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UniCredit chief upbeat on Monte dei Paschi deal as takeover talks start

Chief executive Andrea Orcel said that Unicredit is well placed to secure a beneficial deal with the Italian government in talks to take over Monte dei Paschi di Siena, which it sees as the best M&A option at present. Orcel defended the merits of a possible MPS acquisition as UniCredit posted a higher than expected second-quarter net profit. This is a day after agreeing to enter exclusive negotiations over the bailed-out rival.

Italy’s No.2 bank said that it had signed an accord with the Treasury setting guidelines for a potential takeover of MPS. UniCredit, which had long rebuffed government pressure to buy MPS, said that it would only acquire selected parts of the lender in a deal that would leave its capital buffers unchanged while boosting earnings per share by a double-digit percentage. Chief Executive Andrea Orcel said that discussions will unfold over the next few weeks with a decision expected by mid-September. He reported that they strongly feel that, with the principles they have highlighted, given the timing and the ability to select what they buy, Monte dei Paschi is the best option, and the only option on the table at this point.

Orcel said that the deal would allow significant cost cuts and boost UniCredit’s market position in Italy. UniCredit would be shielded from legal risks weighing on MPS following years of mismanagement. Shares in UniCredit rose 2.5%. MPS surged 7%. MPS faces a capital shortfall of up to 2.5 billion euros and banking stress test results due later are set to turn the spotlight on to its frail finances. UniCredit improved its 2021 outlook for loan loss charges. Net profit for the April-June period came in at 1.03 billion euros versus a company-provided analysts’ average estimate of 736 million.

UniCredit said that it now expects its cost of risk. Shrinking loan losses also helped drive profits at Barclays and Santander. Revenue totalled 4.4 billion euros, above an average 4.3 billion forecasts, with fees rebounding by 21% from a year ago when Italy enforced a strict lockdown to fight the pandemic. Higher fees and trading income more than offset the yearly decline in interest income. UniCredit has pledged to boost its lending business, with Orcel, hired after predecessor Jean Pierre Mustier fell out with the board over strategy, saying a phase of active retrenchment for the bank was now over.

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LexisNexis risk solutions study reveals sharp rise of financial crime compliance costs

Decision makers inside banks, investment firms, asset managers and insurance firms identify the drivers impacting financial crime compliance. LexisNexis® Risk Solutions revealed that the results of its annual True Cost of Financial Crime Compliance Study for the U.S. and Canada. The total projected cost of financial crime compliance for the region is approximately $49.9 billion. The survey illustrates the sharp increase in financial crime compliance costs.

The study projects the average annual cost of financial crime compliance for U.S. financial institutions with $10 billion. Pandemic Continues to Spur Growth. The pandemic continues to negatively impact compliance operations. Sixty eight percent of U.S. respondents report longer times required to complete due diligence. Fifty five percent of U.S. respondents report reduced productivity compared.

More U.S. financial institutions now rank real estate and hospitality as top money laundering risk segments. Crime involving digital payments, trade-based money laundering and money mule schemes are on the rise. Digital currency is a growing problem for Canadian firms. Crimes involving digital payments have the greatest impact on compliance costs. Cryptocurrency crimes have the greatest impact on compliance costs for Canadian firms. The survey results demonstrate that financial institutions are battling a broader set of issues.

Survey respondents indicate that a lack of current and extensive data tops the list of Know Your Customer (KYC). Leslie Bailey, vice president of financial crime compliance strategy for LexisNexis Risk Solutions stated that the study shows clear linkages between the pandemic, digital crime and increasing regulations. Hence, financial institutions need to prepare for expanded compliance obligations and risks from emerging financial crime. Bailey added that digital transformation is a game-changer for financial crime compliance operations.

This will require a sophisticated approach that incorporates insight into digital behaviors. This study surveyed 145 decision-makers in the U.S. and Canada. Responses were collected in June 2019, August 2020 and June 2021. Organizations such as banks, investment firms, asset management firms and insurance firms. The total annual cost of compliance across firms was calculated using survey data. The spend amount was generated by multiplying the average percent allocated to financial crime costs.

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COP26 delegates agree on need to deliver on $100 BLN climate finance pledge

Delegates heading to the COP26 U.N. climate summit in Glasgow. These delegates agreed that they must deliver on the $100 billion per year pledge. COP26 president Alok Sharma said that, it is to help most vulnerable nations for tackling the climate change.

After many days of meetings at the pre-COP26 climate event, which happened in Italy, Sharma said that there was a consensus to do more. Which is to keep the 1.5 degrees Celsius target within reach, adding more needed to be done collectively in terms of national climate plans.

The COP26 conference in Glasgow aims to secure more ambitious climate action. This is from nearly 200 countries, those all that have signed the 2015 Paris Agreement for limiting the global warming, well below 2.0 degrees Celsius. And to 1.5 degrees, above pre-industrial levels.

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City’s exposure to Evergrande is very minimal-Hong Kong finance Chief

Hong Kong’s exposure to debt-laden developer China Evergrande Group is very minimal at 0.05%. This is of banking assets, South China Morning Post reported, citing the city’s finance minister. Financial Secretary Paul Chan told the newspaper that it is very minimal and won’t cause them any systemic risks. He added that he had arrived at the conclusion after a recent audit of the local banking sector’s exposure to the company.

Chan also said that the Hong Kong’s stock market was inevitably subject to some volatility. This is amidst a recent mainland crackdown on some industries. But still he believed any setback would be temporary. With liabilities of $305 billion, Evergrande has sparked concerns its cash crunch could spread through China’s financial system. This may reverberate globally and that is a worry that has eased with the Chinese central bank’s vow, to protect homebuyers’ interests. Evergrande has missed two bond interest payments. Bondholders have said this and its offshore debt, amounting to about $20 billion, trades at distressed levels.

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