Economy

FRANKFURT (Reuters) – European Central Bank policymakers are meeting on Thursday amidst turmoil in financial markets that could force it to divert from plans for another hefty interest rate hike even though inflation remains too high. After embarking on a campaign to curb price growth that has seen it raise rates since July at its fastest pace on record, the ECB had been set for another 50 basis point increase on Thursday. But the collapse last week of Silicon Valley Bank in the United States has raised concerns about stresses across the banking sector and caused shares to plunge, with Credit Suisse, long dogged by problems, at the centre of the rout in Europe.Now the ECB must reconcile its inflation-fighting credibility with the need to maintain financial stability in the face of overwhelmingly imported turmoil.Complicating its task, the central bank for the 20 countries that use the euro currency has essentially already committed to a 50 basis point increase on Thursday.”Unless the ECB sees the inflation outlook significantly different than one week ago, anything but a 50 basis point move would be a big mistake and hurt credibility,” Danske Bank economist Piet Haines Christiansen said. Euro zone inflation was 8.5% in February, below its peaks of last autumn but way above the ECB’s 2% target, and the outlook is likely to remain grim.Although forecasts for headline inflation will be cut due to the fall in energy prices, the new figures will continue to show price growth significantly above the target in 2024 and slightly over in 2025, a source with direct knowledge told Reuters. Meanwhile projections for underlying inflation, an indicator of the durability of price growth, are set to be raised, suggesting that disinflation will be protracted and monetary policy will have to remain tight for some time. This outlook is so worrying that prior to the turmoil in the banking sector, which could derail the ECB’s strategy and the whole economy, a long list of policymakers had advocated rate hikes continuing beyond March.COLD FEET?Markets are nevertheless doubting the ECB’s resolve and have dialled back bets on the size of Thursday’s move and subsequent rate hikes. Money market pricing suggests that investors now see just a 30% chance of a 50 basis point increase, down from as high as 90% early on Wednesday. “Central Banks should not ignore the signs from the markets and the more likely recession forthcoming,” former ECB Vice President Vitor Constancio said. “They should tone down their hiking campaign. The ECB should do at most 25 bps and not the announced 50 bps.”The peak ECB rate, also known as terminal rate, is now seen at only around 3.25%, down from 4.1% last week, an exceptional reversal in market pricing.Hoping to prop up confidence, the Swiss National Bank said late on Wednesday that it was ready to provide Credit Suisse with liquidity, if necessary, though the bank met all capital and liquidity requirements. “Clearly there is a strong case for the ECB to wait and see how things develop,” Andrew Kenningham at Capital Economics said. “But our best guess at this stage is that the bank will press on with its pre-announced plan to raise the deposit rate from 2.5% to 3.0%, while stressing that policy is not on a predetermined path.”Even if the ECB goes ahead with the 50 basis point hike, it is almost certain to move away from its recent practice of signalling its next step and will leave the door open regarding the May meeting, even if a bias for higher rates remains.ECB President Christine Lagarde will almost certainly try to reassure investors on the health of the bloc’s banks, arguing that they are better capitalised, more profitable and more liquid than during previous periods of turmoil. But the ECB is likely to stop short of offering specific measures to help banks, especially since it has just removed a subsidy from a key liquidity facility in an attempt to wean lenders off central bank cash. Lagarde could nevertheless signal that the ECB is ready to step in should contagion start impairing the health of euro zone lenders, and thus preventing the ECB’s monetary policy from being deployed effectively.”The ECB will be minded to stick to the separation principle: gearing the monetary policy stance towards achieving the inflation aim; and using other tools to deal with financial stability,” BNP Paribas (OTC:BNPQY) said. “Indeed, interest rates are probably the wrong tool to address a liquidity problem. More

Many believe the legislation to raise the retirement age to 64 from 62 will pass Parliament, and they are looking beyond the vote to fight on.PARIS — Hundreds of thousands of French protesters on Wednesday swarmed cities across the country, and striking workers disrupted rail lines and closed schools to protest the government’s plan to raise the legal retirement age, in a final show of force before the contested bill comes to a vote on Thursday.The march — the eighth such national mobilization in two months — and strikes embodied the showdown between two apparently unyielding forces: President Emmanuel Macron, who has been unwavering in his resolve to overhaul pensions, and large crowds of protesters who have vowed to continue the fight even if the bill to raise the retirement age to 64 from 62 passes Parliament — which many believe it will.“Macron has not listened to us, and I’m no longer willing to listen to him,” said Patrick Agman, 59, who was marching in Paris on Wednesday. “I don’t see any other option than blocking the country now.”But it remains unclear what shape the protest movement will take from here, with plenty of room for it either to turn into the kind of unbridled social unrest that France has experienced before or to slowly die out.Even as throngs marched in cities from Le Havre in Normandy to Nice on the French Riviera on Wednesday, a joint committee of lawmakers from both houses of Parliament agreed on a joint version of the pension bill, sending it to a vote on Thursday.While it remained unclear if Mr. Macron had gathered enough support from outside his centrist political party to secure the vote, the prime minister could still use a special constitutional power to push the bill through without a ballot. It’s a tool the government used to pass a budget bill in the fall, but it risks exposing it to a no-confidence motion.Although many French people surveyed expect the bill to pass, opponents of the legislation signaled they intended to keep fighting.Laurent Cipriani/Associated PressIn a sense, the demonstrations on Wednesday were a last call to try to prevent the bill from becoming law. “It’s the last cry, to tell Parliament to not vote for this reform,” Laurent Berger, the head of the country’s largest union, the French Democratic Confederation of Labor, said at the march in Paris.Three-quarters of French people believe the bill will pass, according to a study released by the polling firm Ellabe on Wednesday. And many protesters were looking beyond the vote, convinced that a new wave of demonstrations could force the government to withdraw the law after it is passed.Some teachers said they had already given notice of another strike to their principals. Others said they had saved money in anticipation of future strike-related wage losses.“The goal is really to hold on as long as possible,” said Bénédicte Pelvet, 26, who was demonstrating while holding a cardboard box in which she was collecting money to support striking train workers.All along the march route in Paris, colorful signs, banners and graffiti echoed the determination to continue the fight regardless of the consequences. “Even if it’s with garbage, we’ll get out of this mess,” red graffiti on a wall read, a reference to the heaps of trash that have piled up throughout cities in France because garbage workers have gone on strike.Rémy Boulanger, 56, who has participated in all eight national demonstrations against the pension bill, said anger had grown among protesters toward a government that he said “has turned a deaf ear to our demands.”France relies on payroll taxes to fund the pension system. Mr. Macron has long argued that people must work longer to support retirees who are living longer. But his opponents say the plan will unfairly affect blue-collar workers, who have shorter life expectancies, and they point to other funding solutions, such as taxing the rich.A strike by garbage workers has led to a pileup of trash on French streets.Christophe Archambault/Agence France-Presse — Getty ImagesAbout 70 percent of French people want the protests to continue, and four out of 10 say they should intensify, according to the Ellabe poll.Union leaders have hinted that the mobilization would not stop, but they have yet to reveal their plans. “It’s never too late to be in the street,” Philippe Martinez, the head of the far-left C.G.T union, said on Wednesday.France has a long history of street demonstrations as a means to win, or block, changes. Most recently, the Yellow Vest movement that was born in 2018 led to demonstrations that went on for months and forced the government to withdraw plans to raise fuel taxes. But the last time the French government bowed to demonstrators and withdrew a law that had already passed was in 2006, when a contested youth-jobs contract was repealed.“Redoing 2006 would be ideal,” Mr. Boulanger said. But he acknowledged that a sense of fatigue was spreading among protesters — Wednesday’s protests were smaller than those a week ago. He said he was instead looking to the next presidential election, more than four years away, to bring about change.Other protesters pointed to 1995, when strikes against another pension bill paralyzed France for weeks, forcing the government to abandon its plan to send the proposed law to a vote.Ms. Pelvet, another demonstrator, acknowledged that the unions’ vow to bring the country “to a standstill” last week had failed, with a fair number of trains and public services still operating.“Nobody wants to go home,” Ms. Pelvet said. “But the road ahead is not clear yet.”Catherine Porter More

The stunning demise of Silicon Valley Bank has spurred soul-searching about how large and regional banks are overseen.The Federal Reserve is facing criticism over Silicon Valley Bank’s collapse, with lawmakers and financial regulation experts asking why the regulator failed to catch and stop seemingly obvious risks. That concern is galvanizing a review of how the central bank oversees financial institutions — one that could end in stricter rules for a range of banks.In particular, the episode could result in meaningful regulatory and supervisory changes for institutions — like Silicon Valley Bank — that are large but not large enough to be considered globally systemic and thus subject to tougher oversight and rules. Smaller banks face lighter regulations than the largest ones, which go through regular and extensive tests of their financial health and have to more closely police how much easy-to-tap cash they have to serve as a buffer in times of crisis.Regulators and lawmakers are focused both on whether a deregulatory push in 2018, during the Trump administration, went too far, and on whether existing rules are sufficient in a changing world.While it is too early to predict the outcome, the shock waves that Silicon Valley Bank’s demise sent through the financial system, and the sweeping response the government staged to prevent it from inciting a nationwide bank run, are clearly intensifying the pressure for stronger oversight.“There are a lot of signs of a supervisory failure,” said Kathryn Judge, a financial regulation expert at Columbia Law School, who also noted that it was too early to draw firm conclusions. “We do need more rigorous regulations for large regional banks that more accurately reflect the risks these banks can pose to the financial system,” she said.The call for tougher bank rules echoes the aftermath of 2008, when risky bets by big financial firms helped to plunge the United States into a deep recession and exposed blind spots in bank oversight. The crisis ultimately led to the Dodd-Frank law in 2010, a reform that ushered in a series of more stringent requirements, including wide-ranging “stress tests” that probe a bank’s ability to weather severe economic situations.But some of those rules were lightened — or “tailored” — under Republicans. Randal K. Quarles, who was the Fed’s vice chair for supervision from 2017 to 2021, put a bipartisan law into effect that relaxed some regulations for small and medium-size banks and pushed to make day-to-day Fed supervision simpler and more predictable.Critics have said such changes could have helped pave the way for the problems now plaguing the banking system.“Clearly, there’s a problem with supervision,” said Daniel Tarullo, a former Fed governor who helped shape and enact many post-2008 bank regulations and who is now a professor at Harvard. “The lighter touch on supervision is something that has been a concern for several years now.”Jerome H. Powell, right, the chair of the Federal Reserve, and Randal K. Quarles, then the vice chair for supervision, at the Fed, in 2018. “The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review,” Mr. Powell said in a statement this week.Aaron P. Bernstein/ReutersThe Federal Reserve Bank of San Francisco was in charge of overseeing Silicon Valley Bank, and experts across the ideological spectrum are questioning why growing risks at the bank were not halted. The firm grew rapidly and took on a large number of depositors from one vulnerable industry: technology. A large share of the bank’s deposits were uninsured, making customers more likely to run for the exit in a moment of trouble, and the bank had not taken care to protect itself against the financial risks posed by rising interest rates.Worsening the optics of the situation, Greg Becker, the chief executive of Silicon Valley Bank, was until Friday on the board of directors at the Federal Reserve Bank of San Francisco. The Fed has said reserve bank directors are not involved in matters related to banking supervision.Questions about bank oversight ultimately come back to roost at the Fed’s board in Washington — which, since the 2008 crisis, has played a heavier role in guiding how banks are overseen day to day.The board has indicated that it will take the concerns seriously, putting its new vice chair of supervision, Michael Barr, in charge of the inquiry into what happened at Silicon Valley Bank, the Fed announced this week.“The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review by the Federal Reserve,” Jerome H. Powell, the Fed chair, said in a statement.It is unclear how much any one of the 2018 rollbacks would have mattered in the case of Silicon Valley Bank. Under the original postcrisis rules, the bank, which had less than $250 billion in assets, most likely would have faced a full Fed stress test earlier, probably by this year. But the rules for stress tests are complex enough that even that is difficult to pinpoint with certainty.“Nobody can say that without the 2018 rollbacks none of this would have happened,” Ms. Judge said. But “those rules suggested that banks in this size range did not pose a threat to financial stability.”But the government’s dramatic response to Silicon Valley Bank’s collapse, which included saving uninsured depositors and rolling out a Fed rescue program, underlined that even the 16th-largest bank in the country could require major public action.Given that, the Fed will be paying renewed attention to how those banks are treated when it comes to both capital (their financial cushion against losses) and liquidity (their ability to quickly convert assets into cash to pay back depositors).There could be a push, for instance, to lower the threshold at which the more onerous regulations begin to apply. As a result of the 2018 law, some of the stricter rules now kick in when banks have $250 billion in assets.Another major focal point will be the content of stress tests. While banks used to be run through an “adverse” scenario that included creative and unexpected shocks to the system — including, occasionally, a jump in interest rates like the one that bedeviled Silicon Valley Bank — that scenario ended with the deregulatory push.An interest rate shock will be included in this year’s stress test scenarios, but the larger question of what risks are reflected in those exercises and whether they are sufficient is likely to get another look. Many economists had assumed that inflation and interest rates would stay low for a long time — but the pandemic upended that. It now seems clear that bank oversight made the same flawed assumption.The collapse of Silicon Valley Bank could precipitate changes for financial institutions that are not large enough to be considered globally systemic and thus subject to tougher oversight and rules.Jason Henry for The New York TimesMany people were wrong about the staying power of low rates, and “that includes regulators and supervisors, who are supposed to think about: What are the possibilities, and what are the scenarios?” said Jonathan Parker, the head of the finance department at the Massachusetts Institute of Technology’s Sloan School of Management.And there is a bigger challenge laid bare by the current episode: Several financial experts said the run on Silicon Valley Bank was so severe that more capital would not have saved the institution. Its problem, in part, was its huge share of uninsured deposits. Those depositors ran rapidly amid signs of weakness.That could spur greater attention in Congress and among regulators regarding whether deposit insurance needs to be extended more broadly, or whether banks need to be limited in how many uninsured deposits they can hold. And it could prompt a closer look at how uninsured deposits are treated in bank oversight — those deposits have long been looked at as unlikely to run quickly.In an interview, Mr. Quarles pushed back on the idea that the changes made under his watch helped to precipitate Silicon Valley Bank’s collapse. But he acknowledged that they had created new regulatory questions — including how to deal with a world in which technology enables very rapid bank runs.“Certainly, none of this resulted from anything that we changed,” Mr. Quarles said. “You had this perfect flow of imperfect information that really increased the speed and intensity of this run.”In the days after the collapse, some Republicans focused on supervisory failures at the Fed, while many Democrats focused on the aftershocks of deregulation and possible wrongdoing by the bank’s executives.“All the regulators had to do was read the reports that Silicon Valley Bank was submitting, and they would have seen the problem,” Senator John Kennedy, Republican of Louisiana and a member of the Banking Committee, said on the Senate floor.By contrast, two Senate Democrats — Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut — sent a letter to the Department of Justice and the Securities and Exchange Commission on Wednesday urging the agencies to investigate whether senior executives involved in the collapse of Silicon Valley Bank had fallen short of their regulatory responsibilities or violated laws.Ms. Warren also unveiled legislation this week, co-sponsored by roughly 50 Democrats in the House and Senate, that would reimpose some of the Dodd-Frank requirements that were rolled back in 2018, including regular stress testing.Senator Sherrod Brown, Democrat of Ohio and chairman of the Banking Committee, told reporters that he intended to hold a hearing examining what happened “as soon as we can.”Mr. Barr, who started at the Fed last summer, was already reviewing a number of the Fed’s regulations to try to determine whether they were appropriately stern — a reality that had spurred intense lobbying as financial institutions resisted tougher oversight.But the episode could make those counterefforts more challenging.Late on Monday, the Bank Policy Institute, which represents 40 large banks and financial services companies, emailed journalists a list of its positions, including claims that the failures of Silicon Valley Bank and Signature Bank were caused by “primarily a failure of management and supervision rather than regulation” and that the panic surrounding the collapses proved how resilient big banks were to stress, since they were largely unaffected by it.The trade group also emailed those talking points to congressional Democrats, but other trade groups, including the American Bankers Association, have stayed silent, according to a person familiar with the matter.“We share President Biden’s confidence in the nation’s banking system,” a spokesman with the American Bankers Association said. “Every American should know that their accounts are safe and their deposits are protected. Our industry will work with the administration, regulators and Congress to further bolster that trust.”The fallout could also kill big banks’ attempts to roll back regulations that they say are inefficient. The largest banks had wanted the Fed to stop forcing them to hold cash equivalents to what they say are safe securities like U.S. government debt. But Silicon Valley Bank’s failure was caused in part by its decision to keep a large portion of depositors’ cash in longer-dated U.S. Treasury bonds, which lost value as interest rates rose.“This definitely underscores why it is important that there be some capital requirement against government-backed securities,” said Sheila Bair, a former chair of the Federal Deposit Insurance Corporation.Catie Edmondson More

Good morning. As markets contend with the collapse of Silicon Valley Bank, turmoil in the banking sector has also popped up in Europe. Credit Suisse shares plunged a day after the bank revealed that its auditor had identified “material weaknesses” in its financial reporting controls. We have the details below. Separately, the exiled Chinese businessman Guo Wengui has been arrested on US fraud charges over an investment scam targeting thousands of his online followers.Here’s what else to keep tabs on today:Wealth Summit Asia: Join the FT for a must-attend, one-day event for market-leading private banks, family offices and wealth managers. Register here.Iran-UAE talks Iran’s top security official will travel to the United Arab Emirates for talks in the latest sign of improving relations between the nations.ECB rate decision: The European Central Bank has made clear it intends to raise its deposit rate by half a percentage point to 3 per cent.Today’s top news1. The Swiss central bank said it would provide a liquidity backstop to Credit Suisse after the lender’s shares cratered as much as 30 per cent, sparking a broader sell-off in European and US bank stocks.Alphaville: There’s no contagion between US regional banks and Switzerland’s financial markets, besides bad vibes. 2. US regulators are preparing to respond to collapse of Silicon Valley Bank. The chair of the US Securities and Exchange Commission has called for a strengthening of “the guardrails of finance” in the wake of the collapse of Silicon Valley Bank, while the Federal Reserve is weighing tougher rules on capital and liquidity for midsized banks. Relationship banking: Young tech companies, a large part of SVB’s deposits, are scrambling to rearrange their banking arrangements following SVB’s collapse.3. US prosecutors have charged Chinese businessman Guo Wengui with being a serial fraudster who funded his lavish exile through a string of investment scams. Guo, a critic of the Communist government who fled to New York, was arrested yesterday in connection with an alleged scheme to misappropriate more than $1bn from thousands of his online followers.4. One of Hong Kong’s most senior finance officials is planning to visit the UK in April in the territory’s first ministerial-level trip to the country in three years and a sign of Prime Minister Rishi Sunak’s quiet reset of UK-China economic relations.5. The US defence secretary discussed the downing of a US surveillance drone over the Black Sea with his Russian counterpart in a rare conversation amid escalating tensions over the incident.Related read: The IMF is finalising a four-year lending programme worth $15.6bn for Ukraine.The Big Read

Disney chief executive Bob Iger poses on the red carpet with sith Stormtroopers for the European film premiere of ‘Star Wars: The Rise of Skywalker’ in London © Tolga Akmen/AFP/Getty Images

Since Bob Iger’s second term as Disney chief executive began in November, one topic has dominated conversations: what to do with Hulu, the popular but complicated streaming service in which Disney owns a majority stake. The debate, which also includes the future of the ESPN sports network, gets to a bigger question: what kind of company should Disney be?We’re also reading . . . Taiwan: Relations between Honduras and Taiwan, which date back to 1941, are being cut as the Central American country opens official relations with China.Special report: Technology groups dominate the FT’s fourth annual ranking of high-growth companies in the Asia-Pacific which is published today. Chart of the dayChina’s consumer spending returned to growth in the first two months of 2023. Data points to an early sign of a recovery, but the first comprehensive overview of activity since Beijing ended its pandemic restrictions pointed to a mixed economic picture.

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Take a break from the newsHow does the Boeing 787 Dreamliner compare with the Boeing 747, the double-decker “Queen of the Skies”? As the last of the 747s enters service, Mark Vanhoenacker shares a pilot’s perspective on how flying has evolved. Additional contributions by Gordon Smith and Tee Zhuo. More

Blaming workplace diversity or environmentally and socially conscious investments for the firm’s downfall signals a “complete lack of understanding of how banks work,” one expert said.WASHINGTON — A growing chorus of conservative pundits and politicians have said the failure of Silicon Valley Bank was the result of the bank’s “woke” policies, blaming the California lender’s commitments to workplace diversity and environmentally and socially conscious investments.These claims are without merit. The bank’s collapse was due to financial missteps and a bank run.Moreover, the firm’s policy on diversity, equity and inclusion — also known as D.E.I. — is similar to ones that have been broadly adopted in the banking sector. So is its approach to taking environmental and social considerations into account when investing — referred to as E.S.G. — although that has become a target of conservatives.In fact, Silicon Valley Bank is considered about average in the industry when it comes to these issues.Here’s a fact check.What Was Said“They were one of the most woke banks in their quest for the E.S.G.-type policy in investing.”— Representative James R. Comer, Republican of Kentucky, in an appearance on Fox News on Sunday“This bank, they’re so concerned with D.E.I. and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission.” — Gov. Ron DeSantis of Florida on Fox News on SundayThis lacks evidence. First, experts have broadly agreed that the bank’s demise had little to do with “wokeness.” As The New York Times and others have explained, the collapse was due to a bank run precipitated by a decline in start-up funding, rising interest rates and the firm’s sale of government bonds at a huge loss to raise capital.The bank’s loans to environmental and community projects “were not an important factor behind the collapse of SVB,” said Itay Goldstein, a finance professor at the University of Pennsylvania’s Wharton School. “There is no immediate indication that these loans precipitated the run by investors.”Silicon Valley Bank also was not an outlier in its diversity goals or its E.S.G. investments. U.S. investments in those assets are expected to rise to $33.9 trillion by 2026. A 2022 report by the Consumer Financial Protection Bureau found that 59 percent of banks had lending programs specifically for women- and minority-owned businesses, financing that would fit under the “social” umbrella of E.S.G.George Serafeim, a professor at Harvard Business School, said that blaming the collapse on such initiatives reflected either “a complete lack of understanding of how banks work or the intentional misattribution of causality for the bank’s failure.”Maretno Harjoto, a professor of finance at Pepperdine University and expert in E.S.G. investing, agreed that “there is no truth” to the claims. He added that banks will often set E.S.G. and diversity goals due to pressure from investors and stakeholders.Silicon Valley Bank said in a recent report that it would invest about $16.2 billion over the next few years to finance small businesses and community development projects, affordable housing and renewable energy. That level of investment was equivalent to about 8 percent of its $209 billion in assets.But Silicon Valley Bank was hardly alone in pursuing these types of investments. Of the 30 largest banks in the United States — Silicon Valley Bank ranked No. 16 — all but one (First Citizens Bank) have made E.S.G. investments and released reports on them. And the three largest U.S. banks — JPMorgan Chase & Company, Bank of America and Citigroup — all dedicated 8 percent to 14 percent of their overall assets toward social and environmental investments in 2021. All three have committed to at least $1 trillion in sustainable investments by 2030.Among all banking institutions, Silicon Valley Bank actually ranked about average on E.S.G. issues, according to three metrics developed separately by the financial research firms MSCI, Morningstar and Refinitiv. Among the 30 top banks, its middling A rating from MSCI put it on par with 11 banks, while 11 others received the higher AA rating, characterizing them as leaders. The California lender’s score from Morningstar was among the worst of all 30 banks. And its Refinitiv score was worse than all but one financial institution and on par with Signature Bank, which failed this week.Silicon Valley Bank’s commitment to improving diversity among its leadership was fairly typical as well. The largest 30 banks in the United States all have a stated commitment to more inclusive career advancement.The bank’s latest inclusion report noted that 38 percent of senior leadership and 42 percent of its board members were women, and that 30 percent of leadership and 8 percent of its board were nonwhite.By these demographics, Silicon Valley Bank was one of the more racially diverse financial institutions, but not extraordinarily so. Analyses have found that about 19 percent of senior leadership in financial services were nonwhite and 30 percent were women.While The Times was unable to find data on the demographics of boards of directors in the finance sector overall, the boards of the eight banks in the United States considered systemically important were more racially diverse on average than Silicon Valley Bank. Of the 104 board members who govern these banks, 23 percent were members of a racial or ethnic minority and 39 percent were women. More

Brussels is to impose curbs on imports of Chinese green technologies, demoting bidders for public contracts and making it harder for buyers to access subsidies.The measures are expected to be unveiled by the European Commission on Thursday as part of a more aggressive drive to tackle China’s dominance in supplying products including solar panels and heat pumps. Under a draft of the Net Zero Industry Act seen by the Financial Times, public procurement bids using products from a country with more than 65 per cent EU market share would be downgraded. Similar rules would apply to any government programme subsidising consumer purchases. “China is a prime example,” said a person familiar with the plans.Ursula von der Leyen, commission president, has called for the EU to “de-risk” its exposure to China as Brussels seeks to reduce its dependency on the country’s manufactured goods and inches closers to the US’s tough stance on its communist regime.China is responsible for more than 90 per cent of some parts used in solar panels, the document says, and is increasing its dominance of other supply chains including wind turbine production and electric vehicles. This trend has prompted policymakers to acknowledge that the EU is replacing a dependence on Russian gas for one on clean technology from China.But the commission’s trade directorate is concerned that the proposed changes to the public procurement rule book could breach international rules, according to people familiar with the situation. “It’s important that it is consistent with our WTO obligations, our government procurement agreement obligations,” said one, in reference to the World Trade Organization which bans discriminatory policies.“An important element is to ensure that it doesn’t end up being some kind of green protectionism and that we do not make the green transition more expensive both for private companies and for taxpayers.”The draft act could still change after internal discussions between commission departments ahead of its publication. The draft proposal described the diversity of supply as a key component in the assessment of bids. “Supply shall . . . be deemed insufficiently diversified where a single third country supplies more than 65 per cent of the demand for a specific net zero technology within the union,” it says.It would also assess the tenders’ environmental sustainability, which could count against Chinese imports. In sectors where the EU industry is still strong, such as wind turbines and heat pumps, “our trade balance is deteriorating”, the draft warns, amid rising energy and input costs for European manufacturers. Brussels intends to reverse this trend by intervening in the market with the goal of increasing EU production of green technologies to 40 per cent by 2030. The commission will also seeks to boost nascent carbon capture technology by requiring big oil and gas extractors to commit to storing up to 50mn tonnes of CO₂ annually by 2030, with each company given an individual target. Eadbhard Pernot, policy manager at the NGO Clean Air Task Force, said such targets were the “first of a kind”.A separate proposal on critical raw materials on Thursday will be aimed at facilitating domestic mining of lithium and other minerals used in green technology. Brussels intends to introduce tougher environmental measures to restrict imports, according to a draft version of the text which is still being finalised. After the commission publishes its proposals the European parliament and member states have to agree before they become law, a process which can take up to two years.China on Wednesday demanded that European countries implementing significant environmental trade measures submit a written report to the WTO so its members could discuss their legal basis, impact on trade, consistency with international rules and how those measures might impact developing countries, a Geneva-based trade official said. Beijing wanted to start with the EU’s carbon border tax, which will force foreign importers to cover the cost of their CO₂ emissions as of 2026. More

FedNow, the Federal Reserve’s digital payments system, will debut in July.
The system will allow bill payments, money transfers and other consumer activities to move more rapidly and at lower cost.

The Marriner S. Eccles Federal Reserve Board Building in Washington, D.C.
Sarah Silbiger | Reuters

The Federal Reserve’s digital payments system, which it promises will help speed up the way money moves around the world, will debut in July.
FedNow, as it will be known, will create “a leading-edge payments system that is resilient, adaptive, and accessible,” said Richmond Fed President Tom Barkin, who is the program’s executive sponsor.

The system will allow bill payments, money transfers such as paychecks and disbursements from the government, as well as a host of other consumer activities to move more rapidly and at lower cost, according to the program’s goals.
Participants will complete a training and certification process in early April, according to a Fed announcement.
“With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” said Ken Montgomery, the program executive and first vice president at the Boston Fed, which helped spearhead the project under former Boston Fed President Eric Rosengren.
Institutions that participate in the program will have seven-day, 24-hour access, as opposed to a system currently in place that closes on weekends.
Program advocates say it will get money out to people much more quickly. For instance, they said, government payments like those issued in the early days of the Covid pandemic would have been credited to accounts immediately rather than the days it took to reach most people.
Some Fed officials say the program even could supplant the need for a central bank digital currency.

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The jump in rent has come as a cruel postscript to the coronavirus pandemic in the south coast town of Hastings, tipping low-income earners and the unemployed towards destitution.There were some welcome palliatives in the UK Budget on Wednesday — a surprise boost to childcare funding aimed at getting parents back to work, and a three-month extension to energy bill support chief among them.But for many people in the town, one of the poorest in the south of England, household budgets have long ceased to add up. The chancellor Jeremy Hunt’s Spring Statement did little to change that.The dial on universal credit welfare support “is set so low” it never makes up the difference, according to Tracy Dighton, chief officer at the 1066 Citizens Advice bureau in Hastings, offering free advice to people on how to resolve financial and other problems.“It feels like the whole place is held together with bits of string and love,” she said, stressing how central the voluntary sector has become to basic survival. Tracy Dighton, chief officer of the Citizens Advice 1066 bureau in Hastings: ‘It feels like the whole place is held together with bits of string and love’ © Charlie Bibby/FTA surge of interest in once relatively cheap property meant Hastings had the second-highest increase in rental costs in the country between 2021-22, according to estate agents Zoopla. This has landed on top of soaring food and energy costs to stretch the gap between income and expenditure to breaking point for many households.The chancellor has been under pressure to alleviate the most acute cost of living crisis in generations, with voting intentions in the balance in bellwether constituencies such as Hastings, which has historically swung between the Conservatives and Labour party on a fine margin.But with inflation running in recent months at 40-year highs, his Budget underwhelmed many residents. Dighton welcomed the extension to energy support, which will bring an average of £160 relief to struggling households over the next three months. She also welcomed a £100mn fund to help charities and community groups meet rising costs.Staff at the Citizens Advice 1066 bureau in Hastings field calls from clients © Charlie Bibby/FTBut, she said, the measures were insufficient and she worried that people experiencing real hardship for the first time would continue falling through the net. “It feels like bits and pieces rather than something that will make a structural difference,” she said, adding that she had hoped for something bold and new, such as an “essential” tariff for utility bills, or an uplift above inflation in universal credit.“If you’ve lost all your savings after having one thing and another in the pandemic, you have no wriggle room left.”The average income in Hastings at £28,000 is 30 per cent lower than the national average.Ross Mudie, research analyst at the Centre for Progressive Policy think-tank, said coastal towns such as Hastings have faced particular challenges because residents are typically on low incomes or work seasonally. Hastings had the second-highest increase in rental costs in the country between 2021-22, according to estate agents Zoopla © Charlie Bibby/FTThey might have got by when inflation was at 2 per cent but have struggled since it shot into double digits last year, he said.“The big news is about keeping the energy price as is. It’s good for the next three months, but it’s not going to do anything to reduce fuel poverty over the long term.”Nor was there anything to address the housing crisis.Rent in Hastings, like many places, is on the rise, but at 10 per cent it has shot up dramatically when a surge in people during the pandemic, chiefly from London, began buying properties on the seafront and the old town, many for use as second homes or Airbnb rentals, according to the council.Tanya Mitchell, a 48-year-old teaching assistant with two children and a partner working as a parcel courier, said typically her rent had previously risen by £20 or less each year. By cutting back on non-essential expenditure and turning the heating off this winter, they had got by until her landlord raised the rent by £40 to £835 a month for 2023, she said. This had pushed the family to the brink.“We have been good tenants for 15 years. There should be a cap on what landlords can realistically charge.”Dennis Bond, a pensioner in Hastings: ‘You try and do your best, but you just get knocked in the teeth’ © Charlie Bibby/FTProspects for 73-year-old Dennis Bond, a soldier for 20 years before becoming a podiatrist, were also bleak even though he owns a small bungalow outright, has three pensions, an army one, a state one, and a small private one, adding up to £1,600 a month. He said he had been paying about £600 a month more in general costs than his income. “You try and do your best, but you just get knocked in the teeth.”The Conservative MP for the town, Sally-Ann Hart, who won the constituency with a margin of just over 4000 votes in 2019, did not respond to requests for an interview.Paul Barnett, Labour leader of the council, said his biggest worry was housing.Paul Barnett, leader of the council in Hastings © Charlie Bibby/FT“People during the pandemic flocked to Hastings attracted by the unspoilt authenticity of the place — it’s like a rough diamond,” he said. But while an influx of investment has given bits of the town a facelift, it has also constrained accommodation supply.There had been a “three to four times” increase to 1,000 in the number of people needing emergency help from the council with accommodation, Barnett said.He welcomed the government’s announcements that “levelling up” funds have been allocated towards a new health and leisure centre in the town. But for the most part, he said, the measures to tackle the cost of living were “too little, too late”. More