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Investors punish UBS after Credit Suisse rescue, shares plummet

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The Credit Suisse logo is pictured in front of the Swiss Parliament Building, in Bern, Switzerland, on March 19, 2023.DENIS BALIBOUSE/Reuters

Banking stocks and bonds plummeted on Monday after UBS Group sealed a state-backed takeover of troubled peer Credit Suisse Group AG, a deal that was orchestrated in an attempt to restore confidence in a battered sector.

In a package engineered by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse Group AG and assume up to $5.4 billion in losses.

Credit Suisse’s recent history is filled with controversy

Credit Suisse shares slumped 62% in premarket trade to a new low while UBS lost 7.1%. Those sharp moves followed a day of heavy selling in Asian financial markets as early investor optimism about official efforts to stem a banking crisis quickly evaporated.

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In particular, investor focus has shifted to the massive hit some Credit Suisse bondholders would take under the UBS acquisition, which has added to anxiety about other key risks including contagion, the fragile state of U.S. regional banks and the challenges for central banks as they seek to contain inflation and financial risks.

“It should be clear that after more than a week into the banking panic, and two interventions organised by the authorities, this problem is not going away. Quite the contrary, it has gone global,” said Mike O’Rourke, chief market strategist, Jones Trading.

“The reports that UBS is acquiring Credit Suisse will likely magnify Credit Suisse’s problems by moving them to UBS.”

Under the deal, the Swiss regulator decided that Credit Suisse additional tier-1 bonds – or AT1 bonds – with a notional value of $17 billion will be valued at zero, angering some of the holders of the debt who thought they would be better protected than shareholders in the takeover deal announced on Sunday.

Credit Suisse’s Additional Tier 1 bonds dropped sharply in early European trade with a number of dollar-denominated issues being bid at 2 cents on the dollar, Tradeweb data showed.

The Swiss banks’ share tumble comes on top of what was already a rough day for banks, as investors shrugged off earlier promises by top central banks over the weekend to provide dollar liquidity to stabilise the financial system.

Standard Chartered Plc and HSBC shares each fell more than 6% in Hong Kong on Monday to more than two-month lows, with HSBC facing the possibility of posting its largest one-day drop in six months. The MSCI index for financial stocks in Asia ex-Japan was down 1.3%.

CO-ORDINATED ACTION

The shotgun Swiss banking marriage is backed by a massive government guarantee, helping prevent what would have been one of the largest banking collapses since the fall of Lehman Brothers in 2008.

Pressure on UBS helped seal Sunday’s deal.

“It’s a historic day in Switzerland, and a day frankly, we hoped, would not come,” UBS Chairman Colm Kelleher told analysts on a conference call. “I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders,” Kelleher said.

UBS CEO Ralph Hamers said there were still many details to be worked through.

“I know that there must be still questions that we have not been able to answer,” he said. “And I understand that and I even want to apologize for it.”

In a global response not seen since the height of the pandemic, the Fed said it had joined central banks in Canada, England, Japan, the EU and Switzerland in a co-ordinated action to enhance market liquidity. The European Central Bank vowed to support euro zone banks with loans if needed, adding the Swiss rescue of Credit Suisse was “instrumental” in restoring calm.

On Monday, Credit Suisse’s banking operations appeared to be business as usual at its major offices in Asia.

Monetary authorities in Singapore and Hong Kong, where Credit Suisse hosts large regional offices, separately said the Swiss bank’s business continued without interruption.

And Credit Suisse urged its staff to go to work, according to a memo to staff seen by Reuters.

In a separate memo, the bank said as part of the takeover if job cuts proved necessary it would be communicated to staff as per guidelines. The bank will also pay bonuses as communicated before and as per schedule, the memo added.

Credit Suisse staff arriving to work in Hong Kong and Singapore on Monday morning, however, fretted about retrenchments and retaining business.

UNRESOLVED ISSUES

Problems remain in the U.S. banking sector, where bank stocks remained under pressure despite a move by several large banks to deposit $30 billion into First Republic Bank, an institution rocked by the failures of Silicon Valley and Signature Bank.

On Sunday, First Republic saw its credit ratings downgraded deeper into junk status by S&P Global, which said the deposit infusion may not solve its liquidity problems.

There are also concerns about what happens next at Credit Suisse and what that means for investors, clients and employees.

In the memo to employees, Credit Suisse said that once the takeover is complete wealth management clients may want to consider moving some assets to another bank if concentration was a concern.

The deal will also make UBS Switzerland’s only global bank and the Swiss economy more dependent on a single lender.

“The Credit Suisse debacle will have serious ramifications for other Swiss financial institutions. A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away,” said Octavio Marenzi, CEO of Opimas, in Vienna.

UBS chairman Kelleher told a media conference that it will wind down Credit Suisse’s investment bank, which has thousands of employees worldwide. UBS said it expected annual cost savings of some $7 billion by 2027.

The Swiss central bank said Sunday’s deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse.

Credit Suisse shares lost a quarter of their value last week. The bank was forced to tap $54 billion in central bank funding as it tried to recover from scandals that undermined confidence.

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BC short-term rental rules take effect May 1 – CityNews Vancouver

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Premier David Eby says that as B.C. inches closer to new short-term rental rules taking effect, 17 communities have decided to opt into the restrictions.

The update comes as the regulations surrounding how many and what kinds of short-term rentals are allowed in B.C. come into effect on May 1.

The BC NDP tabled the legislation in October of last year which, once in effect, aims to return short-term rentals to the long-term rental market.

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As of May 1, the province is requiring short-term rental platforms, like Airbnb and VRBO, to share data and to remove listings without business licenses and registration numbers “quickly.”

It is also limiting short-term rentals to a property owner’s principal residence — plus one additional unit or suite on that property — for municipalities with more than 10,000 people. Municipalities with fewer than 10,000 people, or those designated as resort municipalities, will be able to opt into the legislation.

Those communities that have opted in, like the resort municipality of Tofino, will see the new laws come into effect on Nov. 1. Some other communities that have agreed to the new rules are Kent, Gabriola Island, Bowen Island, Osoyoos, and Pemberton.

The province says through regulations, the fines for hosts breaking municipal by-law rules will increase to $3,000 from $1,000, per infraction, per day.

“Short-term rentals themselves are not the problem,” Eby said in the update Thursday. “What has been the problem is inadequate oversight over this sector. And a group of people who have … said I’d like to actually buy up a whole bunch of homes that would otherwise be rented by people, or what other otherwise be purchased by families looking for a place to live, and I’d like to operate a private hotel chain through Airbnb or VRBO.”

“To give you a sense of the scale of the problem we face in British Columbia with this kind of activity [from] this small group of individuals, we have 19,000 entire homes in our province that are available year-round on short-term rental platforms,” he continued.

“And I can tell you that there are 19,000 families and individuals that are looking for a place to live, to buy, to rent right now, that are in competition with people that are looking to operate homes as hotels.”

Data from McGill University released in 2023 showed that the top 10 per cent of hosts in B.C. earn nearly half of all revenue created.

Eby added that, starting Thursday, a portal will be available for people to report operators for going against the new rules, and also giving hosts a platform to check their requirements of operation.

“These rules balance the need for long-term homes, including people and tourism and hospitality industry where the need to accommodate guests. As the premier mentioned, people are seeing long-term homes open up for rent, and more short-term rentals are being listed for sale or becoming long-term homes for families and individuals,” Housing Minister Ravi Kahlon said.

The province reiterated Thursday that short-term rentals are still “welcomed” in B.C., as long as they operate within provincial and local rules.

“We encourage people to continue to explore beautiful British Columbia and stay in legal short-term rental accommodations. We want guests, hosts, local governments, and platforms to know what to expect May 1,” Kahlon added.

Short-term rentals create big economic impacts: Airbnb

In a statement Thursday, Airbnb claimed a newly released economic analysis shows it generated more than $2.5 billion “in economic impact across BC in 2023,” and supported more than 25,000 jobs in the province.

“The analysis shows that for every $100 spent on an Airbnb stay, guests spent an additional $229 on other goods and services such as local businesses, restaurants, attractions, shops, and more,” the short-term rental agency said.

Airbnb believes the new “strict” short-term rental laws are “putting at risk billions in tourism spending and economic benefits.”

“BC’s new short-term rental law is going to significantly impact the province’s tourism sector, just as peak tourism season arrives – taking extra income away from residents, limiting accommodation options for guests, and potentially putting at risk billions in tourism spending and economic impact,” said Nathan Rotman, Airbnb Canada policy lead in the statement.

“At a time when BC is facing record deficits and economic growth is slowing, these new rules hurt resident hosts, tourists, communities and the economy as a whole.”

Airbnb is also contributing to tax revenue in the province, the agency claimed, explaining, “British Columbian Hosts on the platform generated approximately $93 million in taxes in 2023, bringing much-needed tax revenue for a province that’s projected to face a record high $7.9 billion deficit.”

You can watch CityNews 24/7 live or listen live to CityNews 1130 to keep up to date with this story. You can also subscribe to breaking news alerts sent directly to your inbox.

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'It's disgusting:' Doug Ford lashes out at oil companies over double-digit gas price hike – CityNews Toronto

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Premier Doug Ford lashed out at the gas companies for the double-digit overnight increase in the price of gas across the GTA, calling it unacceptable and disgusting.

Speaking at an unrelated announcement in Oakville, Ont., on Thursday, Ford took a moment to vent on behalf of “16 million people” across the province.

“You go out last night and you’re sitting there for 20 minutes in the lineup to get gas. It’s unacceptable,” said Ford. “Everywhere I was going it was a $1.59. You wake up this morning and it’s $1.80. It’s absolutely disgusting.”

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Prices at the pumps surged 14 cents overnight to 178.9 cents/litre at most GTA stations. Analysts attribute the increase to the annual changeover from winter gas to summer gas.

“That is why prices are going up so significantly all at once is essentially we’re seeing discounts on winter gasoline to get rid of it but now that we’ve made the jump, summer gasoline inventories are much lower and thus a much higher price,” Patrick De Haan, the head of petroleum analysis at Gas Buddy tells CityNews.

That explanation, Ford said, was simply a way for the gas companies to gouge people.

“It’s absolutely disgusting what the oil companies are doing,” said an agitated Ford as he questioned whether the gas companies are waiting for the tanks to drain at gas stations before filling them up with the new summer formulation. “Or are you using the old gas and charging the higher cost.”

“I have my opinion that it’s not physically possible to drain every single gas station to put the fresh stuff in. So either you’re putting the fresh stuff in last month or you’re gouging the people right now.”

Ford went on to say that after consulting with some friends in the United States, he found that gas prices were trending around $3.80 per gallon. “Folks, let’s do the math – it’s a $1.80 (a litre) that’s $7.20 (a US gallon).”

Mike Eppel, 680 News Radio Toronto Senior Business Editor, says it also comes down to a refining capacity issue in this country.

“So there’s lots of oil, that’s not the issue – oil supplies are high. It’s the refining capacity. We haven’t had a refinery built in eastern Canada since whenever – you can’t get a pipeline built. And anytime there is any disruption in the system, up goes the price for gas.”

Ford did not limit his anger on rising gas prices to just the oil companies, closing his rant by taking a shot at the federal government’s carbon tax, which took effect on April 1 and pushed gas prices up three cents a litre.

“This goes back to the federal government sticking their hands in the people’s pockets, they don’t care that we have some of the highest prices in North America on the carbon tax, they jack it up 17.5 per cent,” explained Ford. “And then of course the oil companies thought they’d hop on board, no one’s going to notice, because if I remember … just a few months ago I remember filling up for $1.30 to $1.34. Did the barrel of oil go up 30 per cent? The answer is no. So where is the 30 per cent.”

While the price of gas is expected to fall by four cents/litre on Friday, prices will continue to fluctuate with no real relief in sight until June or July.

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Google fires 28 employees who protested $1.2B contract with Israeli – National Post

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Google has fired 28 employees after a number of staffers protested the company’s cloud contract with the Israeli government.

The workers were terminated after staging protests inside Google’s offices in New York and Sunnyvale, California, per CNN.

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In a statement, Google’s parent company Alphabet said that “physically impeding other employees’ work and preventing them from accessing our facilities is a clear violation of our policies, and completely unacceptable behavior.”

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The protests were organized by the No Tech For Apartheid campaign and protesters held signs that read “No More Genocide For Profit” and “We Stand with Palestinian, Arab and Muslim Googlers.”

The company said it would continue to investigate and take action as needed, reports The Guardian.

The protesters say that Project Nimbus, a $1.2 billion contract granted to Google and Amazon.com in 2021, provides cloud services to the Israeli government and aids in the creation of military applications.

A form letter on the campaign’s website demands that Amazon CEO Andy Jassy, Amazon Web Services CEO Adam Selipsky, Google CEO Sundar Pichai and Google Cloud CEO Thomas Kurian “end all ties with Israeli apartheid and cut the Project Nimbus contract.”

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Google says the Nimbus contract “is not directed at highly sensitive, classified, or military workloads relevant to weapons or intelligence services.” It added that Google Cloud “supports numerous governments around the world, including the Israeli government.”

“We have been very clear that the Nimbus contract is for workloads running on our commercial cloud by Israeli government ministries, who agree to comply with our Terms of Service and Acceptable Use Policy.”

The No Tech for Apartheid campaign called the firings a “flagrant act of retaliation” and a “clear indication that Google values its $1.2 billion contract with the genocidal Israeli government and military more than its own workers.”

The campaign added that some of the individuals fired did not directly participate in the protests.

Despite what its critics allege, Israel has attempted to warn and shield civilians as the IDF hunts the Hamas terrorists who hid themselves among Gaza’s civilian population and infrastructure after the group’s October 7 attack. As well, critics who call Israel an apartheid state ignore the freedoms enjoyed by the democratic country’s Arab citizens, who play major roles in business, the judiciary and even the Knesset.

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