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UBS seeks $6-billion in government guarantees for Credit Suisse takeover

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Logos of the Swiss banks Credit Suisse and UBS are seen on two buildings in Zurich, Switzerland, March 18, 2023.Michael Buholzer/The Associated Press

UBS AG is asking the Swiss government to cover about US$6-billion in costs if it were to buy Credit Suisse, a person with knowledge of the talks said, as the two sides raced to hammer together a deal to restore confidence in the ailing Swiss bank.

The 167-year-old Credit Suisse is the biggest name ensnared in the turmoil unleashed by the collapse of U.S. lenders Silicon Valley Bank and Signature Bank over the past week, spurring a rout in banking stocks and prompting authorities to rush out extraordinary measures to keep banks afloat.

The $6-billion in government guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, two people told Reuters.

One of the sources cautioned that the talks to resolve the crisis of confidence in Credit Suisse are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine.

Swiss regulators are racing to present a solution for Credit Suisse before markets reopen on Monday, but the complexities of combining two behemoths raises the prospect that talks will last well into Sunday, said the person, who asked to remain anonymous because of the sensitivity of the situation.

Credit Suisse, UBS and the Swiss government declined to comment.

The frenzied weekend negotiations come after a brutal week for banking stocks and efforts in Europe and the U.S. to shore up the sector. U.S. President Joe Biden’s administration moved to backstop consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilize its shaky balance sheet.

UBS was under pressure from the Swiss authorities to carry out a takeover of its local rival to get the crisis under control, two people with knowledge of the matter said. The plan could see Credit Suisse’s Swiss business spun off.

Switzerland is preparing to use emergency measures to fast-track the deal, the Financial Times reported, citing two people familiar with the situation.

U.S. authorities are involved, working with their Swiss counterparts to help broker a deal, Bloomberg News reported, also citing those familiar with the matter.

British finance minister Jeremy Hunt and Bank of England Governor Andrew Bailey are also in regular contact this weekend over the fate of Credit Suisse, a source familiar with the matter said. Spokespeople for the British Treasury and the Bank of England’s Prudential Regulation Authority, which oversees lenders, declined to comment.

Forceful response

Credit Suisse shares lost a quarter of their value in the last week. It was forced to tap $54-billion in central bank funding as it tries to recover from a string of scandals that have undermined the confidence of investors and clients.

The company ranks among the world’s largest wealth managers and is considered one of 30 global systemically important banks whose failure would ripple throughout the entire financial system.

The banking sector’s fundamentals are stronger and the global systemic linkages are weaker than during the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a late Friday note to clients. That limits the risk of a “potential vicious circle of counterparty credit losses,” Karoui said.

“However, a more forceful policy response is likely needed to bring some stability,” Karoui said. The bank said the lack of clarity on Credit Suisse’s future will pressure the broader European banking sector.

A senior official at China’s central bank said on Saturday that high interest rates in the major developed economies could continue to cause problems for the financial system.

There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at the possibility of buying some of its assets, while U.S. financial giant BlackRock denied a report that its vice-chairman, Philipp Hildebrand, was participating in a rival bid for the bank. Asked about the report, BlackRock spokesman Ryan O’Keeffe said in a telephone interview that “Philipp has no formal involvement in these discussions at all.”

Berkshire Hathaway Inc’s Warren Buffett has been in touch with senior officials in President Joe Biden’s administration in recent days about the regional banking crisis, Bloomberg News reported, citing people familiar with the matter.

There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at the possibility of buying some of its assets, while U.S. financial giant BlackRock denied a report that it was participating in a rival bid for the bank.

Interest rate risk

The failure of California-based Silicon Valley Bank brought into focus how a relentless campaign of interest rate hikes by the U.S. Federal Reserve and other central banks – including the European Central Bank this week – was pressuring the banking sector. SVB and Signature’s collapses are the second- and third-largest bank failures in U.S. history behind the demise of Washington Mutual during the global financial crisis in 2008.

Banking stocks globally have been battered since SVB collapsed, with the S&P Banks index falling 22%, its largest two weeks of losses since the pandemic shook markets in March 2020.

Big U.S. banks threw a $30-billion lifeline to smaller lender First Republic, and U.S. banks altogether have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

A coalition of midsize U.S. banks, Mid-Size Bank Coalition of America (MBCA), asked regulators to extend FDIC insurance to all deposits for the next two years, Bloomberg News reported on Saturday, citing an MBCA letter to regulators.

In Washington, focus has turned to greater oversight to ensure that banks and their executives are held accountable.

Biden called on Congress to give regulators greater power over the sector, including imposing higher fines, clawing back funds and barring officials from failed banks.

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Two people dead in listeria outbreak linked to recalled plant-based milk – The Globe and Mail

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Two people dead in listeria outbreak linked to recalled plant-based milk  The Globe and MailView Full Coverage on Google News

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Half of Ontarians support union’s goals in ongoing LCBO strike: poll

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Fewer than one-third of Ontarians say they want the provincial government to intervene to end the 12-day strike at Ontario’s main liquor retailer, while about half are supportive of the striking union’s demands.

That’s according to a new Leger poll that asked if the government should use binding arbitration or legislation to ensure LCBO stores open as soon as possible.

Twenty-nine per cent of respondents supported such a move, while 44 per cent opposed it. The poll also asked if respondents support the union’s stated goals, including wage increases and more permanent positions. Just under half, 49 per cent, answered in the affirmative, while 25 per cent said they were not supportive.

Awareness of the strike in Ontario is high, according to the poll, with 89 per cent saying they knew about it, though only 15 per cent reported being personally affected. The Leger poll of 601 residents, conducted last weekend, can’t be assigned a margin of error because online surveys are not considered truly random samples.

Approximately 10,000 workers at the LCBO walked off the job on July 5 after negotiations broke down.

The union representing the workers said the sides were headed back to the bargaining table Wednesday.

The Ontario Public Service Employees Union has said the main issue is the province’s alcohol expansion plans that would see ready-to-drink cocktails sold outside LCBO stores — a move it maintains poses an existential threat to the LCBO and could lead to major job losses.

Colleen MacLeod, chair of the union’s LCBO bargaining unit, has said the plan would “mean thousands of lost jobs, fewer hours for the 70 per cent of LCBO retail workers who are casual and struggling to make ends meet, and hundreds of millions in dollars of lost public revenues drained from health care, education and infrastructure.”

The LCBO, a Crown corporation, nets the province $2.5 billion a year.

On Monday, the Ontario government sped up its expansion plan. The 450 stores across Ontario already licensed to sell beer, wine and ciders will be able to start ordering coolers and seltzers on Thursday and sell them as soon as they arrive.

The province has said it does not want to privatize the LCBO, and that the expansion is about giving people more choice and more convenience to buy alcohol.

Stephanie Ross, an associate professor in the school of labour studies at McMaster University, said Premier Doug Ford doesn’t have a great reputation when it comes to labour, given the high-profile disputes in recent years with health-care and education workers. And he’s faced accusations of making policy moves that benefit friends in the private sector, a criticism that’s been levied against him in the LCBO dispute.

“There is a base of support for the union’s message here, both in terms of the working conditions that they’re trying to fight to improve, and in terms of the role that the LCBO plays in funding public services in the province,” she said.

But the public may not be as sympathetic to LCBO workers as it has been to some others, like in the Metro grocery workers’ strike last year, she said — a relatively straightforward fight by low-paid workers struggling to afford food against the industry being partially blamed for food prices.

“And so in the depths of a kind of historic cost-of-living crisis, I think it was easier to feel sympathy for such workers in terms of really having to fight to make up lost ground.”

That means the LCBO union has its work cut out to try and convince the public of its cause, said Ross, especially when consumers are already divided on the liquor privatization issue in the first place. She thinks the union is doing a good job, however, of arguing the case for the LCBO as a public asset that helps fund important public services.

Larry Savage, a professor in the labour studies department at Brock University, said it’s clear both the union and the Ford government “are working hard to win over the public to their respective positions.”

The union has a “potentially powerful strategy” to gain public support, but it’s not a surefire one, he said in an email.

This strategy “requires people to connect the dots between the privatization of the LCBO and the loss of a critical revenue stream that contributes billions to public services like health care and education.”

Meanwhile, the government’s strategy has been to try and leverage consumer frustration over the strike in order to drive more support for increased privatization, said Savage.

“It’s a high-risk strategy because a heavy-handed approach can sometimes backfire and garner greater sympathy for the workers and their cause.”

In the Leger poll, 32 per cent of respondents said they looked for alternative locations to buy alcohol due to the strike, and while 15 per cent said they were concerned the strike could cause them to spend more money on alcohol.

Savage said while many consumers are likely inconvenienced, he also thinks most Ontarians are suspicious of the premier’s intentions when it comes to the LCBO: “It’s a classic case of private profits over the public good.”

This report by The Canadian Press was first published July 17, 2024.

 

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Half of Ontarians support union’s goals in ongoing LCBO strike: poll

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Fewer than one-third of Ontarians say they want the provincial government to intervene to end the 12-day strike at Ontario’s main liquor retailer, while about half are supportive of the striking union’s demands.

That’s according to a new Leger poll that asked if the government should use binding arbitration or legislation to ensure LCBO stores open as soon as possible.

Twenty-nine per cent of respondents supported such a move, while 44 per cent opposed it. The poll also asked if respondents support the union’s stated goals, including wage increases and more permanent positions. Just under half, 49 per cent, answered in the affirmative, while 25 per cent said they were not supportive.

Awareness of the strike in Ontario is high, according to the poll, with 89 per cent saying they knew about it, though only 15 per cent reported being personally affected. The Leger poll of 601 residents, conducted last weekend, can’t be assigned a margin of error because online surveys are not considered truly random samples.

Approximately 10,000 workers at the LCBO walked off the job on July 5 after negotiations broke down.

The union representing the workers said the sides were headed back to the bargaining table Wednesday.

The Ontario Public Service Employees Union has said the main issue is the province’s alcohol expansion plans that would see ready-to-drink cocktails sold outside LCBO stores — a move it maintains poses an existential threat to the LCBO and could lead to major job losses.

Colleen MacLeod, chair of the union’s LCBO bargaining unit, has said the plan would “mean thousands of lost jobs, fewer hours for the 70 per cent of LCBO retail workers who are casual and struggling to make ends meet, and hundreds of millions in dollars of lost public revenues drained from health care, education and infrastructure.”

The LCBO, a Crown corporation, nets the province $2.5 billion a year.

On Monday, the Ontario government sped up its expansion plan. The 450 stores across Ontario already licensed to sell beer, wine and ciders will be able to start ordering coolers and seltzers on Thursday and sell them as soon as they arrive.

The province has said it does not want to privatize the LCBO, and that the expansion is about giving people more choice and more convenience to buy alcohol.

Stephanie Ross, an associate professor in the school of labour studies at McMaster University, said Premier Doug Ford doesn’t have a great reputation when it comes to labour, given the high-profile disputes in recent years with health-care and education workers. And he’s faced accusations of making policy moves that benefit friends in the private sector, a criticism that’s been levied against him in the LCBO dispute.

“There is a base of support for the union’s message here, both in terms of the working conditions that they’re trying to fight to improve, and in terms of the role that the LCBO plays in funding public services in the province,” she said.

But the public may not be as sympathetic to LCBO workers as it has been to some others, like in the Metro grocery workers’ strike last year, she said — a relatively straightforward fight by low-paid workers struggling to afford food against the industry being partially blamed for food prices.

“And so in the depths of a kind of historic cost-of-living crisis, I think it was easier to feel sympathy for such workers in terms of really having to fight to make up lost ground.”

That means the LCBO union has its work cut out to try and convince the public of its cause, said Ross, especially when consumers are already divided on the liquor privatization issue in the first place. She thinks the union is doing a good job, however, of arguing the case for the LCBO as a public asset that helps fund important public services.

Larry Savage, a professor in the labour studies department at Brock University, said it’s clear both the union and the Ford government “are working hard to win over the public to their respective positions.”

The union has a “potentially powerful strategy” to gain public support, but it’s not a surefire one, he said in an email.

This strategy “requires people to connect the dots between the privatization of the LCBO and the loss of a critical revenue stream that contributes billions to public services like health care and education.”

Meanwhile, the government’s strategy has been to try and leverage consumer frustration over the strike in order to drive more support for increased privatization, said Savage.

“It’s a high-risk strategy because a heavy-handed approach can sometimes backfire and garner greater sympathy for the workers and their cause.”

In the Leger poll, 32 per cent of respondents said they looked for alternative locations to buy alcohol due to the strike, and while 15 per cent said they were concerned the strike could cause them to spend more money on alcohol.

Savage said while many consumers are likely inconvenienced, he also thinks most Ontarians are suspicious of the premier’s intentions when it comes to the LCBO: “It’s a classic case of private profits over the public good.”

This report by The Canadian Press was first published July 17, 2024.

 

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