MONOPOLY CAPITALI$M

Swiss sweat over size of new superbank

Credit Suisse will be folded into UBS, Switzerland's largest lender.

An employee is seen in silhouette with sign of Swiss giant banking UBS and a sign of Credit Suisse bank in Zurich on Mar 20, 2023. (Photo: AFP/Fabrice Coffrini)

22 Mar 2023 

ZURICH: The arranged marriage of UBS and Credit Suisse will create the biggest bank Switzerland has ever seen, with some wondering if the superbank might be too big for its own good.

The deal struck late Sunday (Mar 19) prevented the collapse of the country's second-biggest lender by folding it into the largest.

Even before last week's dramatic events, both firms were already among the 30 around the world deemed of strategic importance to the global banking system and therefore too big to fail.

Some in business, industry and politics are not convinced that one even bigger bank will turn out for the better.

"Credit Suisse was really the bank of the economy and industry," said Philippe Cordonier of Swissmem, the national association representing the engineering industry.

For exporting companies, Credit Suisse offered a range of services essential for international transactions, "payments abroad, credits, leasing or currency hedging", he told AFP.

LESS COMPETITION

"This is where the question arises of what skills will be kept," said Cordonier, as the profiles of the two banks, although close, are not identical.

So far, many questions remain unanswered.

Such a takeover would normally need months of negotiations, but UBS only had a couple of days, under some serious arm-twisting by Swiss authorities.

UBS chief executive Ralph Hamers admitted at an analysts' conference that he did not yet have all the details of the takeover.

Switzerland is a confederation of 26 cantons and Cordonier said the alternative could be to turn from the national banks to the cantonal banks.

However, many do not currently have the skills to help companies export to far-off markets such as Asia, and would have to develop them.

The other option is to turn to foreign banks, although they would not possess "in-depth knowledge" of the Swiss market, Cordonier said.

"If there is only one major bank that has the capacity to work abroad, this will restrict the choice of solutions for companies," said the engineer, who is also concerned about the repercussions on costs "if there is less competition".

WORRIES

Founded in 1856 by Alfred Escher, the godfather of Swiss railways, Credit Suisse was closely linked to the country's economic development.

The bank financed the expansion of the rail network, the construction of the Gotthard Tunnel beneath the Alps, and the start-up of Swiss companies that went on to become leaders in their sector.

"Twenty-five years ago, there were four big Swiss banks," recalled the Swiss Federation of Companies, which represents small and medium enterprises.



Related:


Credit Suisse is in crisis. What went wrong?


Stunned Credit Suisse staff fear uncertain future despite UBS rescue deal


Commentary: Fall of Credit Suisse shows more work is needed on bank risk


The banking sector has already seen major convergence in 1998 when the Swiss Bank Corporation merged with the Union Bank of Switzerland to form the modern UBS.

"The concentration into a smaller number of banks reduces competition and makes it more difficult to obtain good financing conditions for SMEs," the federation said in a statement.

The orchestrated takeover has also triggered virulent criticism among Swiss political circles, of all stripes.

Politicians have called for the further tightening of regulations - which are already strict in Switzerland - in the face of this new giant, which will dominate the nation's banking sector.

SWIFT SOLUTION

A partial nationalisation could "at least" have been considered, said Tobias Straumann, professor of economic history at the University of Zurich, told the Berner Zeitung newspaper.

Carlo Lombardini, a lawyer and professor of banking law at the University of Lausanne, said the UBS takeover "was surely the only swift and feasible solution".

However, he would have preferred another outcome, such as a takeover "by a foreign bank", he told AFP.

"But a large foreign group doesn't do acquisitions in a weekend," he admitted.

The other solution would have been to nationalise Credit Suisse "to enhance the good bank" and consolidate the poor assets into a "bad bank" to be liquidated, he explained.

However, it is already too late for such what-ifs, Lombardini said.

"It's like wondering what would have happened if Napoleon had not lost at Waterloo," he said.

"The real problem is we are going to have an even more 'too big to fail' bank," he warned.

WATER IS LIFE

Drought, floods and sickness: Key takeaways from UN's water report

Amélie BOTTOLLIER-DEPOIS
Wed, March 22, 2023 


Billions of people experience water-related issues on a daily basis -- from contaminated drinking water, to droughts and floods -- with a UN report warning Tuesday that the risk of a global crisis is "imminent."

Here are some key takeaways from the UN Water forum, which published its report as the first major conference on the issue in nearly a half-century is set to get underway Wednesday in New York.

- Shortages -

Global water consumption has increased by about 1 percent per year over the past four decades.

To meet that growing demand, humans have been tapping more and more into groundwater, resulting in the depletion of between 100-200 cubic kilometers (26-52 trillion gallons) of reserves each year.


About 10 percent of the world's population lives in a country where water stress (the ratio of water use to water availability) is considered "high or critical," creating significant impacts on its availability for personal needs.

And according to a report issued Monday by the IPCC -- a UN panel of climate experts -- "roughly half of the world's population currently experience severe water scarcity for at least part of the year."

The World Bank estimates that climate change-exacerbated water shortages could cost some regions up to six percent of GDP by 2050 due to impacts on agriculture, health, income, and potentially forced migration or even conflict.

- Cities v. agriculture -

Agriculture makes up more than 70 percent of global water usage, but as city populations have continued to grow, "water allocation from agriculture to urban centers has become a common strategy to meet freshwater needs," the UN said.

But that's not likely to be enough. The number of urban residents threatened by water scarcity is expected to rise from 933 million in 2016 to between 1.7 and 2.4 billion in 2050, according to UN-Water, which projects that India will experience the most severe effects.

- Natural disasters -

As the planet warms, humidity in the atmosphere increases by about seven percent with each additional degree Celsius. That in turn leads to more rainfall, which is more intense and less regular.

Between 2000 and 2019, floods are estimated to have caused $650 billion in damage, affected 1.7 billion people and caused more than 100,000 deaths, according to the report.

Warming also intensifies and raises the frequencies of droughts, which over the same period affected 1.4 billion people and caused $130 billion in damage.

Together, droughts and floods account for more than three-quarters of the natural disasters impacting humans.

- Sanitation and hygiene -

In 2020, over one in four people around the globe still lacked access to safe drinking water, while 3.6 billion (46 percent of the population) lacked access to safely managed sanitation services, including the nearly 500 million who must resort to "open defecation."

In addition, more than 40 percent of domestic wastewater was not treated safely before being released into the environment in 2020.

Twenty-nine percent of the world's population (2.3 billion people) lacked basic hygiene services, including 670 million without any handwashing facilities.

At least two billion people drink water which has been contaminated with feces -- which can contribute to the spread of diseases such as cholera, dysentery and polio.

In 2019, 1.4 million deaths are estimated to have been caused by the lack of adequate sanitation and hygiene services.

Worries are also growing over other kinds of pollutants, such as chemicals and pharmaceutical drugs, pesticides, or plastics and nanomaterials.

- Ecosystem damage -

Pollutants are also threatening freshwater ecosystems, which are particularly affected by agricultural runoff.

These fragile ecosystems are "among the most threatened in the world," the report says, while highlighting the disappearance of more than 85 percent of wetlands.

"The loss of environmental services and biodiversity is expected to continue as natural landscapes are lost to cultivated land," the report says, noting that these transitions can result in the emission of greenhouse gases.

- Major investments needed -

While it is difficult to put a precise number on how much investment would be needed to achieve the UN's sixth "Sustainable Development Goal" of ensuring access to clean water and sanitation for all by 2030, a study cited by the report estimates that it would cost more than $1 trillion per year.

Just providing safe drinking water by 2030 would require a tripling of current investment levels, the report says.

 

'Vampiric' water use leading to 'imminent' global crisis, UN warns

AMÉLIE BOTTOLLIER-DEPOIS

Tue, Mar 21, 2023, 

Humanity's "lifeblood" -- water -- is increasingly at risk around the world due to "vampiric overconsumption and overdevelopment," the UN warned in a report, published hours ahead of a major summit on the issue was set to begin Wednesday.

The world is "blindly travelling a dangerous path" as "unsustainable water use, pollution and unchecked global warming are draining humanity's lifeblood," United Nations Secretary General Antonio Guterres said in a foreword to the report, released hours ahead of the first major UN meeting on water resources in nearly half a century.

Co-hosted by the governments of Tajikistan and the Netherlands, the UN Water Conference will gather some 6,500 participants, including a hundred ministers and a dozen heads of state and government Wednesday through Friday in New York.

Richard Connor, lead author of report, told AFP that the impact of the "world water crisis" will be a "matter of scenarios."

"If nothing is done, it will be a business-as-usual scenario -- it will keep on being between 40 percent and 50 percent of the population of the world that does not have access to sanitation and roughly 20-25 percent of the world will not have access to safe water supply."

With the global population increasing every day, "in absolute numbers, there'll be more and more people that don't have access to these services," he said.

At the UN conference, governments and actors in the public and private sectors are invited to present proposals for a so-called water action agenda to reverse that trend and help meet the development goal, set in 2015, of ensuring "access to water and sanitation for all by 2030."

The last conference at this high level on the issue, which lacks a global treaty or a dedicated UN agency, was held in 1977 in Mar del Plata, Argentina.

Some observers have already voiced concerns about the scope of these commitments and the availability of funding to implement them.

"There is much to do and time is not on our side," said Gilbert Houngbo, chair of UN-Water, a forum for coordinating work on the topic.

The report, published by UN-Water and UNESCO, warns that "scarcity is becoming endemic" due to overconsumption and pollution, while global warming will increase seasonal water shortages in both areas with abundant water as well as those already strained.

- 'Now or never' -

"About 10% of the world's population lives in a country where water stress has reached a high or critical level," the report says.

According to the most recent UN climate report, published Monday by the IPCC expert panel, "roughly half of the world’s population currently experience severe water scarcity for at least part of the year."

Those shortages have the most significant impact on the poor, Connor told AFP.

"No matter where you are, if you are rich enough, you will manage to get water," he said.

The report notes the particular impact of existing water supplies becoming contaminated due to underperforming or nonexistent sanitation systems.

"At least 2 billion people (globally) use a drinking water source contaminated with feces, putting them at risk of contracting cholera, dysentery, typhoid and polio," it said.

That high number does not even take into account pollution from pharmaceuticals, chemicals, pesticides, microplastics and nanomaterials.

To ensure access to safe drinking water for all by 2030, current levels of investment would have to be tripled, the report says.

Freshwater ecosystems -- which in addition to water, provide life-sustaining economic resources and help combat global warming -- "are among the most threatened in the world," the report warns.

"We have to act now because water insecurity is undermining food security, health security, energy security or urban development and societal issues," Henk Ovink, the Dutch special envoy for water, told AFP.

"It's now or never as we say -- a once in a generation opportunity."

Rhode Island Is Struggling To Realize Its Offshore Wind Potential

By Michael Kern - Mar 20, 2023

Rhode Island is making strides in the renewable energy sector, with plans to develop offshore wind energy. Governor McKee recently announced a Request for Proposals (RFP) for 600 to 1,000 megawatts of newly developed offshore wind capacity. This move is part of the state’s commitment to reduce greenhouse gas emissions and increase its use of renewable energy sources.

The first offshore wind farm in the US was built off Block Island in 2016, and it has been providing clean energy to the area ever since. The proposed Revolution Wind Farm project would be located off the coast of Rhode Island and Connecticut and have a capacity of 704 MW. It would provide clean, affordable power to both states.

In addition to Revolution Wind Farm, there are other potential sites for offshore wind development in Rhode Island. The Bureau of Ocean Energy Management (BOEM) has identified areas with annual average wind speeds of 7 meters per second or greater at 90-m height as suitable for offshore development. These areas could potentially be used for future projects that would generate even more renewable energy for Rhode Island residents.

However, despite these promising opportunities, only one proposal was submitted in response to Governor McKee’s RFP – from Orsted US Offshore Wind. While this is a positive step forward, some stakeholders had hoped that more developers would submit proposals so that there could be more competition and better prices for consumers.

Rhode Island officials are currently evaluating Orsted’s proposal and will make a decision on whether or not to move forward with it later this year. If approved, it could lead to significant investment in the state’s economy and create thousands of jobs related to construction and operation of the new offshore wind farm. It could also help reduce electricity costs by providing an additional source of clean energy that is cheaper than traditional fossil fuels like coal or natural gas.

Offshore wind has become increasingly popular worldwide due to its potential for generating large amounts of renewable energy with minimal environmental impact. In order for Rhode Island to remain competitive in this growing industry, it must continue investing in infrastructure and technology related to offshore wind development while also ensuring that any projects meet stringent safety standards and adhere to strict environmental regulations.

Overall, Rhode Island is taking important steps towards increasing its use of renewable energy sources such as offshore wind power. With continued investment in infrastructure and technology related to offshore wind development, along with careful evaluation of any proposals received from developers, Rhode Island can ensure that it remains at the forefront of this rapidly growing industry while also helping reduce greenhouse gas emissions and providing clean, affordable electricity for its residents.

By Michael Kern for Oilprice.com

New Report Estimates A $110 Trillion Price Tag For Net Zero Emissions

By Irina Slav - Mar 21, 2023

Global investments in the energy transition would need to increase to $3.5 trillion per year if the world is to become a net-zero place by 2050, a climate change think tank has said in a new report, in which it noted there were no fundamental barriers to the net-zero plan. That spending would total $110 trillion by 2050.

In its report, titled “Financing the Transition: How to make the money flow for a net-zero economy”, the UK-based Energy Transitions Commission said the massive sum of money would go towards building more wind and solar power generation capacity, plus other low-carbon generation technology. Part of the total would also go into transmission and distribution infrastructure building and another part would be spent on battery storage and seasonal storage.

“Though this report confirms that there are no big fundamental barriers to the energy transition – that was the hypothesis going in – it was striking that the numbers showed 70% of the finance that must be raised has to go [into electrification of power systems],” Mike Hemsley, deputy director of the think tank, told Recharge.

The sum that the Energy Transitions Commission says would need to be spent on net zero compares with the $1 trillion annually that is being spent today.

“This report also identifies that there are two conceptually different types of finance required: ‘classic’ investment which gives an economic return for money paid in, and concessional/grant payments, essentially paying someone to do something they might not do otherwise as there is no economic incentive,” Hemsley also told Recharge.

Those concessional or grant payments, the report notes, could reach $300 billion annually by 2030.

According to the authors of the report, some of that massive sum could be offset by a decline in investments in oil and gas, to the tune of $500 billion annually. The offset sum would reduce the annual investment bill of the world to $3 billion, which would be equal to 1.3 percent of global GDP over the next 30 years.

By Irina Slav for Oilprice.com

The UK Will Face A Rising Risk Of Power Supply Shortfalls This Decade

By Tsvetana Paraskova - Mar 21, 2023

The UK risks a shortage in stable electricity generation in the late 2020s as more coal-fired and older gas and nuclear power plants close, research commissioned by energy firm Drax Group showed on Tuesday.  

Peak demand for Britain’s electricity is expected to rise by 4 gigawatts (GW) by 2027, the research carried out by consultancy Baringa showed. At the same time, the imminent closure of coal-fired power plants, older gas-fired power generation, and closure of nuclear power plants will remove up to 6.3 GW of secure capacity from the UK’s grid, according to the research. 

Dispatchable capacity, which can be called on when needed and which supports Britain’s energy security, will fall from 93% to 85% at times of peak demand, increasing the risk of a supply shortfall, the research found.  

The UK will see a surge in intermittent capacity due to the rise in wind and solar capacity installations, but it will still need stable power generation to serve as a backup in times of peak demand.

This winter, for example, National Grid several times has requested coal-fired capacity to be ready to be sent to the grid if needed, at times of soaring demand on the coldest winter days and nights.

On Sunday, natural gas produced 34.8% of British electricity, followed by wind 22.5%, imports 16.6%, nuclear 14.9%, solar 4.6%, biomass 4.5%, and hydro 2.2%, with no coal-generated power sent to the grid, the operator said on Monday.

According to Baringa’s research for Drax, “The system will need to rely on other forms of capacity, such as electricity interconnectors and intermittent renewable generation like wind or solar, to make up the 15% difference at times of peak demand.”

Drax’s biomass power station in Yorkshire, providing 2.6 GW of electricity, is the largest provider of dispatchable power to the GB electricity system, as well as being one of the only renewable sources of secure supply, the company said. Drax also urged the UK government to support its carbon capture and storage project before it can commit to a $2.45 billion (£2 billion) project to install bioenergy with carbon capture and storage (BECCS) technology at its plant.

German Federal Government Signals Energy Crisis Aid Is Not Sustainable 

By Charles Kennedy - Mar 21, 2023

Germany’s government has warned local authorities that the money it has been distributing amid the energy crisis since last year will not become a new norm.

“All of this burden sharing is based on decisions taken in exceptional political and economic situations,” deputy finance minister Luise Hoelscher said in the ministry’s regular monthly report, as quoted by Bloomberg.

“It’s clear that it cannot be the yardstick for coping with future challenges,” Hoelscher also said. “The financial situation of the federal government has in fact deteriorated considerably in recent years compared with the financial position of the states.”

The federal government of Germany incurred a budget deficit of more than $130 billion in 2022 (129.3 billion euro) largely as a result of pandemic aid and financial support for companies, households, and local governments amid the energy crunch that squeezed the country last year.

Despite the aid, the largest German state, North Rhine-Westphalia, was forced to declare an emergency situation last November in order to be allowed to take on new debt to survive.

North Rhine-Westphalia, home to 20 of the 50 largest German companies, declared an “extraordinary emergency situation” in order to be able to access more loans which would otherwise be denied to the state because of a rule on how much debt a state can borrow

Germany last year doled out as much as 270 billion euros, or close to $290 billion, to protect consumers from the worst effects of the energy crunch, topping the spenders’ list in Europe, including the UK.

The European Union’s total bill for energy aid to businesses and consumers came close to 700 billion euro, or about $720 billion. Some EU member states were not really happy with Germany’s generosity, accusing it of gaining an unfair advantage for its businesses thanks to its deeper pockets.

Venezuela Oil Minister Resigns Amid PDVSA Corruption Probe

By Charles Kennedy - Mar 21, 2023

Tareck El Aissami, Venezuela’s oil minister for three years, has resigned amid a corruption probe into state oil company PDVSA, Reuters has reported, noting six arrests have already been made.

The probe, which also covers the judiciary, has so far resulted in the arrests of two judges, a mayor, and three high-level government officials, the report noted, citing Venezuelan media and unnamed sources.

According to the same sources, some 20 PDVSA officials have also been placed under arrest in the past few days. These arrests are likely to have been made in relation to the investigation of oil cargoes that have been leaving the country without payments being made to the company, the Reuters sources said.

The Venezuelan state oil company suffered hefty losses because of those unpaid for cargoes and the affair led to a freeze of oil supply contracts early this year when the new head of the company, Pedro Rafael Tellechea, came into office.

At the time, Reuters reported that the payment problems have arisen because PDVSA has been forced to use the services of small middlemen companies to ship its oil abroad because of U.S. sanctions. These handle most of the shipments of Venezuelan crude abroad, but some is traded by three Western companies: Chevron, Eni, and Repsol, which were all granted a sanction waiver to do that.

Meanwhile, Venezuela’s oil industry, crippled as it is by U.S. sanctions, remains a big earner. In fact, Caracas said it expected income from oil exports to finance as much as 65 percent of the state budget for this year.

More specifically, the Venezuelan government has stipulated a budget of $14.7 billion for this year, of which $9.34 billion should come from PDVSA—up 14 percent from 2022. With current prices, this is quite unlikely to happen, so Venezuela would either have to boost production or hope prices start climbing again.

By Charles Kennedy for Oilprice.com

Goldman Sachs Sees Commodities Supercycle On The Horizon

By Julianne Geiger - Mar 21, 2023

Investment banker Goldman Sachs sees a commodities supercycle on the horizon triggered by China and a shift away from capital in the energy markets and energy investments.

The exodus from energy markets was brought on by panic in the banking sector, Goldman Sachs' head of commodities, Jeff Curie, said on Tuesday at the Financial Times Commodities Global Summit according to Reuters.

"As losses mounted, it spilled into commodities," Currie said, adding that it could take months to get capital back. "We will still get a deficit by June and it will drive oil prices higher."

"On copper, the forward outlook is extraordinarily positive. We'll be at the lowest observable inventories that have ever been recorded at 125,000 tonnes. We have peak supply occurring in 2024...Near term we put (the copper price) at $10,500 and longer term our price target is $15,000 a tonne."

Copper prices rose on Tuesday on signs of solid demand and a bit more calm in the banking sector. Three-month copper CMCU3 on the LME was trading at $8,833.50 a tonne as the banking panic subsided.

Federal regulators shut down Silicon Valley Bank when it was unable to meet withdrawal requests as panic ensued. They also shut down New York's Signature Bank, fueling the market panic even more. 

The SVB collapse likely means no more rate hikes, Goldman said previously. Higher rate hikes could curtail crude oil demand, so a pause in the hikes could lead to higher demand than what had been previously forecast.

Goldman Sachs has most recently estimated that the Brent crude oil benchmark will reach $94 per barrel in the coming months, with 2024's Brent prices reaching $97 per barrel.

By Julianne Geiger for Oilprice.com