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HSBC installs Communist committee
EN GARDE, LAGARDE!
JACK BARNETT AND STEFAN BOSCIA
ECB CHIEF FINALLY READIES FOR BATTLE AGAINST RUNAWAY EUROZONE INFLATION
JACK BARNETT THE EUROPEAN Central Bank (ECB) yesterday launched its first interest rate rise in over a decade with a shock 50 basis point move. The biggest inflation surge in the eurozone since the creation of the single currency in 1999 forced President Christine Lagarde and co to launch a bigger hike than she had previously indicated. The Continent’s monetary authority has lagged behind the Bank of England and the
US Federal Reserve in curbing stimulative policy in response to price rises. UK interest rates have risen from 0.1 per cent to a 13-year high of 1.25 per cent since December, while the Fed has raised its main rate 150 basis points since March. Despite the unexpected jump, eurozone rates are now just zero per cent. They are however out of negative territory for the first time since 2014. Lagarde had committed to a 25 basis point rise. The euro, which kissed parity with the US dollar last week, jumped
around 0.9 per cent on the news, but quickly fell during Lagarde’s press conference. The ECB signalled more tightening is on the way. “Further normalisation of interest rates will be appropriate” in future meetings, it said. Living costs are already up 8.6 per cent, more than four times the ECB’s two per cent target, among the 19 countries that use the euro. They are expected to surge even higher and possibly tip the bloc into recession.
Yesterday’s “rate hike will not bring down inflation in the short run,” Carsten Brzeski, global head of macro ING, said, adding another 50 basis point rise will land before the winter. Russia’s invasion of Ukraine has propelled inflation higher by lifting energy costs, which is “having a dampening effect on the economy,” Lagarde said. The ECB also announced the muchanticipated name of a targeted bond buying tool designed to narrow government debt spreads.
BRITAIN’s biggest lender and Asia-focused HSBC has set up a small Chinese Communist Party (CCP) cadre in its Chinese investment bank. HSBC has become the first foreign lender to install a CCP committee, according to reports yesterday in the Financial Times. Chinese law enforces domestic finance firms to have party officials in sufficient positions of authority. The committees typically act as a workers’ union. Until now, Beijing has not wholly enforced the requirement on foreign banks operating in the country. It is the latest controversy for the bank, which has already come under fire for backing a controversial national security law in the territory which effectively banned protest movements and severely limited free speech. Former US secretary of state Mike Pompeo accused the bank of a “corporate kowtow” to Beijing. HSBC told City A.M. last night: “Employees of private firms in China are able to form a Party branch. “These branches are common and can be set up by as few as three employees... management has no role in establishing such groups.”
Star performance for Boden’s Starling as challenger records first annual profit CHARLIE CONCHIE STARLING Bank bucked the global fintech gloom yesterday as it posted first full year profits of £32.1m. The London-based digital lender, which offers both personal and business banking, said it had swung into the black in the year
to March after a jump in revenues to £188m. The profits come after an acquisitive push into the mortgage market in the past year including the £50m purchase of Fleet Mortgages, which helped swell its book to more than £2bn
by the end of March. Boss, founder and City A.M. personality of the year Anne Boden told reporters yesterday the profits placed the firm "in a Starling boss and fintech champion Anne Boden
category of one” as loss-making fintech firms globally are hit by plunging valuations and an exodus of investors. “If you look at the listed markets and certain entities such as buy-now pay-later, we see a huge correction going on there,” she said on a call. “And that tends to be in those
organisations that have huge growth and huge numbers of customer numbers, but they’re not profitable yet,” she said. However, Boden told reporters that uncertainty was likely to scupper any chance of Starling’s much-anticipated IPO in the next year, with 2024 now most likely.
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