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Home » Daily Briefing » Daily briefing - 18 February 2019

Daily briefing - 18 February 2019

Huawei_1
Huawei HQ in Shenzhen

The Financial Times has been running a slide rule over Wirecard for several years, and recent reports alleging wrongdoing in accounting and reporting at the company are beginning to hurt the processor. In the last years, Wirecard has built an empire that values the company at more than Commerzbank. This morning the German regulator Bafin stepped in to stop short sellers. "Watchdog Bafin said the ban was its first such move on record for an individual stock, though it banned shorting of bank shares in 2008," reports Reuters. "Short selling is a trading tactic in which an investor borrows stock to sell in the hope of being able to buy it back later at a lower price."

The perverse outcome of Australia's banking investigation may be ordinary people finding access to credit growing harder, according to bank analysts. "While we believe mortgage credit underwriting standards have improved in recent years, we see further underwriting process tightening in other lending categories (for example, personal loans and credit cards)," Macquarie analysts wrote, adding that less-regulated non-bank mortgage lenders were growing at three times the rate of bank lending. "The update to responsible lending guidance also comes as banks are preparing for major changes in how they assess consumers due to a change known as comprehensive credit reporting (CCR), which will give lenders far more information about a customers' other debts and their financial history," writes the Brisbane Times. "Banks have previously only provided 'negative' data for customers' credit reports, such as whether the borrower has defaulted. The new regime will require banks to also provide 'positive' credit information, such as how frequently they have paid their bills on time." It's wrong for ordinary people to take the brunt of these changes — but it's also a bit alarming that behind all the digital layers and agile methods, credit underwriting looks like a bit like an assembly of old bits and bobs.

Some relief this morning for the clearing industry as the no-deal Brexit scenario looms, despite the British parliament's delusion that it can somehow vote away a no-deal. "European derivatives traders have been given formal permission to use crucial UK market infrastructure in a no-deal Brexit, as regulators enact contingency plans to contain market turmoil from Britain's departure from the EU," notes the Financial Times. "The European Securities and Markets Authority issued temporary licences to the UK clearing houses — LCH, ICE Clear Europe and LME Clear — on Monday." The mood of UK business is somewhere between fuming and absolutely incandescent. Read for instance this piece from the head of Britain's Bangladesh Caterers Association, who now regrets voting for Brexit and telling his members to follow suit.

British airline Flybmi announced that it is cancelling flights and entering administration. "The airline has faced several difficulties, including recent spikes in fuel and carbon costs, the latter arising from the EU's recent decision to exclude UK airlines from full participation in the Emissions Trading Scheme," said a spokesman. "Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe." Flybmi operated a government-subsidised flight between Stansted and Derry in Northern Ireland to encourage trade. It's been a trying week in the airline industry. While Emirates soaked up most of the bad news last week by cancelling its remaining A380 order, its sister airline in Abu Dhabi quietly rolled out its own bad news on the weekend, cancelling a huge order for the smaller A350. "Etihad Airways is currently undergoing a spree of financial difficulties," writes airlinegeeks.com. "As part of its efforts to adjust in size and scale in seek of better returns, the airline is rumored to have cancelled its remaining order of 42 A350s."

US vice-president Mike Pence was in Europe last week, ordering the hapless Europeans to stop talking to Iran and being roundly ignored. Mr Pence has been banging the gong about Huawei too, and this weekend, the UK managed to make a decision about 5G and decided that Huawei is okay, defying Pence and the Huawei haters. But in the context of the global economy, it's Saudi Arabia and Mohamed bin Salman's visit to China this month that intrigues. As we've noted consistently in recent months, Saudi Arabia and Abu Dhabi are headed for dire problems that only China can solve. The South China Morning Post took the opportunity over the weekend to repeat Bank of England governor Mark Carney's recent comments about the likely emergence of other global reserve currencies. It also noted the discontent in Europe over the US approach to Iran, which has had the effect of uniting Europe.

Mauritius to Receive World's First Digital Asset Custody Regulatory Framework

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