FCA boss warns against ‘excessive regulatory mode’ in private equity

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Good day. Today we have an exclusive interview with the head of Britain’s top financial regulator.

The chief executive of the Financial Conduct Authority, Nikhil Rathi, has said he is “not convinced” that private equity groups pose a systemic risk, taking a contrary stance to that of the Bank of England, which last week said it Lenders should stress test their exposure to the $8 trillion Industry due to risks to the broader economy.

“What I do think is important is that the (private equity) industry doesn’t nickel and dime us on data,” he told the Financial Times, “because we need to understand the evidence here and take a view on what’s happening.”

Rathi also sits on the Bank of England’s financial policy committee, which maps risks to the wider economy. In its most recent report, the committee stepped up warnings about leverage, transparency and private equity valuations.

“There are risks in private markets, there is work to be done, but I don’t think we should fall into an excessive regulatory mode where we put leverage limits on all this activity, if we don’t actually have the evidence for it.” that,” Rathi said. Here are more of his comments to Ortenca Aliaj in London.

• UK Banks: Interest earned by major lenders on their Bank of England reserves rose 135 per cent to more than £9 billion last year, according to data published yesterday.

Here’s what I’m keeping an eye on today:

• Economic data: The OECD publishes its economic outlook, while S&P Global has manufacturing purchasing managers’ indices for the EU, France, Germany, Italy, Poland, Russia and Spain. United States reports monthly factory orders.

• Meetings: French President Emmanuel Macron will meet his Japanese counterpart Fumio Kishida in Paris, where Japan is chairing the OECD ministerial council meeting. The annual meeting of the Asian Development Bank begins in Tbilisi, Georgia.

• UK local elections: Prime Minister Rishi Sunak’s political fate depends on contests for more than 2,600 council seats and 11 mayoralties taking place today in England and Wales. Our Inside Politics newsletter and Political Fix podcast will hold a special event next Wednesday to discuss the results. Sign up here.

• Results: Report from Apple, ArcelorMittal, ConocoPhillips, ING, Shell, Smiths News, Standard Chartered and Universal Music.

Five more featured stories

1. The US military has almost completed a $320 million floating dock off Gaza. a complex project to allow humanitarian aid by sea to reach the besieged enclave where land routes have been interrupted by politics and war. Hundreds of American troops have spent weeks building the structure promised by President Joe Biden in early March. But here’s why a senior UN official has called it “a useless distraction.”

• Ceasefire talks: US Secretary of State Antony Blinken has told Israel and Hamas that “the time has come” to reach an agreement that would release the hostages and stop more than six months of fighting.

• US Campus Unrest: Republicans are attacking Biden for failing to quell war protests, while right-wing Congresswoman Marjorie Taylor Greene has called for House Speaker Mike Johnson to be ousted for his role in a sweeping bill. aid for Ukraine and Israel.

2. Shell’s large shareholders have urged other investors to back their resolution seeking greater climate action. send a “strong signal” to the oil and gas industry. Amundi and Axa Investment Managers are among 27 shareholders, who together own around 2.5 percent of the fossil fuel group, who have called on the company to align its “medium-term” emissions target with the Climate Agreement. Paris. Here are more details about the resolution.

• ExxonMobil: US regulators are close to approving the $60 billion acquisition of Pioneer Natural Resources on the condition that the smaller oil company’s former CEO, Scott Sheffield, does not join the big company’s board of directors.

3. Uber faces a multimillion-dollar lawsuit from London black cab drivers. reviving a long-simmering battle between the San Francisco-based ride-hailing app and the UK capital’s taxi sector. The lawsuit, which will be filed today at London’s High Court on behalf of more than 10,500 taxi drivers, alleges that Uber improperly obtained a license from Transport for London in 2012. Here’s what this means for the American company.

4. Embraer is exploring options for a new passenger plane that can rival Airbus and Boeing. said people familiar with the situation. The Brazilian aerospace and defense group is studying plans for a narrow-body aircraft or long-range business jet, with a business case ready for the company’s board of directors by the end of next year. Here’s more information about the project, which is still in its early stages.

5. The strength of the US economy poses a dilemma for Joe Biden and the Federal Reserve. and the high borrowing costs that American voters complain about will persist at least until the November elections. Central Bank Chairman Jay Powell dashed the president’s hopes yesterday when he said high rates would “need more time to do their job.”

• Opinion: The Federal Reserve plays an important role in keeping inflation under control, but we must be realistic about the limits of monetary policy, writes Tej Parikh.

Want more information on how rate setters fight inflation? Register for our central banking newsletter from Chris Giles if you are a premium subscriber, or upgrade your subscription here.

visual history

Stagnant Western aid and Russia’s success in a largely land war have given Ukraine a difficult start to the year. But in the Black Sea, kyiv continues to advance. Despite having no real navy, Ukraine has disabled or destroyed a third of Russia’s Black Sea fleet in the past two years. Our latest visual story explores Ukraine’s surprising naval success and its strategic and economic importance to a country dependent on maritime trade.

We are also reading. . .

• Berkshire after Buffett: The second part of our series on the future of the company looks at Ajit Jain, the risk “genius” who heads Berkshire Hathaway’s insurance operations.

• UK consumption: A Financial Times analysis of official data shows British households are reducing their consumption of beer, meat and household appliances, highlighting the impact of the cost of living crisis.

• Italian politics: Deputy Prime Minister Matteo Salvini is facing a revolt within his far-right League party after choosing a homophobic and pro-Russian candidate for the EU elections.

• Puig: The Spanish group behind Jean Paul Gaultier is aiming for a valuation of €14 billion when it goes public this week, as chairman Marc Puig reduces his family’s influence over the 110-year-old company.

chart of the day

New lending to UK commercial real estate fell to a record low in 2023 as lenders and investors battled falling property values, higher debt costs and pressure to deal with troubled loans . Total loan originations during the year were £33bn, the lowest in a decade, according to a closely watched report by Bayes Business School.

Take a break from the news

Once described by the Financial Times as “the perfect 15-minute city”, Frankfurt is synonymous with urban liveability, and that extends to its arts, sports and festival offerings, as our latest Globetrotter guide reveals.

Additional contributions from Benjamin Wilhelm and Gordon Smith