Category Archives: Europe

International banks team up to create digital currency

Banks announce project to create a new form of digital cashIf you can’t beat them…

Six of the world’s biggest banks have teamed up with UBS to pilot a project to create a new kind of digital cash that is designed to exploit the blockchain technology that already facilitates bitcoin transactions.

Barclays, Credit Suisse, and HSBC are among the major organisations to announce their collaboration with UBS over the ‘utility settlement coin’ (USC), a virtual currency that was originally the brainchild of London start-up Clearmatics. Further discussions with central banks, as well as a review of data privacy and cyber security measures are scheduled but it’s hoped that the USC will speed up settlements and could bring central banks one step closer to the introduction of a formal digital currency.

Head of strategic investment and fintech innovation at UBS, Hyder Jaffrey, said in a statement that discussions would continue over the next 12 months, with the aim of a limited ‘go live’ towards the end of 2018.

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Google hit by $2.7bn EU fine over search engine results

Google’s woes continue as it receives a record fine for anti-competitive practices

You know you’ve had a bad week when two adverse rulings come home to roost – with billion-dollar consequences. So, it’s hard not to feel a little of Google’s pain as it faces down a pair of expensive and potentially damaging international judgements.

A record fine for anti-competitive practices

First up, the European Union’s record $2.7-billion fine for anti-competitive behaviour. This relates to the company’s practice of handling its own shopping search engine – Google Shopping – in a different way from those of its competitors by defaulting it to the top of searches while bumping others down the list. Regulators say that by illegally promoting its own price comparison service in this way, Google has ‘abused its market dominance as a search engine’ and demoted the services of competitors like Kelkoo.

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Yahoo under pressure over hacking and privacy fears

Yahoo under pressure from EU regulators over hacking and alleged email privacy breachYahoo faces investigation over email privacy

It never rains but it pours! With public trust in freefall over the delayed announcement of a large-scale Yahoo account hack, the company’s decision to scan clients’ email accounts on behalf of US authorities has fuelled discussions in Europe over the thorny issue of privacy.

According to Reuters, Yahoo is facing criticism over its compliance with a classified US government request to comb through customers’ incoming emails for information specified by US intelligence officials. European politicians have since called on the European Commission (EC) to investigate the incident – which could derail the progress of the transatlantic data sharing deal agreed earlier this year.

‘Any form of mass surveillance infringing on the fundamental privacy rights of EU citizens would be viewed as a matter of considerable concern,’ commented Ireland’s Data Protection Commissioner in a statement.

Yahoo’s only response was that it ‘complies with the laws of the United States’, declining to confirm whether it scanned users’ emails or to say if Europeans’ emails were intercepted during the operation. The episode is likely to touch a nerve with Europeans who fear that the ‘Privacy Shield’ data sharing deal doesn’t offer enough protection against mass surveillance by US intelligence agencies.

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Sterling at risk of losing reserve currency status

Post-Brexit shocks to sterling have rocked the currency’s reserve currency statusPost-Brexit blues

When Britons voted narrowly to exit the European Union in a public referendum earlier this year, they may not have envisaged the ensuing shock to the country’s currency and financial reputation.

But now, with sterling languishing at its lowest value in 40 years and the UK stripped of its Triple-A credit rating, the country is also facing the possible loss of its reserve currency status, should it fail to secure continued access to the European single market.

US ratings agency Standard & Poor has admitted that the British government is risking significant damage to the economy’s growth, with potentially long-term implications for the country’s debt and credit profile. S&P fears that if the UK loses access to the single market, its businesses will suffer incalculable consequences for the foreseeable future.

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Hard Brexit could result in British banking crisis

Head of Germany’s central bank warns that UK could lose its status as the financial centre of EuropeThe Brexit dilemma

More than three months have now passed since the British public voted to leave the European Union but there’s been no clear indication so far of how – or when – the British government intends to effect the political and economic split. In order for the process of Brexit to begin, Article 50 of the Lisbon Treaty must be invoked but because that will set the clock ticking on a strict two-year timetable for negotiations, no-one seems in much of a hurry to push the button.

There’s much that is still unclear – and it’s this uncertainty that’s vexing not only the British public but also the businesses that have a lot riding on whether or not Brexit will allow them to continue to have access to the single market. Britain sells almost half of its exports via the common market, and any change to this process is likely to be expensive.

A ‘soft’ Brexit would minimise the economic impact on the UK but is likely to come at the expense of limiting the number of migrants – an area of concern for many who voted to leave the EU. On the other hand, the ‘hard’ Brexit favoured by some leading Conservative eurosceptics could have disastrous consequences for businesses, most notably for the City of London.

Passporting rights are at stake

The head of Germany’s central bank recently warned that London’s position as a financial centre would come into question if the UK left the single market. In this scenario, it’s likely that banks would automatically be stripped of their ability to conduct business across the EU, which would open the door for other European financial capitals to annexe business from London.

In an interview with the Guardian, Bundesbank president Jens Weidmann pointed out that banks’ passporting arrangements are ‘tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area’ (EEA).

Passporting rights allow firms to use London as a hub for serving clients from across the EU, without having to negotiate licences in separate countries. Because of this, international banks with affiliates in the UK actually account for a large share of international banking activity in London. Bullish Brexiters like Foreign Secretary Boris Johnson have reassured banks that the UK will retain passporting rights even if it leaves the EEA, but Weidmann negative this assumption, saying that business would reconsider relocating their headquarters.

UK-based businesses feeling the pressure

According to a survey of 100 business leaders from large companies by accountancy firm KPMG, more than three-quarters of chief executive officers are considering moving either their headquarters or some part of their operations outside of Britain following the referendum. The CBI and PricewaterhouseCoopers have also reported a deterioration of confidence in the financial services sector in the three months to September.

The surveys suggest Prime Minister Theresa May faces a challenge to retain businesses and jobs when Brexit negotiations finally get underway, and that talk of a hard Brexit is already causing companies to consider – or even accelerate – their own exit strategies.

‘CEOs are reacting to the prevailing uncertainty with contingency planning,’ commented Simon Collins, KPMG’s UK chairman.

Apple hit with tax penalty after EU ruling

Tech giant Apple to pay billions of euro in back taxes after EU rulingUnfair advantage

Tech giant Apple has been hit with Europe’s biggest-ever tax penalty after Brussels ruled that the company had received what amounted to illegal state aid from Ireland. The company will be required to pay billions of euro in back taxes as the European Commission seeks to redress the aggressive tax avoidance strategies employed by the world’s biggest corporations.

The judgment follows a three-year investigation into claims that Dublin violated EU law by granting Apple an advantage not available to other companies. It’s likely that the decision will be the subject of appeals by both Apple and Ireland – both of which deny any wrongdoing.

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