- Banking industry is assessing China exposures
- Review of risks sent to Western governments – UK Finance
- Bank boards discuss possible impact of any China curbs – bankers
- Lawyers receive surge in calls for mitigation advice
- West-China tensions have put banks on alert
Finance
Exclusive: Banks assess China risks after being stung by Russia sanctions
LONDON, Oct 13 (Reuters) – Big banks in Britain are preparing for any future escalation of Western sanctions on China and have shared their “scenario planning” with the British and U.S. governments, a senior banking official has told Reuters.
The project involves sharing lessons learned from other sanctions frameworks, including those on Russia, and discussions about the effect any measures imposed on China might have, Neil Whiley, director of sanctions at lobby group UK Finance, said.
After many companies were wrongfooted by the speed and breadth of prohibitions on Russia, banks are drawing up contingency plans in case geopolitical tensions between the West and China escalate, seven finance industry sources said. They did not expect any imminent changes to sanctions.
The work by UK Finance – which represents around 300 firms, including HSBC (HSBA.L), Barclays (BARC.L) and JPMorgan (JPM.N) – examines the transparency of asset ownership and control and how easily Chinese products can be traced, Whiley said.
It also focuses on the extent of commercial ties between the West and China across industries, including supply chains in high-risk sectors like technology, and attempts to highlight measures that might backfire if applied to China.
The work has been carried out against a backdrop of tensions between the West and China over the status of Taiwan, which Beijing claims, growing export controls, accusations of Chinese spying and a security crackdown by Beijing on companies.
UK Finance convened fortnightly meetings of big British and overseas banks over several months, Whiley said, before drawing up a draft document that runs to tens of thousands of words. Reuters was not able to review the document.
The draft was completed in August and shared with Western government contacts in recent weeks, he said.
The U.S. Treasury Department, which runs the Office of Financial Sanctions Implementation, Britain’s Foreign Office and Barclays did not respond to requests for comment. JPMorgan declined to comment.
Three senior London-based bankers, who declined to be named because they were not authorised to speak publicly, said their boards had discussed the possibility of stronger Western sanctions on China in future.
Scenarios from major cyber-attacks through to a military intervention in Taiwan could potentially trigger further prohibitions on China, one lawyer who advises banks said.
“The biggest financial institutions are … determining whether the exposure they have (to China) is tolerable given a pessimistic direction of travel for geopolitics,” said one security expert, who declined to be named.
TRACING RISKS
The preparations have been driven in part by the unprecedented sanctions slapped on Russia following its full-scale invasion of Ukraine, which left some companies struggling to get assets out of the country or exit positions.
One of the bankers said sanctions on Russia had “removed naivety” among businesses and prompted the industry to think more deeply about China risks.
Communications between officials from the United States and China have increased in recent months, thawing frosty relations somewhat ahead of a meeting between Chinese President Xi Jinping and U.S. President Joe Biden next month.
China, the world’s second-largest economy, remains central to Western supply chains. The European Union’s trade deficit with China, for example, widened to $276.6 billion in 2022 from $208.4 billion a year earlier, Chinese customs data show.
British finance also has close ties with China. Two of the country’s biggest banks – HSBC and Standard Chartered – make most of their profits in Asia, forcing them to straddle the geopolitical faultlines.
HSBC and Standard Chartered declined to comment.
SURGE IN CALLS
Whiley said the UK Finance project was designed to be part of industry-wide “horizon-scanning” to assess potential risks across multiple countries, in line with regulatory guidance, and did not reflect expectations or requests for more sanctions.
Nonetheless, financial firms are alive to the risks.
Another banker, who works for a lender with a presence in Asia, said the bank’s board was planning for more strains between China and Taiwan and likely consequences for financial markets, including currency and equity reactions.
Lloyd’s of London underwriters are among insurers that have raised rates and cut cover for risks involving Taiwan as concerns grow about possible military action by China, Reuters exclusively reported in August.
Against that background, four lawyers in London reported a surge in calls from financial clients seeking guidance on China, from sanctions compliance and risk assessment through to how to deal with any investigations or enforcement.
Demand for advice was so keen that one lawyer, who declined to be identified, said his firm last month held its first client-only seminar on Russia, China and how geopolitics were shaping sanctions and compliance.
“Companies will … want to make sure that for long-term engagements with Chinese entities, they have robust sanctions provisions in their contracts and agreements,” said Leigh Hansson, a London and Washington-based lawyer at Reed Smith.
Banks’ concerns are being driven partly by the robust U.S.-steered approach to the semi-conductor and technology industry and foreign policy discussions, lawyers said.
The Biden administration has curbed chip exports to China to deny Beijing access to advanced technology that could further military advancements or human rights abuses. China hit back with accusations of economic coercion.
One lawyer said he did not expect any repeat of the Russia response and for “commercial reality” to enter foreign policy decision-making in relation to China.
“(Any sanctions) will be very much targeted at specific companies, specific products and services,” the lawyer said.
Additional reporting by Sinead Cruise, Stefania Spezzati and Lawrence White in London and Michelle Price in Washington; Editing by Catherine Evans
Our Standards: The Thomson Reuters Trust Principles.
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Finance
The Container Store files for Chapter 11 bankruptcy
Investors in The Container Store (TCSG) have been sent packing as the struggling home goods chain files for bankruptcy.
The retailer filed for Chapter 11 bankruptcy protection late Sunday, Yahoo Finance learned exclusively. The company said in a press release it is doing this in order to refinance its debt to “bolster its financial position, fuel growth initiatives, and drive enhanced long-term profitability.”
For the quarter-ended Sept. 28, 2024, The Container Store listed total liabilities of $836.4 million against $969 million in total assets.
CEO Satish Malhotra — a former Sephora executive who took over atop The Container Store in 2021 — is confident the maneuver will allow the 46-year old company to stick around.
“The Container Store is here to stay,” Malhotra said in a statement, adding that it is taking these necessary steps in order to advance the business, strengthen customer relationships, expand its reach and bolster its capabilities.
It plans to lean into custom space offerings, “which continue to demonstrate strength,” he said.
The bankruptcy process is expected to last several weeks with the reorganization anticipated to happen within 35 days. The bankruptcy does not include the company’s Elfa home goods business in Sweden.
The business will operate as usual across all stores, online and in-home services. The company operates 102 stores across 34 states.
The company says all customer deposits are safe and protected, and vendors will get paid in full. There are no planned layoffs.
There are also no planned store closures, but that may be a possibility in the future as the company goes through the reorganization process.
Chapter 11 allows companies to “renegotiate the terms of their leases to align their store footprint with market realities and business needs,” sources told Yahoo Finance, adding “if they do not achieve meaningful rent reductions, they may be forced to close a select few locations.”
The filing has been expected by industry experts.
Read more: Why Walmart won the 2024 Yahoo Finance Company of the Year award
The Container Store — a chain founded in 1978 that rose to fame for its nifty home organizational goods in the 1990s — was delisted from the New York Stock Exchange on Dec. 9 after it fell below the exchange’s standard to maintain a market cap of $15 million over 30 consecutive trading days.
The company has seen its profits plunge post the home remodeling frenzy fueled by the COVID-19 pandemic and competition picked up from Walmart (WMT), Amazon (AMZN) and Target (TGT). It has been unprofitable for the past two fiscal years, with losses tallying about $10 million for the fiscal year-ended Sept. 28, 2024.
Finance
Personal finance lessons from Warren Buffett’s latest letter
Last Nov. 25, Warren Buffett announced that he would donate a substantial portion of the shares he owned in Berkshire Hathaway to his four family foundations.
In his announcement, he included a letter which contained some important personal finance lessons that we can apply to our own situation.
One of my favorites is his comment that hugely wealthy parents should only leave their children enough so they can do anything but not enough that they can do nothing.
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Despite being one of the richest men in the world, Buffett shared that his children only received $10 million each when his wife died. Although $10 million is a lot of money, it’s less than 1% of his wife’s estate.
I am not hugely wealthy, nor do I have $10 million. However, Buffett’s comment about just giving our children enough made me reflect on the importance of also making our children resilient.
Many of us want to make sure that our children will be financially secure by the time we pass away. While there is nothing wrong with this, sometimes we go overboard in making sure that this goal is met.
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For example, sometimes my husband and I are guilty of overindulging our children.
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Warren Buffett’s comment reminded me that we should also allow our children to go through difficulties so that they will become resilient and learn how to survive comfortably with less. Aside from letting them know that they shouldn’t expect much in terms of inheritance, this could mean limiting their allowance, allowing them to commute to school when there is no car available, and saying “no” to their request to buy nice and expensive things like the latest top of the line gadgets.
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Another thing that we are guilty of (especially if you are Filipino Chinese like me) is thinking that we need to build a successful business so that our children will eventually have a steady source of income and the bragging rights of being their own boss.
Although there is nothing wrong with building a successful business, passing it on to our children should not be a priority. This is because there’s no guarantee that our children will want to run our business. In fact, they might not be equipped to run the business properly. If that is the case, they may end up running our business to the ground. This would put them in a worse position, especially if they were raised to think that they do not have to worry about money because they have a business that will take care of them.
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Another personal finance lesson Warren Buffett shared is the importance of being grateful and learning to give back.
In his comments, Warren Buffett acknowledged the role of luck in making him wealthy—being born in the US as a white male in 1930 and living long enough to enjoy the power compounding.
However, he recognized that not everyone is as lucky as he is. Because of this, Buffett and his family are focused on giving back so that others who were given a very short straw at birth would have a better chance at gaining wealth.
Learning how to be grateful is very important. We cannot be truly happy unless we are grateful for what we have. In fact, many people who are rich are unhappy because they constantly compare themselves to others who have something that they don’t.
Meanwhile, giving back is a natural outcome of being grateful. It is also very fulfilling. For example, in my company COL Financial, we believe that everyone deserves to be rich. This is why we actively educate Filipinos on personal finance and the stock market.
Helping Filipinos better manage their hard-earned money is one of the greatest fulfillments of my career as an analyst. In fact, this is one of the reasons why I have stayed as an analyst despite the availability of other higher paying jobs.
Finally, Warren Buffett shared the importance of learning how to say no.
People who are wealthy will always be approached by friends, family and others seeking help. Although giving back is important, there is a limit as to how much we can give. Because of that, we need to learn how to say no, even if it is difficult or unpleasant.
To make it easier for his children to say no, Buffett’s foundations have a “unanimous decision” provision which states that unless all his three children agree, the foundations cannot distribute funds to grant seekers.
Although most of us are not as rich as Buffett, we can also benefit from having an accountability partner to help us say no to requests for help. That person can be our spouse, our sibling, or someone who shares our values and understands that while we want to be generous, our resources are limited. Our accountability partner can also help us decide who we should or should not help which is also a difficult task.
Warren Buffett ended his letter by saying that his children spend more time directly helping others than he has and are financially comfortable but not preoccupied with wealth. Because of that, his late wife would be proud of them and so is he.
As a parent, I’d be happier to have children who grow up to become productive citizens with good values rather than to have children who become very rich but are dishonest and greedy. INQ
Finance
Personal finance guru Dave Ramsey warns over 'mind-blowing' Christmas debt
Holiday spending is putting a big strain on American wallets and leaving some in debt well past the holiday season; however, personal finance expert Dave Ramsey said ‘mind-blowing’ debt can be avoided.
“The average over the last several years has been that people pay their credit card debt from Christmas into May,” The Ramsey Solutions personality shared during an appearance on “Fox & Friends” on Wednesday. “So it takes them about half the year to come back, and because they don’t plan for Christmas… it sneaks up on them like they move it or something.”
According to a study conducted by Achieve, the average American will spend more than $2,000 for the 2024 holiday season, breaking down the outflow of cash into travel and holiday spending on hosting parties, food, clothing, and other gifts.
STOP OVERSPENDING OVER THE HOLIDAYS AND START THE NEW YEAR OFF FINANCIALLY STRONG
Another recent survey by CouponBirds indicated that parents will spend an average of $461 per child and that 49% of parents will go into debt to pay for this Christmas.
The Ramsey Solutions personality balked at the amount of money shelled out for the season while explaining that the holiday should not come as a shock, and that spending for it should be planned out.
“Those numbers are mind-blowing when you look at the averages there. That’s a lot of money going out,” Ramsey added, “all in the name of happiness comes from stuff, and it doesn’t.”
He also weighed in and agreed on advice from fellow expert, Ramsey Solutions personality and daughter Rachel Cruze, who suggested making a list of people to shop for and noting how much to spend on each.
“You know, I’m old, and I met a guy from the North Pole,” the expert joked. “He said ‘make a list and check it twice,’ so Rachel’s right.”
Ramsey followed up by expanding on his daughter’s suggestion: “If you do that, and you put a name beside it, and then you total up those dollar amounts, you have what’s called a Christmas budget.”
“If you stick to that, you won’t overspend,” “The Ramsey Show” host remarked.
The money guru pointed out what he sees as problematic with the holiday season – not taking a shot at Christmas itself – but referring back to the spending issues.
“The problem with Christmas is not that we enjoy buying gifts for someone else. That’s a wonderful thing,” he reassured. “The problem is we impulse our butts off, and we double up what we spend because the retailers make all their money during this season.”
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Ramsey concluded by advising shoppers to be wary of retailers and to not be ensnared by their marketing strategies.
“They’re great merchandisers,” he warned. “They’re great at putting stuff in front of us that we hadn’t planned to buy.”
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