2024-06-11 07:53

FRANKFURT, June 11 (Reuters) - Many euro zone banks are still far from meeting accounting rules on the provisions needed to protect against loan losses, despite some progress in factoring in climate risks, the European Central Bank's top supervisor said on Tuesday. A decade-old accounting standard designed to avoid a new banking crisis requires lenders to make an upfront provision when they make a loan, and then a fuller one if there are signs of potential default, rather than waiting for it to go unpaid. But euro zone banks are dragging their feet in applying the International Financial Reporting Standard 9 (IFRS 9), Claudia Buch said, repeating a concern shared by other European regulators. "While progress has been made, especially in the area of climate and environmental risks, many banks are still far from meeting the expectations of IFRS 9," Buch told an ECB conference. The proportion of unpaid loans on the balance sheet of euro zone banks has shrunk to a historic low since the financial and debt crises of 15 years ago, partly thanks to the ECB's own pressure on lenders. But a surge in interest rates and new geopolitical risks ranging from the war in Ukraine to a disruption of established trade patterns with China and the U.S. are making regulators nervous again. Buch said banks relied too much on broad "overlays" - general provisions against new risks and uncertainty that cannot be easily captured by their internal models. As examples, Buch said some banks used "umbrella overlays" which fail to account for how different sectors are affected to varying degrees by the same risk sectoral differences. Other banks simply lowered the general forecasts for economic growth that they use to calculate expected losses. "This ignores that for example a disruption of trade patterns may threaten some export-oriented clients while it might only marginally affect aggregate GDP," Buch, who has been at the helm of the ECB's Supervisory Board since the start of the year, added. "This practice underestimates the true default risks that banks are facing." In addition, Buch said "many" banks failed to reclassify their loans appropriately, repeating a gripe often aired by her predecessor Andrea Enria. IFRS rules envisage three "stages" for loans - performing, underperforming and non-performing - based on how likely they are to go unpaid, resulting in rising levels of provisioning. "Good risk management in banks requires improving the use of overlays to consider the impact of novel risks more precisely, to use simulations and scenarios, and to improve stage transfers," Buch said. Sign up here. https://www.reuters.com/sustainability/sustainable-finance-reporting/many-euro-zone-banks-still-far-meeting-rules-provisions-2024-06-11/

2024-06-11 07:31

BENGALURU, June 11 (Reuters) - The Philippine central bank is sticking with its view that interest rates could be lowered as early as August despite an uptick in inflation last month, saying it was happy with where consumer prices were going. Speaking in the Reuters Global Markets Forum New Tab, opens new tab, Bangko Sentral ng Pilipinas Governor (BSP) Eli Remolona said there was chance the central bank could ease monetary policy in the third quarter, but it would remain data-dependent. "We are happy where inflation is going but we understand there are risks. We are guarding against those risks," Remolona said, citing supply shocks that could stem from the geopolitical tensions. The BSP's key policy rate is at a 17-year high of 6.50% after a series of rate hikes last year to tame inflation which has come down from a 14-year peak of 8.7% in January last year. "We're hawkish but less so than before. So we're still tight in terms of monetary policy," Remolona said. A rate cut in the third quarter would likely put the BSP ahead of major central banks including the Federal Reserve which is expected to deliver its first rate cut later this year. Strong U.S. jobs data have prompted investors to push back bets of rate cuts by the Fed this year, exerting pressure on Asian currencies including the Philippine peso. "Our bigger concern is inflation, and growth, number two. The peso becomes a concern only if it moves in a very sharp way so that it begins to cause a pass-through effect on inflation," Remolona said. Remolona said the central bank does not target a specific exchange rate level, and it is only in the market "if there is a sign of dysfunction". "We don't worry too much about where it will go. We worry more about how it gets there. Volatility is bad for both exports and imports ... we want to avoid that." Remolona reiterated the BSP's future policy decisions will depend more on Philippine data. While annual inflation (PHCPI=ECI) New Tab, opens new tab has quickened for a fourth straight month in May to 3.9% from 3.8% the previous month, the five-month inflation average of 3.5% was well inside the central bank's 2.0%-4.0% target range. Remolona said the central bank wants inflation "more firmly settled" near the middle of its target range but it is mindful of the risks that higher interest rates pose on growth. "In the process of trying to tame inflation, it's possible that we may overdo it and so we may suffer some loss of output unnecessarily, just in the effort to get inflation to stay near 3%. But any loss in output will be temporary," Remolona said. The Philippine economy grew 5.7% in the first quarter, lagging expectations, but picking up the pace slightly from the last three months of 2023. Remolona said hitting the bottom end of the government's 6.0%-7.0% growth target this year was "doable." The Philippine central bank, which kept its benchmark rate steady at its last five meetings, will meet on June 27 to review policy. (Join GMF, a chat room hosted on LSEG Messenger, for live interviews: https://lseg.group/3TN7SHH New Tab, opens new tab) Sign up here. https://www.reuters.com/business/finance/philippine-cbank-says-q3-interest-rate-cut-still-table-2024-06-11/

2024-06-11 06:58

MUMBAI, June 11 (Reuters) - The Indian rupee's choppy trading last week in the wake of the national election results prompted importers and exporters to hedge a larger portion of their foreign exchange book in the forwards market, data showed. Importers bought foreign exchange forward contracts worth $9 billion last week, a more than 70% jump from the same period a year before, data from clearing house CCIL shows. Exporters hedged $6 billion, matching the year-on-year increase for importers. The spurt in hedging activity came in a volatile week that started with the rupee rallying to 82.9475 per dollar on Monday after exit polls indicated a comfortable majority for Prime Minister Narendra Modi's party and its allies. But official results on Tuesday showed the ruling alliance party just about clung on to its majority, sending the rupee sliding to 83.53. That range is roughly in line with the 83.00 to 83.50 range the rupee has held over the past two-and-a-half months and is a "well-expected" near-term one, an FX salesperson at a large private sector bank said. "Two things were responsible for the pickup in hedging. One was the perceived increase in the political risk premium and the other, which is more important, was the range that the rupee itself made," the salesperson said. The rupee's rally on Monday was an opportunity for importers and the decline after that for exporters, he said. The currency has been held in a narrow range, helped by the Reserve Bank of India's regular intervention. The central bank has repeatedly sold dollars near 83.50 to prevent it from breaching the all-time low of 83.5750, hit in April. On the flip side, the RBI is widely expected to use any major rallies in the rupee to build forex reserves. "When you have a currency that has, for a long time, held established ranges, it makes sense for companies to take advantage of moves that are near the top or bottom of that," said Kunal Kurani, associate vice president at Mecklai Financial. Sign up here. https://www.reuters.com/markets/currencies/indian-firms-ramped-up-forex-hedging-volatile-election-results-week-2024-06-11/

2024-06-11 06:26

2024 world oil demand growth forecast of 1.10 mln bpd, EIA says OPEC maintains 2024 forecast for relatively strong demand growth US oil output expected to rise to a record in 2024, EIA says Coming up: API data on U.S. crude oil stockpiles HOUSTON, June 11 (Reuters) - Oil prices settled slightly higher on Tuesday as the U.S. Energy Information Administration (EIA) raised its global oil demand growth forecast for the year, while OPEC stuck to its forecast for relatively strong growth in 2024. Brent crude futures rose 29 cents, or 0.4%, to $81.92 a barrel, continuing a sharp recovery as fears of oversupply have ebbed since Brent closed at $77.52 a week earlier, its lowest since February. U.S. West Texas Intermediate (WTI) crude futures gained 16 cents, or 0.2%, to settle at $77.90. The EIA raised its 2024 world oil demand growth forecast to 1.10 million barrels per day from a previous estimate of 900,000 bpd. The Organization of the Petroleum Exporting Countries (OPEC) maintained its 2024 forecast for relatively strong growth in global oil demand, citing expectations for travel and tourism in the second half. This month, OPEC and allies agreed to extend most oil output cuts well into 2025 but said they would phase out the cuts over the course of a year from October 2024. "We're now at least considering the idea that maybe demand will pick up in the second half, and the market may actually need some additional OPEC+ supply," said Tim Evans, an independent energy analyst. "The market was becoming somewhat oversold... We're getting a bit of a trampoline effect," Evans added. U.S. crude oil output in 2024 is expected to rise more than previously forecast to 13.24 million barrels, its highest ever, EIA said. U.S. crude oil stocks fell by 2.428 million barrels in the week ended June 7, according to market sources citing American Petroleum Institute figures. Inventories were expected to have fallen by slightly over one million barrels last week, a preliminary Reuters poll showed. The World Bank said the U.S. economy's stronger-than-expected performance prompted it to lift its 2024 global growth outlook slightly, but warned overall output would remain well below pre-pandemic levels through 2026. Mostly strong U.S. economic data and inflation still higher than the Fed's target have pushed financial markets to limit expectations to only two 25-basis points rate reductions this year, likely starting in September. Economists have said there was a considerable risk of only one or no rate cuts in 2024. U.S. consumer prices data for May and the conclusion of the Fed's two-day policy meeting are both scheduled for Wednesday. The European Central Bank should persist in restraining economic growth given the ample inflationary pressures and wait with its next rate cut until uncertainty recedes, ECB chief economist Philip Lane said on Tuesday. Traders were also cautious a day ahead of the release of macroeconomic data from China. Saudi crude exports to China fell for a third straight month. Global crude oil and oil products shipments taking the long route between Asia, the Middle East and the West are up 47% since attacks began on vessels using the shorter Red Sea route, the EIA said. Meanwhile, Hamas accepted a U.N. resolution backing a plan to end the war with Israel in Gaza and was ready to negotiate details, a senior official of the Palestinian militant group said, in what the U.S. Secretary of State called a hopeful sign. Sign up here. https://www.reuters.com/business/energy/oil-prices-extend-rally-potential-us-crude-purchase-reserve-2024-06-11/

2024-06-11 06:11

June 11 (Reuters) - As football fever builds for major tournaments in Europe and the Americas, a small yet buzzy part of the cryptoverse is stealing centre stage: fan tokens. These are not your average digital assets, they're tokens issued by national sides or individual clubs that promise supporters a tradeable way to engage with their teams. Activity in tokens linked to participating national teams has increased ahead of the Euro 2024 European soccer championship, which kicks off on Friday, and the Copa América in North and South America that starts a week later. The market value of the Chiliz cryptocurrency - the native coin of the Socios blockchain which hosts most major fan tokens, and thus a broad proxy for the niche sector - has climbed to more than $1.07 billion from about $687 million at the start of the year and is nearing levels last seen around the 2022 World Cup, according to data from CoinGecko. Trading volumes of fan tokens have also picked up in recent months, registering more than $170 million on May 24, versus between $25 million and $57 million for most of January, according to data from Kaiko. The total market value of listed fan tokens stands around $413 million, CoinGecko data shows. This summer of sport could be a key test for the still-nascent sector of fan tokens, which typically offer perks like raffle entries, early ticket access, merchandise discounts, or chances to vote on minor decisions such as match songs Backers laud the tokens as a rare example of real-world crypto utility, while critics highlight the tensions between the stated purpose of team engagement and the speculative - and risky - nature of tradeable assets. A spokesperson for Chiliz said the company's marketing was clear that "fan tokens are fan-engagement tools and should be used as such." The price of Portugal's fan token has edged up about 2% in the past 30 days to $2.94, while Argentina's token briefly touched its highest level since 2022 at $2.46 - though both are still trading below their peaks hit around the 2022 World Cup. "There has been a major uptick in trading volumes but we expect it to be short-lived," said Jag Kooner, head of derivatives at Bitfinex, pointing to a drop-off in trading following the World Cup. Many top soccer teams and sports stars promoted crypto assets - such as non-fungible tokens (NFTs) or fan tokens - to supporters during a previous crypto boom in 2021, drawing the ire of critics who warned they might encourage financial speculation. British lawmakers warned last year that the rise of NFTs in sport was putting supporters at risk of financial harm and potentially damaging the reputations of clubs. Meanwhile, the football supporters' association of England and Wales has dismissed fan token partnerships as "trying to monetize trivial matters" or "inserting financial barriers into genuine supporter engagement". ENGAGEMENT VS SPECULATION Changes in token volume and price don't always correspond with team performance, noted Adam McCarthy, research analyst at Kaiko. "I don't see evidence that holders benefit from holding these tokens as a sort of bet on the respective teams success," he added. A study analyzing fan token trading New Tab, opens new tab around major sporting events found that it often aligns with a "buy the rumor, sell the news" pattern that is found in traditional finance. Volumes and returns typically increase ahead of major tournaments, then fall at the onset of important matches. On the other hand, another study New Tab, opens new tab found fans who buy tokens typically take advantage of the benefits offered via voting on club-related decisions. "When fans are given a chance to influence club decisions, they engage substantively," said Lennart Ante, who worked on both studies and is CEO of the Blockchain Research Lab. "The dual nature of fan tokens as both engagement tools and speculative assets creates a dichotomy," Ante added. "The future of fan tokens could hinge on how this distribution between engagement-focused users and speculators evolves." SLOW GROWTH EVEN AS TOKENS POP UP The growth of tokens linked to club sides, rather than national teams, remains slow. At the same time, the number of fan tokens has increased in recent years, given the ease of launching tokens on blockchains like Solana, Bitfinex's Kooner said. Chiliz said they had launched four new fan tokens in the past 12 months for clubs including Tottenham Hotspur and and Benfica. French football giant Paris Saint-Germain New Tab, opens new tab, which has a fan token, announced earlier this year it would become a network validator for the Chiliz Chain blockchain, meaning it would manage and secure part of the chain. English team Watford FC New Tab, opens new tab recently offered a 10% stake in the club to investors and fans via digital equity tokens. Beyond the equity stake, other perks include dinners with team members and private training ground tours, depending on the level of investment. (This story has been corrected to change to 'four new fan tokens', after a company clarification, in paragraph 20) Sign up here. https://www.reuters.com/technology/cryptoverse-soccer-tokens-shine-ahead-summer-sport-2024-06-11/

2024-06-11 05:59

NEW YORK, June 11 (Reuters) - The dollar hit a four-week high on Tuesday, ahead of a highly anticipated inflation report that is likely to influence the timing of the first rate cut by the U.S. Federal Reserve, while the euro was pressured by political uncertainty in the European Union. Stronger-than-expected jobs gains and higher wage inflation in Friday's U.S. jobs report for May raised concerns that inflation may remain sticky while growth stays strong, making the U.S. central bank less likely to cut rates in the coming months. Traders have pared back expectations of the first U.S. rate cut in September, which now has roughly 50-50 odds. The U.S. Labor Department is due to release its consumer price index (CPI) for May at 8:30 a.m. EDT (1830 GMT) on Wednesday, just hours before the Fed concludes its latest two-day policy meeting. "I do think the Fed members will take that (CPI data) into consideration," said Noel Dixon, senior macro strategist at State Street Global Markets. The U.S. central bank is expected to leave interest rates unchanged, but Fed policymakers will update economic projections widely known as the "dot plot." If inflation remains in line with expectations, Dixon expects the dots to show an expectation of two 25-basis-point rate cuts this year, down from the median projection of three cuts as of March. "You could get some short-term weakness in the dollar, especially given the big move we've had in euro/dollar," Dixon said. However, "once the dust settles, I think we'll get back to the relative monetary policy divergence story and ... that'll continue to be supportive for the dollar going into the rest of the year." Economists polled by Reuters expect headline consumer price inflation to ease to 0.1% from 0.3% last month, and core price pressures to remain steady at 0.3% from last month. (USCPI=ECI) New Tab, opens new tab, (USCPF=ECI) New Tab, opens new tab The dollar index was last up 0.1% at 105.24 but rose as high as 105.46, its strongest level since May 14. The euro fell 0.2% to $1.0742 and earlier reached $1.07195, its lowest level since May 2. The single currency has also fallen on concerns that gains by eurosceptics in European elections and the calling of a snap French election could complicate the EU's attempts to deepen integration. Marine Le Pen's National Rally was forecast on Monday to win the coming French election but fall short of an absolute majority. Meanwhile, the Bank of Japan will conclude its two-day meeting on Friday, which economists expect to result in the central bank starting to taper its monthly bond purchases. The dollar was little changed on the day against the Japanese currency at 157.03 yen . The yen's plunge to a 34-year low of 160.245 per dollar at the end of April sparked several rounds of official Japanese intervention to the tune of 9.79 trillion yen. In cryptocurrencies, bitcoin fell 3.53% to $67,200.27. Sign up here. https://www.reuters.com/markets/currencies/dollar-firm-ahead-key-inflation-test-fed-forecast-update-2024-06-11/