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The Morning Risk Report: Climate Risks for Big Banks Could Hurt Financial System, OCC Says
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Good morning. The largest U.S. banks should guard against climate-related risks, a top banking regulator said in a proposed set of guidelines released Thursday.
“Weaknesses in how banks identify, measure, monitor and control the potential physical and transition risks associated with a changing climate could adversely affect a bank’s safety and soundness, as well as the overall financial system,” the Office of the Comptroller of the Currency said in a draft guidance statement.
[Continued below...]
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The guidance is aimed at U.S. banks with more than $100 billion in total consolidated assets, but also will likely influence many small and regional banks in the U.S. as they weigh looming hazards linked to a changing climate.
Michael Hsu, the acting comptroller of the currency, has urged the financial services industry to take risks posed by climate change more seriously.
The draft guidance includes principles on how large banks ought to address climate-related financial risk in their governance, policies and strategies. Those principles will shape OCC expectations for regulated banks.
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Crypto Startup Element Finance Appoints New Chief Legal Officer
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Element Finance has hired former Treasury Department anti-money-laundering official Gregory Lisa as its new chief legal officer, the cryptocurrency startup said on Wednesday.
The move comes as ElementFi, which launched on the Ethereum blockchain in June, quickly expands. The company, which is building a decentralized finance protocol for fixed-rate yields, in October raised about $32 million in Series A funding, bringing its value to $320 million.
Mr. Lisa served as the interim director of the office of compliance and enforcement at the Treasury’s Financial Crimes Enforcement Network, where he led enforcement of anti-money-laundering rules against crypto firms, between 2015 and 2016. He also worked as an enforcement attorney at the Consumer Financial Protection Bureau between 2011 and 2014. He was most recently with the law firm Hogan Lovells.
Mr. Lisa said in a company blog post that he joined ElementFi to help apply existing rules to decentralized finance markets with a new way of thinking. “If we’re going to make DeFi survive, and thrive, it has to be in a way that ensures that markets aren’t manipulated, that people aren’t subject to fraud, and that illicit finance doesn’t get a foothold,” he said.
—Mengqi Sun
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Emmanuel Faber, who stepped down as Danone’s chief executive earlier this year, had played a key role in advancing the company’s sustainability efforts. PHOTO: ERIC PIERMONT/AGENCE FRANCE-PRESSE/GETTY IMAGES
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The former chief executive of Danone SA, who left the food company earlier this year amid pressure from investors, has found a new job: running a body tasked with writing climate-disclosure rules for companies.
The IFRS Foundation, the London-based nonprofit organization that oversees the International Accounting Standards Board, said Emmanuel Faber would become chair of the new International Sustainability Standards Board. His three-year term begins Jan. 1.
Mr. Faber stepped down as CEO and chairman of Danone in March after investors called for his ouster, citing underperforming brands and poor share-price performance. Mr. Faber had worked at Paris-based Danone for 24 years in roles including chief financial officer, deputy general manager and, from 2014 onward, chief executive.
While at Danone, Mr. Faber played a key role in advancing the company’s sustainability efforts, including introducing a carbon-adjusted earnings-per-share metric and committing to a French legal framework of pursuing a social and environmental purpose that goes beyond generating profit.
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The U.K.’s Financial Conduct Authority fined Swiss asset manager GAM Holding AG and one of its former star bond-fund managers for conflicts of interest, resolving a longstanding case related to the company’s investments in loans generated by the now-defunct Greensill Capital.
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GAM will pay £9.1 million, equivalent to about $12 million, to settle the matter. Tim Haywood, the former fund manager, will pay £230,037. GAM and Mr. Haywood agreed to accept the regulator’s conclusions, which found the company had failed to ensure its systems adequately controlled conflicts of interest related to three investments. Mr. Haywood was fined separately for violating his company’s gifts and entertainment policy.
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A U.S. proposal to give tax credits to Americans who buy U.S.-built electric vehicles threatens to hurt Mexico’s industry and spur illegal migration to the U.S., Mexican Economy Minister Tatiana Clouthier said on Thursday.
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Ms. Clouthier suggested the proposal could jeopardize bilateral cooperation in controlling the flow of migration. She added that the proposed tax credit, part of a broader spending bill known as Build Back Better that is currently before the U.S. Senate, risks creating market distortions and pulling jobs away from Mexico to the U.S.
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A federal judge in Manhattan overturned a roughly $4.5 billion settlement between OxyContin maker Purdue Pharma LP and members of the Sackler family who own the drugmaker, a surprising decision that raises questions about the future of the company and its owners, who have been accused of fueling the nation’s opioid crisis.
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The Biden administration added dozens of Chinese companies and research institutes to blacklists restricting access to U.S. investment and technology for their alleged support for China’s military and the mass surveillance of mainly Muslim ethnic groups.
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The Senate passed legislation Thursday to ban imports from China’s Xinjiang region over concerns about the use of forced labor, sending the bill to President Biden, who is expected to sign it.
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Former McDonald’s Corp. Chief Executive Steve Easterbrook agreed to return compensation now valued at more than $105 million to resolve a legal dispute related to his dismissal as head of the burger chain, the company said on Thursday.
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Closing arguments began Thursday in Elizabeth Holmes’s criminal-fraud trial, marking the final opportunity for prosecutors and defense lawyers to sway jurors to their side of the case.
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HSBC Holdings PLC was fined for inadequate anti-money-laundering controls that the London-based bank used to monitor hundreds of millions of dollars of transactions.
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Unemployment has fallen rapidly this year, hitting 4.2% in November. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
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The lesson the Federal Reserve drew from the pre-pandemic economy was that unemployment could run at historic lows without fueling inflation. It’s why the central bank last year promised it would no longer raise interest rates just because the job market was strong.
That assumption is turning out to be wrong and the Fed thus finds itself in a situation it hoped it wouldn’t face: preparing to raise interest rates to slow the economy though the labor market remains far from where it was two years ago.
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Rising Covid-19 infection rates, inflationary pressures and labor shortages slowed the economic recovery in the U.S. and Europe this month despite signs the supply problems that have hobbled factories over recent months were easing.
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Europe’s foremost central banks took diverging policy paths a day after the Federal Reserve set the stage for rate rises in 2022, differing approaches that underscore the challenges for policy makers as they balance surging inflation and renewed risks to growth from the fast-spreading Omicron variant of the coronavirus.
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New applications for unemployment benefits in the U.S. edged higher last week but stayed very low, reflecting an unusually tight labor market as the economy continued to recover.
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Turkey’s central bank bowed to political pressure to slash interest rates, defying soaring inflation and deepening a currency crisis that has dogged the economy.
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U.S. Marine Corps Base Camp Blaz, to be formally opened in a ceremony early next year, is the latest sign that Guam, a remote U.S. outpost in the Pacific Ocean, is becoming more crucial for military planners as they sharpen their focus on Asia, and tensions with China rise.
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Earlier this year Citi was fined for ‘longstanding internal problems.’ PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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Citigroup said Thursday that it had hired an additional 100 internal auditors.
“This is a very exciting time for Citi Internal Audit, which serves a vital role in ensuring safe and sound operations as we continue to meet the growing needs of our global business,” said Jessica Roos, the company’s chief auditor, in a press release.
While the job prospects for those new hires may never have been better, the celebratory tone is odd for a bank that really does seem to need those extra watchful eyes. Earlier this year Citi was fined for “longstanding internal problems.” Those include sending almost $1 billion to the wrong place and then having the recipients refuse to send most of it back. And then there was the use of its Mexican unit Banamex to launder illicit drug money a few years earlier. Citi paid $97.4 million to settle a criminal inquiry into the matter.
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Meta Platforms said it removed about 1,500 accounts from Facebook and Instagram that it linked to groups it called ‘cyber mercenaries.’ PHOTO: NICK OTTO/BLOOMBERG NEWS
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Big tech companies are escalating their fight against spies for hire.
On Thursday, Meta Platforms Inc. said it removed about 1,500 accounts from Facebook and Instagram that it linked to groups it called “cyber mercenaries” that hack and spy for profit. Facebook researchers tied the accounts to seven entities around the world that appear to sell their services to government and private clients.
One of them, an obscure firm in North Macedonia, used a previously unknown vulnerability in Apple Inc.’s software to hack iPhones, according to watchdog group Citizen Lab, which collaborated with Facebook and issued its own report Thursday. Another group Facebook went after is “an unknown entity in China” involved in surveillance of ethnic minorities, according to the company.
Facebook’s work is the latest, and broadest, attack by big tech companies on the shadowy industry that has grown up around infiltrating smartphones, computers and social media accounts. The most visible player has been NSO Group, an Israeli company which Citizen Lab has tied to spying on dissidents and journalists on behalf of Gulf governments.
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Dan Ammann PHOTO: STEFANI REYNOLDS/ZUMA PRESS
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Dan Ammann, chief executive of General Motors Co.’s Cruise autonomous-vehicle unit, is leaving the company, GM said, a high-profile departure from GM Chief Executive Mary Barra’s executive team.
GM said on Thursday that Cruise president and founder Kyle Vogt will serve as the division’s interim CEO, without elaborating on Mr. Ammann’s departure. Mr. Ammann couldn’t be reached for comment.
A New Zealand native, Mr. Ammann spent several years as GM’s president before moving on to run Cruise in early 2019. While GM’s president and Ms. Barra’s No. 2 executive, Mr. Ammann was credited with shaping a strategy to shrink GM’s global footprint, including the sale of its European business, to sharpen its focus on electric and driverless technology.
In October, he outlined for investors an ambitious target for Cruise to roll out thousands of robot taxis across U.S. cities in the coming years.
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A profile of John Lawler, who took over as Ford Motor Co.’s chief financial officer last year after more than three decades with the company.
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Daniel Doctoroff, chief executive of Alphabet Inc.’s Sidewalk Labs, said he will step down from his role at the company because he likely has amyotrophic lateral sclerosis, known as Lou Gehrig’s disease.
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TikTok says it is testing ways to avoid pushing too much content from a certain topic, such as extreme dieting, sadness or breakups, to individual users. PHOTO: MIKE BLAKE/REUTERS
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Popular video-sharing app TikTok said it would adjust its recommendation algorithm to avoid showing users too much of the same content, as social-media platforms globally come under scrutiny for their potential harm to younger users.
TikTok said on Thursday that it is testing ways to avoid pushing too much content from a certain topic, such as extreme dieting, sadness or breakups, to individual users to protect their mental well-being.
The buzzy app, whose monthly user numbers surpassed 1 billion in September, said it was taking such measures to protect against users “viewing too much of a content category that may be fine as a single video but problematic in clusters.”
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A Broadway theatergoer showed proof of vaccination in New York City, which will soon require private-sector employees to be vaccinated for in-person work. PHOTO: EDUARDO MUNOZ/REUTERS
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New York businesses are grappling with how to comply with a new state requirement that all patrons either show proof of vaccination against Covid-19 or wear masks indoors.
Many retailers and grocers readopted mask mandates when the regulation took effect Monday, according to industry groups. Some office-based companies had already required vaccinations for staffers, but others have reimposed mask requirements and others told unvaccinated workers they could no longer come to the office. Occupancy rates in New York City office buildings remain below 40%.
Gov. Kathy Hochul, a Democrat, announced the requirements last Friday. She said on Tuesday that the state’s Covid-19 infections have increased 58% and hospitalizations by 70% since Thanksgiving. The new policy is preferable to the shutdowns ordered last winter, she said.
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U.S. vaccine advisers recommended adults take a Covid-19 vaccine from Pfizer Inc. or Moderna Inc. over Johnson & Johnson’s after health authorities said the rate of a rare but serious blood-clotting condition was higher than previously detected.
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From Spanish holidays to Greek celebrations to German circus performances, the Covid-19 pandemic has derailed plans and upended Christmas traditions across Europe for a second year in a row.
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Organizers of a prominent international technology conference are postponing a gathering in Hong Kong that was set for March, the latest disruption from the Covid-19 pandemic to the city’s role as a global business hub.
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South Korea had successfully contained Covid-19 throughout much of the pandemic, and it now has one of the highest vaccination rates among wealthy countries. But historic levels of infections, hospitalizations and deaths are prompting the country to reverse plans.
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