Aurelia Butler

BRASILIA (Reuters) – Brazil’s central bank said it is prepared to act in the exchange market in case of disproportionate contamination on prices, highlighting it is paying close attention to recent developments abroad after Ukraine’s invasion by Russia. The central bank’s Financial Stability Committee, which met on Thursday, also stressed that the national financial system exposure to the effects of current international geopolitical tensions is “low”, given the country’s reduced currency exposure and dependence on external funding.”The Committee is attentive to the recent evolution of the international scenario and remains prepared to act, minimizing any disproportionate contamination on the prices of local assets, in particular through the exchange market channel,” it wrote in a statement.According to the central bank, “loan portfolio continues to perform well, provisions for credit losses are adequate and banks remain liquid and well capitalized.” Earlier on Thursday, Brazilian Treasury Secretary Paulo Valle also said the country is well-positioned to face any international volatility.The Brazilian real fell 1.99% against the dollar in reaction to a surge in global risk aversion. Still, it remains among the world’s best-performing currencies to year-to-date, with financial inflows being attracted by cheap equity valuations and high debt yields amid an aggressive monetary tightening to tame double-digit inflation.Policymakers have hiked the country’s benchmark interest rate to 10.75% from its record-low of 2% last March and already signaled the need for additional increases. More

FRANKFURT (Reuters) -Volkswagen and its top shareholder Porsche SE on Thursday fleshed out details of a possible listing of luxury carmaker Porsche, edging closer to what could become one of the world’s largest stock market debuts.In case of an initial public offering, the share capital of Porsche AG would be equally split into preferred and ordinary shares and up to a quarter of the preferred stock would be placed on the market, Volkswagen (DE:VOWG_p) said, confirming an earlier Reuters story.This implies a potential placement and free float of up to 12.5% of Porsche AG’s total share capital, or more than 10 billion euros ($11.2 billion) when using a valuation of around 90 billion.Ordinary shares, which would solely be owned by Volkswagen and Porsche SE under the plans, would not be publicly listed, a spokesperson said.”The automotive industry is changing fundamentally. Volkswagen is determined to play a leading role in a world of zero-emission and autonomous mobility,” Volkswagen Chief Executive Herbert Diess said.”An IPO of Porsche AG would give us additional flexibility to further accelerate the transformation. Porsche AG would gain more entrepreneurial freedom and at the same time continue to benefit from group synergies.”According to the framework agreement, Porsche SE, which owns a 31.4% equity stake in Volkswagen and 53.3% of the voting rights, would buy 25% plus one share of Porsche AG’s ordinary shares from Volkswagen at a 7.5% premium to the placement price of the preferred shares.The would give the Porsche and Piech families, which control Porsche SE, a blocking minority in the listed carmaker that was founded by their ancestor Ferdinand Porsche in 1931.Volkswagen said it would propose that shareholders, which apart from Porsche SE include Qatar and the German state of Lower Saxony, receive 49% of the gross proceeds the carmaker will generate via the sale of preferred and ordinary shares.Qatar, which owns 14.6% in Volkswagen and 17% of its voting rights, would also become a strategic investor in Porsche AG’s preferred shares in case of an IPO, Volkswagen said.Stephan Weil, state premier of Lower Saxony, Volkswagen’s third-largest shareholder, said the state was supporting the presented framework agreement.($1 = 0.8935 euros) More

Joe Biden has significantly ratcheted up pressure on Russia’s economy by cutting off the country’s biggest bank, Sberbank, from the US financial system.Sberbank accounts for close to a third of Russia’s banking sector. The lender and four other financial institutions that the US targeted on Thursday oversee about $1tn in assets in total.“The sanctions we imposed exceed anything that’s ever been done,” the US president said on Thursday. “The sanctions we imposed have generated two-thirds of the world joining us. They are profound sanctions.”The sanctions, imposed in response to Russia’s invasion of Ukraine, restrict Sberbank’s access to US dollar transactions. The US also froze assets at four other Russian banks including its second-biggest lender, VTB, as well as three midsize players, Bank Otkritie, Sovcombank OJSC and Novikombank.“What we’re doing is we’re trying to hit the Russian economy where we think it will hurt the most, and where we will limit the impact on the United States and our partners, but we also have the ability to escalate these steps against these institutions going forward,” a senior US administration official said. But the US stopped short of imposing such harsh restrictions on Gazprombank, Russia’s third-largest bank. The state-controlled lender is the main conduit for foreign payments for oil and gas.Cutting off Gazprombank from dealing in US dollars would have had significant repercussions for Europe, which relies on Russia for 40 per cent of its natural gas supply and 26 per cent of oil.Although Russian banks remained on the Swift messaging system, Biden said there was still the option of cutting them from the global payments initiative that lies at the centre of global trade and facilitates trillions of dollars worth of transactions a day.World leaders are divided over whether to cut Russia from Swift, which would deliver a heavy blow to its banks and its ability to trade beyond its borders.Boris Johnson, the UK prime minister, has pushed “very hard” for such a move, although he has faced resistance from Olaf Scholz, the German chancellor, according to officials in both governments. “These sanctions will have a significant impact on Russia’s overall economy, and average Russians will feel the cost,” said Clay Lowery, executive vice-president for the Institute of International Finance.“These sanctions target Russia’s domestic financial system, causing bank runs and forcing Russia’s central bank to continue hiking rates. As a result, we are likely to see negative growth in an economy that has already been hindered by increasing isolationism.”Earlier on Thursday, Johnson added Russia’s second-biggest bank, VTB, to Britain’s sanctions list but stopped short of including Sberbank. VTB accounts for 16.4 per cent of Russia’s banking assets, compared with Sberbank’s 32.6 per cent.

“Sanctioning other retail banks like VTB and Sberbank will cause significant havoc but ordinary Russian citizens will also pay the price,” said Paul Feldberg, a partner in the investigations, compliance and defence group at law firm Jenner & Block.One in two Russians has an account at Sberbank. Cutting the bank’s access to dollar transactions will have a severe impact on the Russian economy’s ability to do business outside its borders.More than half of Russian exports are denominated in US dollars, down from 80 per cent at the end of 2013. That is equivalent to $300bn, or 19 per cent of gross domestic product, according to Fitch. Sberbank’s share price dropped more than 50 per cent on Thursday as the market expected Russia’s economy to suffer following its invasion of Ukraine and for the west to consider sanctions against its biggest banks.Sberbank said on Thursday night that its systems and offices were working as normal and that clients’ funds were wholly available to them.“Sberbank is closely studying new working conditions amid the sanctions related to correspondent accounts. The adopted restrictions do not affect the safety and availability of client funds,” it said. “Sberbank has all necessary resources, managerial experience and expertise for operating in the current environment.”Additional reporting by Aime Williams in Washington

Video: Russia begins invasion of Ukraine More