and with new cases at their lowest levels since early March, Shanghai is preparing to end more than two months of lockdowns.
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The Covid-19 pandemic led to a surge in remote work, emptying out office towers as more people worked from home. Cities with longer commutes have taken the biggest economic hit, while urban areas where people live closer to work have a higher return-to-office rate, according to The Wall Street Journal’s analysis of U.S. Census Bureau data and building-access company Kastle Systems.
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In April, about 24% of investor votes at Moderna were cast against EY as its auditor. That rejection rate was less than the 35% of GE investor votes to dump auditor KPMG at the 2018 shareholders meeting. GE subsequently hired Deloitte. PHOTO: PHILIPPE LOPEZ/AGENCE FRANCE-PRESSE/GETTY IMAGES
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A growing number of investors are voting against companies’ auditors, possibly signalling dissatisfaction with their services and concern over conflicts of interest.
Shareholders vote annually on major company matters such as executive compensation, the selection of board directors and whether to confirm an auditor for another year. While nonbinding, the votes are an important gauge of investor sentiment.
Opposition to the choice of auditor at big businesses has been creeping up in recent years, though from a low level. Still, the votes suggest a rising distaste among investors over the quality and independence of audit work.
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Last May, Colonial Pipeline suffered a cyberattack that forced the shutdown of the main pipeline carrying gasoline and diesel fuel to the U.S. East Coast. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
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Despite Washington’s recent attempts to expand cybersecurity rules and disrupt hacking gangs, ransomware continues to proliferate and executives report unease about their companies’ ability to ward off the threat.
The number of ransomware attacks against U.S. businesses has continued to increase this year, cybersecurity experts say, while some lawmakers warn the government has limited visibility of such hacks. Companies that rapidly digitized their operations during the pandemic are spending more time and effort navigating a fast-changing and treacherous ransomware landscape.
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JetBlue’s offer to pay Spirit a reverse termination fee gives that deal an edge over Frontier’s offer, ISS says. PHOTO: JOE CAVARETTA/SOUTH FLORIDA SUN SENTINEL/TNS/ZUMA PRESS
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Proxy-advisory firm Institutional Shareholder Services Inc. recommended Tuesday that Spirit Airlines Inc. shareholders vote against a proposed merger with Frontier Airlines.
ISS said Spirit investors would be better off rejecting that deal in order to prod the airline’s board to negotiate more seriously with JetBlue Airways Corp., which has launched a competing, hostile bid that ISS said is financially superior.
Spirit in February agreed to be acquired by Frontier in a cash-and-stock transaction originally valued at $2.9 billion, a deal that would combine the two budget carriers. JetBlue later emerged with a $3.6 billion cash offer to absorb Spirit’s discount operation into its own.
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The planned expansion at the Fidelity Digital Assets subsidiary comes after Fidelity Investments said it would let investors add bitcoin to their 401(k) accounts. PHOTO: NINA WESTERVELT FOR THE WALL STREET JOURNAL
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A Fidelity Investments subsidiary, launched a few years ago to let institutional investors store and trade bitcoin, plans to double its head count this year as it predicts rising demand for cryptocurrency amid market volatility.
Fidelity Digital Asset Services LLC plans to hire 110 tech workers, including engineers and developers with blockchain expertise, to build digital infrastructure to support services for cryptocurrencies beyond bitcoin, said Tom Jessop, its president. The subsidiary also plans to add 100 customer-service specialists.
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Amazon.com Inc.’s decision to throttle back on its e-commerce operations threatens to slow the growth of the industrial-space sector, one of the hottest areas of commercial property.
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Saudi Arabia wants to attract the world’s best and brightest to futuristic projects such as Neom. But a difficult workplace culture is driving many away.
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HP Inc. offered an upbeat earnings outlook even as ongoing supply-chain disruptions and sanctions against Russia impact its laptop and printing business.
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