Banks have been ordered to use the country’s financial messaging systems for domestic transactions

The Bank of Russia has forbidden Russian financial institutions to use the SWIFT messaging system for transactions inside the country, the regulator announced on Monday.

Starting from October, Russian banks will be obliged to only use domestic services for transferring messages on financial transactions. The use of SWIFT will be allowed only for international payments.

“This will ensure reliability, continuity and security of data exchange when conducting intra-Russian transactions,” the regulator said in a statement.

Information on such transactions will now need to be transmitted through the Bank of Russia’s own banking systems, services of third-party Russian companies, or through the Bank of Russia’s own financial messaging system, SPFS.

The SPFS was created by the regulator in 2018 as a substitute for SWIFT on the domestic market. While its coverage is still much smaller than that of SWIFT – which boasts 11,000 financial organizations globally – the spread of SPFS has been gaining momentum in recent months. In February, the Russian Central Bank announced that SPFS now has 469 participants, including 115 foreign entities from 14 nations.

READ MORE: Top Asian economy urges citizens to abandon Western payment systems

Russia was forced to start seeking alternatives to SWIFT in dealing with foreign partners last year, after some of the country’s largest banks were disconnected from the system as part of Western sanctions.

At present, ten Russian banks are disconnected from SWIFT, including Sberbank, VTB, Otkrytie, Rosselkhozbank, Novikombank, Promsvyazbank, Rossiya, Sovcombank, VEB.RF, and MKB. Banks which have not been disconnected but are under blocking sanctions from Western countries may also face difficulties using the system.

For more stories on economy & finance visit RT's business section

A government rescue plan has failed to calm investors’ nerves

The shares of Switzerland’s two largest investment banks, UBS and Credit Suisse, tumbled on Monday as their weekend merger failed to calm growing fears over the state of the global banking system.

UBS shares were down 5% around 11:20 GMT, having regained some of their losses after plunging 10% in early trading. Credit Suisse shares collapsed by 60%.

The pan-European Stoxx 600 banking index was down nearly 1.8% around the same time, with the shares of German banking giants Deutsche Bank and Commerzbank dropping over 3%. France’s BNP Paribas saw shares fall 3.7%, while major banks such as ING, Societe Generale and Barclays all lost over 2.7%.

UBS agreed to acquire its failing rival for 3 billion Swiss francs ($3.24 billion) in stock on Sunday, in a deal brokered by the Swiss authorities. Following the news, analysts warned that the rescue acquisition threatened to distract UBS management and damage returns, despite a 9 billion-franc government guarantee for potential losses from Credit Suisse assets and 100 billion francs in liquidity from Switzerland’s central bank.

“UBS has traditionally operated a high returning, high quality, stable franchise. The acquisition of Credit Suisse throws much of this into question, in our view,” analysts at Keefe, Bruyette & Woods told the Financial Times.

While the merger may well turn UBS into the world’s largest wealth manager, with more than $5 trillion in total invested assets, there are still concerns about the health of the Credit Suisse assets it has acquired.

Read more

“One issue is that the reported price of $3.24 billion equates to approximately 4% of book value, and about 10% of Credit Suisse’s market value at the start of the year. This suggests that a substantial part of Credit Suisse’s $570 billion assets may be either impaired or perceived as being at risk of becoming impaired. This could set in train renewed jitters about the health of banks,” Neil Shearing, group chief economist at Capital Economics, told CNBC.

Investors are also concerned about the write-off of $17 billion worth of Credit Suisse’s AT1 bonds, which was part of the merger deal. The move angered many debt-holders, who have been left empty-handed, and revealed yet another banking sector risk.

Experts say investors are concerned about the long-term benefits of the merger and the outlook for other banks in Switzerland, which has previously been viewed as a role model of sound banking.

For more stories on economy & finance visit RT's business section

Beijing has been a crucial economic partner for Moscow in the face of intensifying Western sanctions pressure

Chinese President Xi Jinping arrived in Moscow on Monday for a three-day official visit to discuss strategic cooperation and other issues with his Russian counterpart Vladimir Putin. RT looks at the state of economic relations between the two nations in the face of growing outside pressure, and what it means for Russia.

1. Record trade
   Official statistics show that Russia was the leader among China’s 20 largest partners in terms of trade growth in 2022. China’s trade with Russia hit a record high last year, growing by nearly a third despite Western sanctions against Moscow. It has continued to rise this year, with both exports and imports jumping by double digits in the first two months of 2023 in annual terms, customs data shows. According to Russian President Vladimir Putin, the $200 billion turnover goal set by Moscow and Beijing for 2024 could be achieved earlier than expected. The two countries are on pace to reach that milestone this year.
2. Energy cooperation
   Bilateral cooperation in the oil and gas sectors has been growing dramatically. Russia has become one of the leading oil suppliers to China and the largest supplier of natural gas. In February, Moscow and Beijing sealed an agreement for additional natural gas supplies to China via the Far Eastern Route. While China’s economy gets an adrenaline boost from cheaper Russian energy, Moscow makes up for the lost revenue on the European market, which is critical for withstanding Western sanctions.
3. ‘Yuanization’ of Russian settlements
   The Chinese currency, the yuan, has become a major player in Russia’s foreign trade, according to data from the country’s central bank. The share of renminbi in Russia’s import settlements jumped to 23% by the end of last year from only 4% in January 2022. The yuan’s share in export settlements also surged from 0.5% to 16%. At the same time, the two countries have been slashing the share of the US dollar and euro in their bilateral trade.
4. China filling Western void
   Chinese companies have been actively filling the gaps in the Russian market left after the departure of Western companies, hundreds of which were forced to leave the country due to Ukraine-related sanctions. There was a surge in Chinese exports to Russia, primarily of machinery and other types of goods, including computers, cell phones, and cars. The share of Chinese auto sales in the Russian market is projected to reach 60% this year, according to car-dealer chain Autodom.
   
5. Russian exports growth
   Goods made in Russia have also been gaining popularity on the Chinese market, and there are expectations of further broadening the scope of Russian exports in spheres like the pulp and paper industry, chemical industry, fertilizer production and metallurgy. Over the past several months, China has overtaken the EU as the top importer of Russian agricultural products.
   
6. Joint projects
   Moscow and Beijing have completed a number of projects in transport infrastructure, including the launch of railroad and motorway bridges over the Amur River in the Far East, which separates the countries. The two sides have also been developing cooperation on major projects in such fields as energy, aviation, space and connectivity. Collaboration in scientific and technological innovation, cross-border e-commerce and other emerging areas is “showing strong momentum,” according to President Xi.
   
7. Global projects
   The development of the ambitious Belt and Road Initiative (BRI), the expansion of BRICS and the Eurasian Economic Union (EEU) are also on the agenda, in order to provide more institutional support for bilateral and regional cooperation.
   
8. Tourism
   Russia and China have recently reinstated an agreement on visa-free group trips, which was suspended during the Covid-19 pandemic. Official statistics show that 2.3 million Chinese tourists visited Russia in 2019, with about 50% of those using visa free facilities. China’s share of Russia’s total number of incoming travelers amounted to 6.6% of the total that year. Meanwhile, around 2 million Russian tourists went to China that year before travel was curtailed due to the coronavirus. According to China’s ambassador to Russia, Zhang Hanhui, both sides are ready “to restore mutual travel of citizens as soon as possible” and to further boost tourism.
   
9. No-limits partnership
   Analysts point out that Beijing has proved to be a particularly crucial economic partner for Moscow due to the unprecedented Western sanctions aimed at shutting Russia out of the global economy. Ties between the two countries are now “at the highest level in their history and are gaining even more strength,” without any limitations or taboos, according to President Putin.

For more stories on economy & finance visit RT's business section

Major benchmarks are sinking due to renewed concerns over global economic health and falling energy demand

Oil prices slumped to their lowest levels in 15 months on Monday, as investors worry that risks in the global banking sector could accelerate a recession that will impact energy demand.

Major global benchmarks were down roughly 3% on Monday. Brent crude fell to $70.80, while US West Texas Intermediate (WTI) plunged to $64.68 per barrel as of 11:00 GMT.

Investors are concerned that persisting risks in the global banking sector could trigger a recession that will lead to a decline in oil demand.

The slide came despite signals that the central banks are stepping up efforts to help distressed lenders in the US and Europe.

“The upcoming OPEC meeting is another potential catalyst on the outlook for the [oil] market. Further downside risk to prices increases the probability OPEC reduces production further to support prices,” the head of commodity research at National Australia Bank, Baden Moore, said.

A ministerial committee of OPEC and major producing nations including Russia, known as OPEC+, is due to meet on April 3. 

For more stories on economy & finance visit RT's business section

The exit of Western and Japanese companies has provided an opportunity to rising industry players

Chinese auto makers have embarked on a major expansion in the Russian market and are expected to reach a 60% share of total sales this year, the newspaper Izvestia reported on Monday, citing car-dealer chain Autodom.

According to the report, in the first half of 2022 the share of Chinese car brands in the Russian market stood at 3.7%, a figure that rose to almost 33% in the second half. Overall car sales in Russia last year decreased by 58.8% to 687,000 units, the Association of European Businesses (AEB) calculated.

Chery, Haval and Geely were named the most popular Chinese car brands in Russia. Their share in the country’s market will continue to grow in 2023, according to the CEO of Autodom Andrey Olkhovsky.

Meanwhile, the Association of Russian Automobile Dealers told Izvestia that it expects around 785,000 new car sales in Russia this year, of which at least 250,000 (32%) will be Chinese made.

According to market expert Viktor Kondrashin, the lack of competition leads to an increase in prices for models such as Geely and Haval. He told the newspaper that “new models of Chinese crossovers currently cost the same as Volvo or Skoda two years ago.” 

READ MORE: Iran awaits green light to start exporting cars to Russia – official

Kondrashin believes that domestic car prices could moderate when deliveries of automobiles from Iran start to arrive.

The popularity of Chinese automobiles in Russia has been rising amid the exodus of European, American, and Japanese brands. Many automakers found it difficult to continue operations in the country due to logistical disruptions resulting from Western sanctions, particularly after deliveries of cars and spare parts to Russia were stopped.

For more stories on economy & finance visit RT's business section

The coordinated action is aimed at easing concerns over the state of the global financial system amid the banking crisis

The US Federal Reserve and five other major central banks launched a coordinated effort on Sunday to boost the flow of US dollars in the global financial system via swap line arrangements, the regulators announced in a joint statement. Apart from the Fed, the action was joined by the Bank of Canada, Bank of England, Bank of Japan, the European Central Bank, and Swiss National Bank.

The move will “enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements” by increasing the frequency of seven-day maturity operations from weekly to daily. Swap lines are agreements between two central banks to exchange currencies, usually with the aim of allowing one of the central banks to obtain liquidity in a foreign currency that can then be forwarded to commercial banks in that country that need the funding.

The operations will begin on Monday and are slated to continue at least through the end of April. The measure is aimed at “serv[ing] as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses,” the monetary authorities stated.

The announcement came after UBS, Switzerland’s largest lender, agreed to buy embattled Credit Suisse in a deal brokered by the Swiss government. The emergency takeover became necessary after Credit Suisse, one of the 30 globally systemically important banks, faced the risk of insolvency amid an outflow of investors and customers following a string of scandals and losses. Banking experts warned that the bank’s failure could have impacted the entire global financial system.

The turmoil at Credit Suisse is not the only problem weighing on the global banking system, however. Markets were thrown into disarray earlier this month by three bank collapses in the US.

Read more

The Fed usually allows liquidity injections when banks outside the US have obligations denominated in dollars but are experiencing reduced access to dollar funding in times of financial turbulence. Such action by the Fed is “very much needed” at the moment, Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA told Bloomberg, especially by the Swiss National Bank and European Central Bank.

“We learned that the hard way during the global financial crisis in 2008 when it took too long to set them up,” she stated. During the global financial crisis of 2008 investors became averse to risks following the infamous collapse of Lehman Brothers, which caused funding markets to seize up and made it hard for European banks to get ahold of US dollars.

For more stories on economy & finance visit RT's business section

January deliveries topped 2.5 billion cubic meters

Russia has become China’s largest supplier of natural gas, beating Turkmenistan, Qatar, and Australia, data from the Chinese customs agency shows.

Total supplies of the Russian fuel amounted to 2.7 billion cubic meters (bcm) in January. During the same period, Turkmenistan and Qatar supplied 2.2 bcm each, while 1.9 bcm more came from Australia.

Most of the Russian gas comes to China via the Power of Siberia pipeline, which has an annual capacity of 38 billion cubic meters. Russia’s state energy major Gazprom delivered nearly 2 bcm of gas via the pipeline in January. Another 0.77 bcm came in the form of liquefied natural gas (LNG) shipments.

China’s total gas imports in January 2023 rose by 1% year-on-year, up to 11.3 bcm. The rise largely came from increased LNG imports which grew for the first time in 13 months, by 7% year-on-year.

In February, Moscow and Beijing signed an agreement for additional natural gas supplies to China via the Far Eastern Route.

READ MORE: China looks to cement energy ties with Russia – ambassador

Under the project, Russia will construct a cross-border section across the Ussuri River between the already operational Russian pipeline and the Chinese city of Hulin. The route will have annual capacity of 10 bcm, bringing the total capacity of Russia’s annual pipeline gas deliveries to China to 48 bcm.

For more stories on economy & finance visit RT's business section

Spaniards see prices for the key ingredients used in paella surge dramatically

The cost of the main groceries needed to cook paella in Spain soared 19.1% in February, compared to the same period a year ago, according to Bloomberg’s monthly Paella Index, which is based on data provided by Spain’s National Statistics Institute.

The price of olive oil reportedly surged the most, by 33.5%. Meanwhile, the prices of legumes and vegetables saw an increase of 23.6%, while the cost of rice jumped by 21.2%. Salt, spices and herbs became 17.1% more expensive. Prices of fresh and refrigerated fish gained 9.4%, while fresh and frozen seafood were up 7.9%.

Price growth among the items needed to make Spain’s signature dish reportedly recorded an all-time high. In comparison, the index saw a year-over-year increase of 9% in February 2022. In the year before that, growth was a mere 1.3%.

Food prices in Spain have continued to accelerate even after Madrid cut taxes on basic staples earlier this year. Last month, the government also raised the minimum living wage by 8%, marking the fifth increase since 2018. The authorities expect the measure to help people tackle the rise in food costs across the country.

READ MORE: Inflation in France and Spain accelerates

In February, food inflation in Spain remained over 15%. In January, inflation eased from 15.7% recorded in December, but was still raging at a rate of 15.4% for food and non-alcoholic drinks, according the National Institute of Statistics (INE).

According to the Economy Ministry, a weather-driven drop in fruit and vegetable production alongside strong demand from abroad have sent prices skyrocketing.

For more stories on economy & finance visit RT's business section

Banking giant UBS has reached a deal to acquire its ailing rival Credit Suisse

UBS Group and Credit Suisse Group, two of the biggest names in European banking, are coming together in a government-brokered deal aimed at shoring up public confidence in the Western financial system and averting a global crisis.

UBS agreed on Sunday to pay 3 billion Swiss francs ($3.24 billion) in stock to acquire its embattled rival in a takeover underpinned by government guarantees and 100 billion francs in liquidity assistance from Switzerland’s central bank. The agreed price of 1 UBS share for each 22.48 shares of Credit Suisse values the latter bank at less than half its market closing price on Friday. The transaction requires UBS to absorb up to $5.4 billion in losses at Credit Suisse.

“I welcome the swift action and the decisions taken by the Swiss authorities,” European Central Bank President Christine Legarde said of the merger. “They are instrumental for restoring orderly market conditions and ensuring financial stability.” Although the region’s banking sector is “resilient,” she added, “our policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”

Read more

The merger of Switzerland’s two biggest Swiss banks is scheduled to be completed by the end of this year. Western governments and central banks have sought to prevent a cascade of bank failures after the collapses earlier this month of Silicon Valley Bank and Signature Bank in the US.

Credit Suisse last month reported a 2022 net loss of 7.3 billion francs and warned that it would incur another “substantial” loss in 2023 before returning to profitability in 2024. With clients withdrawing their money in droves, Credit Suisse turned to the Swiss central bank for a loan of 50 billion francs last week.

The newly combined bank will boast more than $5 trillion of invested assets. UBS Chairman Colm Kelleher told reporters at a press briefing in Bern, Switzerland, that there are “no options” other than closing the acquisition and making it a success. “This is absolutely essential to the financial structure of Switzerland and… to global finance.”

Trucks loaded with Russian cucumbers and tomatoes have been spotted in the Polish town of Bronisze, Berliner Zeitung reports

Poland continues to import Russian vegetables despite wide-ranging EU sanctions against Moscow, Berliner Zeitung reported this week.

According to the newspaper, dozens of trucks are constantly arriving at the wholesale market in the Polish town of Bronisze on the outskirts of Warsaw, loaded with Russian cucumbers and tomatoes. The cucumbers are priced at 55 zloty ($12.48) for 5 kilos, which is well below the cost of EU-produced vegetables, the outlet noted.

Vegetables have become increasingly expensive in recent months, with local farmers struggling to meet higher energy costs to power their greenhouses. Official statistics show annual inflation in Poland accelerated in February to 18.4%, the highest since 1996 and one of the highest levels in the EU, with food prices and energy costs rising at the fastest pace. Recent media reports citing police data claim that Poland has registered a 31% growth in shoplifting crimes at food stores since the price spikes.

In principle, Russian food imports are not banned by EU sanctions. According to the European Council, products primarily intended for human consumption are exempt from export and import restrictions. However, many countries have halted their business from Russia and stopped trading with Russian exporters throughout the past year. Also, some of the restrictions have made financial transactions with Russian entities and the transportation of goods from Russia difficult.

However, according to the German outlet, Polish importers are willing to make an effort to obtain cheap Russian products.

Read more

Poland is not the only European country currently struggling to keep food shelves in supermarkets filled. British grocery stores have recently started to ration vegetables due to shortages, which prompted Food and Environment Secretary Therese Coffey to suggest that shoppers opt for seasonal, home-grown vegetables like turnips instead of pining for imported tomatoes, peppers and cucumbers.

Russian President Vladimir Putin recently suggested that European countries should turn to Russia to tackle food shortages.

“Turnips are a good product, but you will probably have to turn to [Russia] for turnips too, because our crop level still significantly exceeds those of our neighbors in Europe.”

For more stories on economy & finance visit RT's business section

UBS reportedly wants the government to partly cover the acquisition of the failing lender

Multinational investment bank UBS wants the Swiss government to cover about $6 billion of the costs if it agrees to buy Credit Suisse, a rival lender whose shares plummeted this week amid customer outflows and a loss of investors, Reuters reported on Saturday, citing sources.

Earlier media reports indicated that the banks were discussing a merger, an idea pitched by the Swiss National Bank and Financial Market Supervisory Authority (FINMA), to save Credit Suisse from insolvency.

The government funds are expected to help cover the cost of winding down parts of Credit Suisse following the merger, as well as potential litigation charges, sources told Reuters. However, the negotiations on the deal are reportedly tense, as the merger may lead to some 10,000 jobs needing to be cut.

According to a report by The Wall Street Journal, the deal could be announced on Sunday. The news outlet also notes that, in order to speed up the merger process, regulators had offered to waive a requirement that a shareholder vote be held.

Analysts say that Swiss regulators need to present a solution to the crisis at Credit Suisse before markets open on Monday, to avoid a further drop in the lender’s stock price.

The two banks, as well as the Swiss government, have so far declined to comment on the reports.

READ MORE: Swiss banking giant in talks to buy Credit Suisse – media

Credit Suisse shares lost roughly a quarter of their value during the past week, despite having secured a $54 billion loan from the Swiss central bank. The bank is Switzerland’s second largest, behind USB, and is considered systemically important both in Switzerland and globally. Banking experts warn that the bank’s failure would affect the entire global financial system.

For more stories on economy & finance visit RT's business section

The beverage is finding its way into the sanctioned country through parallel imports, RBK reports

Coca-Cola remains one of the top sellers among cola-flavored beverages in Russia, a year after the American company decided to quit the country’s market, business daily RBK reported this week.

The iconic drink was the second-most-popular cola beverage among Russian consumers in January and February, accounting for more than 14% of sales per unit, according to RBK’s calculations based on information from fiscal data operator Prodazhi.rf.

The top seller among cola drinks is the Dobry Cola brand, produced in Russia at factories that belonged to Coca-Cola HBC Russia, the bottler of the original drink. It accounts for just over one-third of the market.

In money terms, imported Coca-Cola ranked first among cola drinks, and topped all sweet carbonated beverages, accounting for 32% of sales, according to data from another fiscal data operator, Evotor.

The unit price of the original Coca-Cola rose by an average of 68% year-on-year in the first two months of this year, reports said.

Read more

Russian retailers and fast-food chains procure the original Coca-Cola from other countries via parallel imports, a practice by which a non-counterfeit product is imported without the permission of the intellectual property owner via alternative supply channels. Russia legalized the mechanism to provide the market with goods that Western companies stopped delivering or producing in Russia due to sanctions.

The iconic drink also finds its way to Russia from the Eurasian Customs Union countries such as Kazakhstan, where it is manufactured by Coca-Cola HBC, RBK explained.

Coca-Cola announced plans to suspend business in Russia last March, joining the exodus of Western brands amid Ukraine-related sanctions. The company operated ten factories in Russia, producing soft drinks including Fanta, Sprite and Schweppes, along with local brands.

For more stories on economy & finance visit RT's business section

The era of cheap energy from Russia is over, the head of Germany’s utilities regulator has said

Germany has managed to avoid an energy crisis this year, but there is a risk that the next heating season will be more difficult, Klaus Mueller, the head of Germany's Federal Network Agency said in an interview with the Rheinische Post, published on Saturday.

According to Mueller, the country’s gas storage facilities are currently 64% full, and even if it the weather turns cold in the next few weeks, German energy supply for the remainder of the heating season is secured. He warned, however, that “we should not relax, as things could be different next winter.”

“We cannot rule out a gas shortage for next winter. Risk factors are that the winter of 2023/24 will be very cold, that households and companies will save too little, that the LNG terminals will not work as planned – we would also have to help our neighboring countries with their energy problems,” Mueller explained. Germany largely managed to avoid energy shortages due to unseasonably mild weather throughout the past couple of months, but Mueller noted that with respect to the next heating season, the weather poses the biggest risk.

“We cannot rely on the fact that next winter will be mild again. When it's cold, many households immediately stop saving. In warm October they saved more than 20% of gas, while during the cold snap in December – only 7%.”

The official also pointed to another risk factor – the absence of Russia’s energy supplies, which made it possible for the country to fill up storage tanks in preparation for the heating season last year. While the EU did not ban Russia’s pipeline gas imports, their flows dwindled significantly after Ukraine-related sanctions and following the sabotage that disabled the Nord Stream 1 pipeline, one of the main routes for Russian gas to Europe. As a result, Germany no longer receives Russian gas directly, and according to Mueller, energy prices will no longer be as low as they were when it did.

Read more

“We don't know what will become of Russia's remaining gas supplies… We have to get used to higher prices, the time of cheap energy from Russia is definitely over,” he stated.

Gas prices have been relatively low throughout the winter, helped by lower demand due to mild weather. Wholesale gas prices, which had soared over €300 per megawatt hour late last summer, fell to a level of around €50 in March. While that is far more than what natural gas cost in early 2021, it is “the new normal,” Mueller said, noting that in order to avoid further price spikes, consumers would have to continue efforts to conserve energy.

For more stories on economy & finance visit RT's business section

Buoyant demand from abroad is reportedly making the products less affordable domestically

Spaniards are facing surging prices for tomatoes and pork amid burgeoning demand for the products from abroad and geopolitical tensions, the Financial Times reported this week, citing the billionaire owner of Spanish supermarket chain Mercadona.

According to the businessman, who is ranked as Spain’s fourth-richest person, the Russia-Ukraine conflict has heavily weighed on tomato prices as it resulted in sharp surge in prices for natural gas, forcing farmers to shut down production of vegetables in greenhouses in Northern Europe due to high heating costs.

As a result, buyers flocked to Spain’s solar-powered growers, pushing up prices from €1.39 per kilogram in January 2021 to €2.05 today.

“The cost has gone up by a whopping 66 cents. We’ve raised prices by 50%,” Roig said, as quoted by the newspaper.

“So we had two options: either buy tomatoes or leave customers without tomatoes. And we believed it was more important to have tomatoes at €2.05 than to not have tomatoes.”

According to Roig, the price of pork, vital for making Iberian ham, has skyrocketed due to soaring demand from China, for which Spain is a major supplier.

“There are one billion Chinese people,” the businessman said. “How much did they ask for? . . . I don’t know. What I do know is that pork cost €1.05 [per kilogram in January 2021] and now it costs €1.96.”

Earlier this week, the country's national institute of statistics (INE) reported that the Consumer Price Index (CPI) for food stood at 16.6% in February, marking the highest level since 1994. This is despite the IVA (Spain's sales tax) reductions adopted during the previous month.

For more stories on economy & finance visit RT's business section

Talks reportedly touched on the 'Oracle of Omaha's' possible investment in the banking sector

Senior US officials have been in talks with billionaire investor Warren Buffet, discussing the unfolding banking crisis and possible ways out of it, Bloomberg reported on Sunday, citing sources within President Joe Biden’s administration.

Known as the “Oracle of Omaha,” Buffett is one of the globe’s most successful investors with a fortune worth roughly $101.6 billion and is head of the Berkshire Hathaway conglomerate, which owns dozens of successful companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.

According to the report, there have been several conversations between the billionaire and Washington officials over the past week, with discussions focused on Buffet’s possible investments in the banking sector and his advice regarding the volatile situation in the industry. Further details of the discussions have not been disclosed, and no official confirmation of such talks has been given.

Officials started seeking Buffet’s financial acumen after the collapses of three US regional lenders earlier this month – Silvergate, Silicon Valley Bank (SVB) and Signature – following mass deposit outflows. The bank runs were triggered by investor worries over the financial health of the institutions following recent interest rate hikes.

The fallout has shaken the entire US banking industry, with dozens of other lenders seeing their stocks plunge despite extraordinary measures announced by regulators last week to assuage customers. Nearly 200 US banks currently face risks similar to those that led to the collapses, according to a study posted this week to the Social Science Research Network.

READ MORE: Dozens of US banks at risk of repeating SVB collapse – study

Buffett has aided banks before. He invested $5 billion in Goldman Sachs following the financial crisis of 2008 and the collapse of Lehman Brothers Holdings. Bank of America secured a capital injection from the billionaire in 2011 when its stock fell due to losses from subprime mortgages.

For more stories on economy & finance visit RT's business section

Households will get poorer and pay more tax over the coming years, a think tank projects

Real wages in the UK will not return to their 2008 level until 2026 despite an easing of inflation, the Resolution Foundation, an independent think tank, reported this week in its analysis of the new budget.

According to the report, the country is on track for a “disastrous decade” of stagnant incomes and high taxes, with cuts to public services.

The publication highlighted that real wages fell at an annual rate of 3.9% in January, noting that the bigger picture for wages is “one of long-term pay stagnation.” 

The decrease in household disposable incomes this year and next are the worst in a century, the think tank stressed.

“Britain’s economy remains stuck in a deep funk – with people supported into work but getting poorer, and paying more tax but seeing public services cut,” it wrote.

The UK is forecast to have gone through “the biggest energy and inflation shock since the 1970s, while avoiding a recession, with unemployment peaking at just 4.4%,” Resolution Foundation added.

According to the study, taxes as a share of GDP are expected to hit 37.7% by the end of the forecast period, representing a 70-year-high and a 4.7% increase since 2019-2020.

The freeze on income tax thresholds since 2022-23 means that typical households will be worse off by £1,110 ($1,337) by 2027-28 when the freeze ends, it noted.

READ MORE: Brits skipping meals to cope with soaring costs – study

Torsten Bell, chief executive of the Resolution Foundation, stated that “Jeremy Hunt’s first budget was a much bigger affair than many expected, combining improvements to the dire economic and fiscal outlook with a significant policy package aimed at boosting longer-term growth in general, and the size of the workforce in particular.

“But stepping back, the UK’s underlying challenges remain largely unchanged. We are investing too little and growing too slowly. Our citizens’ living standards are stagnant. We ask them to pay higher taxes, while cutting public services,” he concluded.

For more stories on economy & finance visit RT's business section

Skoda is now in the final stages of talks over an asset sale, the company’s CEO says

Czech carmaker Skoda Auto, a unit of Germany’s Volkswagen, is closing in on a deal to sell its assets and exit Russia, the company’s CEO Klaus Zellmer announced this week.

Skoda has taken a hit of almost €700 million ($742 million) from exiting its second largest market due to disruptions in logistics chains caused by Western sanctions. Exports of cars and spare parts to Russia have also been stopped.

“The Volkswagen Group has analyzed various scenarios for the future of our business options in Russia,” Zellmer told reporters, adding that “the preferred option is to sell the assets of Volkswagen Group Russia... to a third party.”

He declined to give details on the deal until they are agreed by all parties, but noted that talks on the sale were “in the final stages.”

READ MORE: German firm fined for violating Russia sanctions – media

The automaker, which produced about 780,000 cars globally in 2022, suspended production at its two Russian factories in Kaluga and Nizhny Novgorod shortly after Ukraine-related sanctions were imposed by the EU. The facility in Kaluga has a production capacity of 225,000 vehicles per year, and assembled the Volkswagen Tiguan, Volkswagen Polo, and Skoda Rapid.

Last year, Skoda’s production in Russia plummeted to 18,300 cars from the 90,400 delivered in 2021, according to official data.

The carmaker’s net profit slumped 11.7% to €489 million in 2022, affected by a sharp rise in raw material prices and global supply chain disruptions.

For more stories on economy & finance visit RT's business section

Russia sanctions show Visa and Mastercard could become a “problem,” President Joko Widodo warned

The leader of the world’s most populous Muslim-majority country has said that Indonesia must reduce its dependence on foreign payment systems to negate the risk of a potentially disastrous economic fallout should the country ever come into crosshairs of Western sanctions.

Addressing a business forum in Jakarta this week, Widodo argued that Indonesia must shield itself from geopolitical disruptions, citing a sanction attack on Russia’s financial sector by the US, the EU and their allies over the conflict in Ukraine.

“Be very careful. We must remember the sanctions imposed by the US on Russia. Visa and Mastercard could be a problem,” Widodo said Wednesday at a gathering that promoted the use of Indonesian-made products and services.

Last year, Indonesia rolled out a Domestic Government Credit Card (KKP) program to facilitate transactions between the central and regional governments, and the president urged the public sector to blaze a trail in adopting this and domestic systems, stressing that eventually “everyone should be able to use” domestically issued bank cards so that “we can be independent.”

“If we use our own platforms, and everybody is using them, from ministries and local administrations to municipal governments, then we can be more secure,” Widodo said, according to the Jakarta Post.

Read more

Indonesia's domestic interbank system GPN currently supports only local debit cards and requires some adjustments to properly serve credit cards and international transactions, Indonesian Credit Card Association (AKKI) executive director, Steve Marta, told CNBC Indonesia on Saturday.

Indonesia is a major economy, ranked world’s seventh with $4.37 trillion GDP based on purchasing power parity, between Russia and Brazil.

Moscow rolled out its own national card system Mir soon after the US first targeted the country with sanctions in 2014, and prepared the internal National Payment Card System (NSPK) to smoothly take over all Visa and Mastercard transactions should the companies attempt to pull the plug.

Read more

Last year, as Moscow was hit by further sanctions in response to its military operation in Ukraine, international payment systems indeed halted their services, but locally-issued Western-branded cards continued to work within the country via the NSPK. While these cards can no longer be used internationally, their expiration dates were extended indefinitely to give users enough time to comfortably migrate to the Mir system. 

Russia also has its own financial messaging system, SPFS, which ensures the transactions between banks both inside and outside the country, and acts as a substitute for SWIFT that blocked many sanctioned Russian banks.

Many other lenders are also sitting on unrealized losses caused by the rapid rise in interest rates

Nearly 200 American banks are facing risks similar to what led to the implosion and bankruptcy of Silicon Valley Bank (SVB), according to a paper posted this week to the Social Science Research Network. SVB, a major US lender focused on the tech and startup sectors, was shut down by regulators last week after massive deposit outflows.

In the study, four economists from prominent US universities estimated how much market value the assets held by US banks have lost due to the recent interest rate hikes.

“From March 07, 2022, to March 6, 2023, the federal funds rate rose sharply from 0.08% to 4.57%, and this increase was accompanied by quantitative tightening. As a result, long-dated assets similar to those held on bank balance sheets experienced significant value declines during the same period,” they wrote.

Although higher interest rates can benefit banks by allowing them to lend at a higher rate, many US banks have parked a significant portion of their excess cash in US Treasuries. This was done when interest rates were at near-zero levels. The value of these bonds has now greatly decreased due to the rate hikes – investors can simply purchase newly issued bonds that offer a higher interest rate. The decline in the banks’ portfolios is unrealized, meaning the value has declined but the loss is still only ‘on paper’.

The problem arises when customers request their deposits back and banks are forced to sell their securities – at a significant loss – in order to pay depositors back. In extreme cases, this can lead to a bank becoming insolvent, or as happened with Silicon Valley Bank, the loss of confidence this circumstance engenders can trigger a bank run.

The report’s authors looked into the ratio of US lenders’ funding from uninsured deposits: the greater the share of uninsured deposits, the more susceptible a bank is to a run. For instance, at SVB, where 92.5% of deposits were uninsured, the deposit outflow caused the bank to collapse in a span of only two days. The authors of the study calculated that 186 American banks do not have enough assets to pay all customers if even half of uninsured depositors decide to withdraw their money.

Read more

“Our calculations suggest these banks are certainly at a potential risk of a run, absent other government intervention or recapitalization… Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility of the US banking system to uninsured depositor runs,” the economists concluded, noting that the number of banks at risk could be “significantly” larger if “uninsured deposit withdrawals cause even small fire sales.”

SVB’s failure sent ripples across the entire US banking industry and caused the closure of another lender, Signature Bank. Many other financial institutions have seen their stocks plunge, with the six largest Wall Street banks losing around $165 billion in market capitalization, or some 13% of their combined value. Earlier this week, the ratings agency Moody’s downgraded its outlook for the US banking system from 'stable' to 'negative', citing the “rapidly deteriorating operating environment.”

For more stories on economy & finance visit RT's business section

The authorities claimed Deloitte’s audit of one of the country’s largest bad-debt managers was marred by negligence

China’s Finance Ministry has imposed an unprecedented fine of 212 million yuan ($30.8 million) on accounting firm Deloitte, one of the global audit giants comprising the ‘Big Four,’ for negligence in its audit of bad-debt manager China Huarong, the ministry said in a statement on its website on Friday. Bad-debt managers are asset management firms that are tasked with buying distressed loans from banks.

According to the financial authorities, several inspections, staff interviews, and a paperwork review revealed that Deloitte had failed to detect the condition of Huarong’s underlying assets and objectively assess its businesses operations from 2014 to 2019, while Huarong concealed the fact that it experienced a number of internal and risk control failures at the time.

“During the period when it offered auditing services [to Huarong], [Deloitte] did not maintain [a] professional skeptical attitude, did not effectively conduct essential auditing procedures, did not obtain sufficient and adequate auditing evidence and had severe auditing flaws,” the statement read.

Apart from the fine, Beijing halted operations at Deloitte’s Beijing branch for three months and suspended the licenses of two certified Deloitte accountants. Meanwhile, Huarong, one of the country’s largest bad-debt managers, and its seven subsidiaries were fined 100,000 yuan each over internal governance and risk control failures, as well as “severely distorted” accounting data.

Deloitte said in a statement on Friday that it respected the ministry’s action, but it did not either admit or deny its culpability.

Read more

“To be clear, there is no suggestion by the [ministry] that either Deloitte Hua Yong, its Beijing branch, or any of its people have done anything unethical. We respect and accept the [ministry’s] penalty decision. We regret that, in this matter, the [ministry] considers certain aspects of our work fell below the required auditing standards,” the firm said.

According to a Bloomberg report, Beijing has recently started urging state-owned companies to stop using the Big Four for audits and turn instead to domestic accounting firms in a push to ensure the country’s data security and lower its reliance on foreign firms.

For more stories on economy & finance visit RT's business section