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October 31, 2014

Twenty-Five Eurozone Banks Fail ECB Stress Test - The European Union

On October 26, 2014, the European Central Bank (ECB) said that a total of 25 Eurozone banks failed the health check designed to measure their ability to withstand another economic crisis. A capital shortfall of EUR 25 billion (USD 32 billion) was detected at 25 participating banks among the 130 largest Eurozone banks whose assets have been reviewed by the ECB. The results were part of a year-long examination of the resilience and positions of the Eurozone’s 130 largest banks. Vitor Constancio, vice-president of the ECB, claimed in a press conference that 12 of the 25 banks have already covered their capital shortfall by increasing their capital by EUR 15 billion (USD 19 billion). The other 13 banks will come up with plans to address the shortfall. 

Pinkerton Analyst Comment: The results will be watched closely by all stakeholders and investors as the exercise clears the haze and provides the clearest picture of the health of Eurozone banks. The clarity may help reduce uncertainty and augment liquidity in the market. At the same time, banks with poor credit health and non-performing assets may lose customers and market confidence in the short-term. More concerted efforts can be pushed to revive the banking system in the region.

Garment Shipments Delayed Over Strike At Twin Ports - Bangladesh and the United States

The Daily Star The ongoing strike by the International Longshore and Warehouse Union (ILWU) at the Ports of Los Angeles and Long Beach (California, the U.S.) has reportedly delayed garment shipments from Bangladesh to the U.S.. Port workers have been on strike for the past three weeks demanding renewal of their contracts signed with the Pacific Maritime Association (PMA). It also affected e-retailers as they are unable to deliver their products to customers due to the workers strike at the ports. 

Pinkerton Analyst Comment: It remains unclear how long the strike will continue at the Ports of Los Angeles and Long Beach, the United States’ biggest container hub. If the strike continues for a longer duration, it likely will affect a large number of global retailers that source garments from Bangladesh and other countries. Nevertheless, even if the strike is called off by the workers, delays are likely as there will be congestion at the ports due to lack of chassis supply (trailers which are attached to trucks and are used to load cargo containers) and long waiting times for trucks. Various companies have also reported delays of two to three weeks after their goods have cleared customs due to non-availability of containers. Pinkerton suggests companies that receive or send their consignments through the Ports of Los Angeles and Long Beach to review contingency measures and use alternate ports to avoid delays. 

Deal Against Banking Secrecy Signed - Worldwide

Yahoo News On October 29, 2014, More than 80 countries committed to the Multilateral Competent Authority Agreement to end banking secrecy. Fifty-one countries signed the agreement that will come into effect in 2017, while 30 more committed to signing in 2018. The agreement ensures sharing information between national tax authorities in order to combat fraud and tax evasion. According to the estimations, about USD 7.4 trillion worldwide is hidden in tax havens, depriving national coffers of USD 163 billion in yearly income taxes. 

Pinkerton Analyst Comment: The signed agreement will complicate efforts to hide assets in foreign accounts. While the agreement will make offshore tax evasion more difficult, there are still several loopholes that would need to be fixed by a subsequent agreement. Panama and Singapore, for example, have not signed up, and Switzerland has declared it will only share information with countries important to Swiss industry.

Global Risk
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