2024-11-29 12:42

LONDON, Nov 29 (Reuters) - Non-bank financial institutions such as hedge funds remain vulnerable to a sudden financial shock and would not all be able to access the funding they would need in such a crisis, the Bank of England said on Friday. Announcing the results of its first system-wide test of Britain's financial firms, the BoE said the growing non-bank financial sector has increased its resilience. But its reliance on bank funding in a crisis could lead to "greater risks for financial stability," it said. Unlike typical stress tests which look at how big banks' or other financial firms' balance sheets fare during a crisis, the BoE's System-Wide Exploratory Scenario examined how the actions of the whole network of financial firms, including banks, funds, insurers and central counterparties, could amplify shocks. The scenario envisaged a hypothetical situation in which "a sudden crystallisation of geopolitical tensions" led to a sudden and severe market shock. Such a scenario may be more likely following the U.S. presidential election victory of Donald Trump who has repeatedly threatened to impose tariffs on foreign imports, that could in turn increase trade and political tensions with countries such as China. The results of the BoE's exercise highlighted continuing risks in the non-bank financial institutions sector, with many such firms expecting to be able to rely in a crisis on so-called repo financing from banks that would be unlikely to be available. Non-banks needed to meet some 94 billion pounds worth of margin calls in the scenario, the BoE said, forcing some players such as hedge funds to sell assets where bank funding was not available. The sterling corporate bond market would also come under pressure, the BoE said, as funds looking to raise cash dumped corporate bonds into a falling market, leading to a "jump to illiquidity" with insufficient buyers. While the exercise was designed more to inform firms about the risks than to lead to direct policy action, the BoE said its conclusions supported the broader work of the international regulators to better understand and regulate the growing non-bank sector. Regulators worldwide have been scrutinising more closely the non-bank sector, which now accounts for about half of the global financial system, after several incidents where such firms have needed support in recent years. (([email protected] , opens new tab)) Keywords: BRITAIN BOE/SCENARIOS Sign up here. https://www.reuters.com/world/uk/refile-boe-finds-non-bank-financial-firms-pose-wider-risks-crisis-periods-2024-11-29/

2024-11-29 12:34

BRUSSELS, Nov 29 (Reuters) - The European Commission has approved 1.9 billion euros ($2.01 billion) in state aid for German rail freight operator DB Cargo, a subsidiary of Deutsche Bahn (DBN.UL), the European Union said on Friday. The aid is contingent on the implementation of a restructuring plan aimed at ensuring the company’s long-term viability, the EU said in a statement. The decision follows an in-depth investigation launched in January 2022 after a competitor raised concerns about potential market distortions. WHY IT'S IMPORTANT The approval of this aid could ensure the long-term viability of DB Cargo, crucial for sustainable logistics circuits as a lower-emissions alternative to road transport. CONTEXT DB Cargo has been under scrutiny since a competitor's complaint sparked an in-depth investigation in 2022. The probe focused on a profit and loss transfer agreement between Deutsche Bahn AG and DB Cargo, intra-group services, group financing conditions of loans, and the partial coverage by the German Federal Railway Fund of remuneration for civil servants. KEY QUOTE "The Commission is satisfied that divestitures of activities and assets of DB Cargo, committed by Germany, will mitigate distortions of competition brought about by that state aid," the EU said. BY THE NUMBERS The approved German State aid amounts to 1.9 billion euros and is aimed at supporting DB Cargo's ongoing transformation and restructuring plan to ensure its long-term viability by the end of 2026. WHAT'S NEXT From Jan. 1, the profit and loss transfer agreement, identified as state aid, will no longer be in place. A restructuring plan, including a package of measures to streamline activities and reduce costs, is set to ensure DB Cargo's long-term survival. ($1 = 0.9472 euros) Sign up here. https://www.reuters.com/world/europe/eu-approves-19-bln-euro-state-aid-db-cargo-subject-restructuring-plan-2024-11-29/

2024-11-29 12:29

Volkswagen India unit accused of misclassifying imports Skoda Auto Volkswagen India claims compliance with laws VW classified imports as individual parts, paying lower tax Company says it is cooperating with Indian authorities NEW DELHI, Nov 29 (Reuters) - India has issued a notice to German automaker Volkswagen for allegedly evading $1.4 billion in taxes by "wilfully" paying lesser import tax on components for its Audi, VW and Skoda cars, a document shows, in what is one of the biggest such demands. A notice dated Sept. 30 says Volkswagen (VOWG_p.DE) , opens new tab used to import "almost the entire" car in unassembled condition - which attracts a 30-35% import tax in India under rules for CKD, or completely knocked down units, but evaded levies by "mis-declaring and mis-classifying" those imports as "individual parts", paying just a 5-15% duty. Such imports were made by Volkswagen's India unit, Skoda Auto Volkswagen India, for its models including the Skoda Superb and Kodiaq, luxury cars like Audi A4 and Q5, and VW's Tiguan SUV. Different shipment consignments were used to evade detection and "willfully evade payment" of higher taxes, the Indian investigation found. "This logistical arrangement is an artificial arrangement ... operating structure is nothing but a ploy to clear the goods without the payment of the applicable duty," said the 95-page notice by the Office of the Commissioner of Customs in Maharashtra, which is not public but was seen by Reuters. Volkswagen shares fell as much as 2.13% on the Frankfurt stock exchange after Reuters reported the India tax notice. Since 2012, Volkswagen's India unit should have paid import taxes and several other related levies of about $2.35 billion to the Indian government, but paid only $981 million, amounting to a shortfall of $1.36 billion, the authority said. In a statement, Skoda Auto Volkswagen India said it is a "responsible organization, fully complying with all global and local laws and regulations. We are analyzing the notice and extending our full cooperation to the authorities." The notice asks to respond within 30 days, but Volkswagen didn't comment if it has done so or not. India's finance ministry and the customs department did not respond to Reuters queries. The so-called "show cause notice" issued by the government authority asks Volkswagen's local unit to explain why its alleged tax evasion should not attract penalties and interests under Indian laws, over and above the $1.4 billion evaded duties. A government official who spoke on condition of anonymity said the penalty typically in such cases, if the company is found guilty, could go as high as 100% of the amount evaded, which could force the company to pay up about $2.8 billion in total. High taxes and prolonged legal disputes have often been a sore point for foreign companies in India. Electric vehicle maker Tesla, for example, has for years complained about high taxes on imported cars and Vodafone has fought cases related to back taxes. Chinese automaker BYD also faces an ongoing Indian tax investigation for underpaying taxes of roughly $9 million on imports. FACTORIES SEARCHED, EXECUTIVES QUESTIONED Volkswagen has plans to invest $1.8 billion to build EVs and hybrids in Maharashtra and in February signed an agreement to supply India's Mahindra (MAHM.NS) , opens new tab with electric components. The group's finance chief said in May he was "very positive about India". Still, Volkswagen is a tiny player overall in India's 4 million units a year car market and has struggled to boost sales. The case can increase its headaches in India, where its Audi brand already lags competitors in the luxury segment like Mercedes (MBGn.DE) , opens new tab and BMW (BMWG.DE) , opens new tab. Indian investigators said in their notice that Mercedes was following the necessary rules to pay a 30% tax by importing the CKD units of their cars, and not separate the individual parts. Inspectors searched three of Volkswagen India's facilities in 2022, including the two factories in Maharashtra. Documents related to component imports and email backup of top executives were seized at the time then. The company's India Managing Director, Piyush Arora, was questioned last year and asked "why all the parts required to assemble a car are not shipped together", but "he was not able to answer this question," the investigators said in the notice. Arora did not respond to a Reuters request for comment. USE OF SOFTWARE, MODUS OPERANDI The Indian notice, based on review of the company's internal software, said Volkswagen India regularly placed bulk orders for cars through an internal software which connected it to suppliers in Czech Republic, Germany, Mexico and other nations. After the order was placed, the software broke it down into "main components/parts", roughly 700-1,500 for each vehicle depending on the model. Then, the supplies started. The car parts were packed abroad in different containers within a span of three to seven consecutive days under multiple invoices, and then reached the Indian port roughly at the same time, Indian authorities alleged. "This appears to have been done to pay lesser duties applicable on these individual parts," the notice said, adding the carmaker "deliberately misled customs authorities". Volkswagen told investigators it was using such a route for "efficiency of operations", but the argument was dismissed. "Logistics is a very small and rather least significant step of the whole process ... (Skoda-Volkswagen India) is not a logistics company," the notice said. Sign up here. https://www.reuters.com/business/autos-transportation/volkswagen-india-unit-faces-14-billion-tax-evasion-notice-2024-11-29/

2024-11-29 11:59

LONDON, Nov 29 (Reuters) - British Prime Minister Keir Starmer named Heidi Alexander as the country's new transport minister on Friday, hours after Louise Haigh resigned over an historic offence in connection with misleading police. Sign up here. https://www.reuters.com/world/uk/uk-pm-starmer-names-heidi-alexander-new-transport-minister-2024-11-29/

2024-11-29 11:55

NEW DELHI, Nov 29 (Reuters) - India's infrastructure output (ININFR=ECI) , opens new tab grew 3.1% year-on-year in October, backed by coal and refinery products output, government data showed on Friday. Infrastructure output, which makes up 40% of India's industrial production and tracks activity across eight sectors, grew at a revised 2.4% in September. Last month, coal production increased 7.8% year-on-year compared to a 2.6% increase in September, while output of refinery products grew 5.2%, compared with a rise of 5.8% in September. Steel production grew 4.2%, against a revised 1.6% increase a month earlier. Cement output climbed 3.3% year-on-year, compared with September's revised 7.2% increase, and fertiliser production rose 0.4%, against a 1.9% rise in the previous month. Electricity generation was up 0.6% from a revised 0.5% rise in the previous month. However, crude oil production decreased 4.8% compared with a 3.9% fall in September. Natural gas output fell 1.2% from a 1.3% decline a month ago. Sign up here. https://www.reuters.com/world/india/indias-october-infrastructure-output-grows-31-year-2024-11-29/

2024-11-29 11:51

GDANSK, Nov 29 (Reuters) - Polish utility Tauron (TPE.WA) , opens new tab does not plan to introduce a voluntary departure program to optimise its employee costs, CEO Grzegorz Lot said on Friday. "The company is not currently planning a voluntary departure program. Of course, we pay close attention to costs. However, the amount of work ... the number of activities and investments is so large that our employees are very much needed," Lot said at a press conference. If Tauron shuts down its coal units, the resulting employment issue would be solved by other means, such as offering employees an early retirement or work elsewhere in the group, he added. Poland has agreed to stop mining coal for energy production by 2049 and is working on a new version of the national energy and climate plan that it must submit to the European Commission. The European Union targets carbon neutrality by 2050. Tauron's net profit rose 65% year-on-year in the third quarter of 2024, mainly due to lower costs. Sign up here. https://www.reuters.com/markets/commodities/tauron-has-no-plans-voluntary-departure-program-ceo-says-2024-11-29/