Finance

Exclusive: Banks assess China risks after being stung by Russia sanctions

Published

7 months ago

October 13, 2023

Exclusive: Banks assess China risks after being stung by Russia sanctions

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

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.

Acquire Licensing Rights, opens new tab

Click to comment

Finance

Wisconsin groups support next generation of STEM workers | Finance & Commerce

Published

7 hours ago

May 2, 2024

Press Room

Wisconsin groups support next generation of STEM workers | Finance & Commerce

Listen to this article

MILWAUKEE — Contractors, utilities and public officials this week had something to offer to local students interested in construction and science, technology, engineering and mathematics (STEM).

The construction labor shortage and age gap are continuing conversations in the industry and drives more contractors to find ways to add to the labor pool. In March, there were around 295,000 construction jobs open across the U.S, according to preliminary data from the U.S. Bureau of Labor Statistics. The median age in the construction field is 41.9, BLS data showed.

Meanwhile, different groups this week awarded scholarships, recognition and partnerships to schools and students interested in construction and STEM fields. One partnership between contractors and a school will create a new learning laboratory at a Wauwatosa high school, officials said. Here’s what groups did this week to support the next generation.

Plumbing and mechanical contractors partner with Wauwatosa schools

Wauwatosa East High School has partnered with mechanical contractors JM Brennan and TOTAL Mechanical, manufacturer representative Air Flow, the Milwaukee and Southeastern Wisconsin Plumbing and Mechanical Contractors Association and Sheetmetal and Air Conditioning Contractors Association to develop a learning laboratory to prepare the next building and construction trades labor force, officials said.

The partners will further develop the HVAC part of the technical training space at Wauwatosa East.

“At Tosa East we are very proud of our program,” said Craig Griffie, the technical education teacher at Wauwatosa East. “The students are building a really strong foundation and it’s all due to the partners we have.”

State awards “fab lab” grants to 18 school districts

Gov. Tony Evers and Missy Hughes, secretary of the Wisconsin Economic Development Corp., awarded $493,000 in “fab lab” grants to 18 school districts to train students in science, technology, engineering, arts and mathematics. The money is used to help create fabrication labs at local schools and equip them with computerized manufacturing machines such as 3D printers and laser engravers.

Lawmakers recognize national construction contest winners

State Rep. Clint Moses and Brian Westrate, staff for U.S. Representative Derrick Van Orden, recognized the University of Wisconsin-Stout construction team, faculty and staff. The team clinched a gold medal in estimating at the Associated Builders and Contractors National Craft Competition held this year in Kissimmee, Florida.

Madison utility awards high school scholarships

Madison-based Alliant Energy awarded scholarships worth $1,000 to 25 high school seniors in Iowa and Wisconsin. The scholarships are awarded to students who perform community service work, academic achievement and wrote an essay about community problems solved through science, technology, engineering or mathematical concepts.

Julie Bauer, executive director of the Alliant Energy Foundation, said “supporting workforce readiness and fostering young minds interested in STEM-based careers is critical to developing the future of a skilled and innovative workforce.”

Finance

Faegre Drinker Grows Dallas Finance & Restructuring Practice

Published

14 hours ago

May 2, 2024

Press Room

Faegre Drinker Grows Dallas Finance & Restructuring Practice

Glenn Reitman has joined Faegre Drinker as a partner in the finance & restructuring practice in Dallas, the firm said Thursday.

Reitman represents lenders and borrowers in structuring, negotiating, and documenting finance transactions, according to Faegre Drinker. He has particular expertise with commercial, real estate, and energy projects and structured financing.

His finance practice includes private equity, venture capital, leveraged buyouts, structured products, loan workouts, and restructurings, said the firm.

This story was produced by Bloomberg Law Automation.

Finance

What will the finance team of the future look like – Accountancy Age

Published

21 hours ago

May 2, 2024

Press Room

What will the finance team of the future look like – Accountancy Age

Author

Peter Spence, AICPA & CIMA

Date published
May 2, 2024

Categories

A significant part of the work we do at AICPA & CIMA is about looking at trends within the profession and using them to discern what the future of accounting looks like, so as to best prepare our members to thrive within it.

This is the rationale behind our Future of Finance 2.0 project, of which we have just released the latest iteration. This paper highlights and explores what I think is the most significant long-term trend which is currently reshaping the accounting and finance profession, and it essentially relates to mindset.

In the past, it would be fair to characterise our profession as being quite rigid and rules based. This is not intended to be derogatory, it is simply a reflection of the work we did and the career paths we followed to do it. What we are seeing today, and will see more of in the future, is a shift towards a more expansive mindset, with value-creation at its heart.

Our work will incorporate a wider range of responsibilities, including but not limited to being the stewards of sustainability data and strategy and working with colleagues in all parts of the of organisations we serve to drive efficiency, productivity and sustainable value creation.

Sustainability

Sustainability is one of the key drivers of change within the profession, but it is important to understand that this is not just a response to regulatory changes which require us to present the data. While these are obviously important, it is important to look beyond this, and to apply the value creation mindset I have mentioned, because this is where the opportunities are.

Forward thinking organisations are not approaching this in terms of “we have to report”. They are looking at how their business models can adapt to produce truly sustainable growth, because that is where competitive advantage will be found.

Now clearly, that is not a description of the majority of workplaces at the moment, but you can see evidence of the direction of travel in our survey results. We found that 48% of accounting and finance professionals are currently measuring the impact of sustainable initiatives and only 45% say that they are currently measuring the performance of these initiatives. That is a significant proportion, and the fact that more and more companies are looking at the performance of these initiatives shows you where we are heading.

Business partnering is the way of the future

Another big change our research picked up was the increasing move towards the business partnering model. Something which struck me as very significant was the difference in attitudes towards the future we found among the professionals we surveyed. 60% of them said they identify as finance business partners, and 84% of those are extremely optimistic about the future of the profession. Of the 40% who say they don’t identify as finance business partners, only 15% said they are optimistic about the future of the profession. I think that is a pretty good indication of where our profession is heading, so I strongly recommend you take that into account in your career planning.

To make the most of this trend, the accountants of the future will need the ability to use data and analytics combined with business acumen, so they can improve strategic decision-making and drive business performance within their organisations.

Overall the challenge for the profession which our research identified is the need to adapt to the requirements of sustainable business practice while exploiting the possibilities of new technology. To succeed we will have to adopt a multi-capital perspective of value while learning to work across organisational boundaries. If we can achieve this, we can look forward to a bright future. Demand for data-driven decision-making and sustainable business models is only going to grow, so we can be confident that the need for strategic value creating finance teams will make us a valuable partner in every organisation in the years to come.