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Now for the latest financial news, with Sally Bundock | :00:00. | :00:00. | |
Banking on a bailout, Italy's banking crisis comes | :00:00. | :00:17. | |
We talk you through what is at stake. | :00:18. | :00:23. | |
Singapore's giant state investment fund fights allegations | :00:24. | :00:26. | |
it is fanning the flames of the Indonesian haze. | :00:27. | :00:37. | |
Welcome to World Business Report, I'm Sally Bundock. | :00:38. | :00:39. | |
In a minute, we will find out how Google has struck a deal with Cuba | :00:40. | :00:44. | |
It is a crucial week for Italian banks, and investors | :00:45. | :00:54. | |
UniCredit, Italy's largest, is due to announce a new business | :00:55. | :00:59. | |
plan today, which will be key to its survival. | :01:00. | :01:01. | |
Meanwhile, shareholders of Banca Popolare di Vicenza meet | :01:02. | :01:03. | |
today to decide whether they will sue the bank's former managers | :01:04. | :01:07. | |
for damages, after it needed an emergency bailout in May | :01:08. | :01:09. | |
following a failed market floatation. | :01:10. | :01:10. | |
But top of the list of worries is the world's oldest bank, | :01:11. | :01:14. | |
and Italy's third biggest, Banca Monte dei Paschi di Siena. | :01:15. | :01:16. | |
The European Central Bank believes it is the most vulnerable. | :01:17. | :01:26. | |
This is mainly because it is burdened with toxic debt, | :01:27. | :01:29. | |
in other words, loans that are unlikely to ever | :01:30. | :01:31. | |
That is a problem that extends to the Italian banking system | :01:32. | :01:39. | |
So these lenders are trying to get rid of those loans by selling them | :01:40. | :01:45. | |
to investors who specialise in toxic debt. | :01:46. | :01:47. | |
Some, including Monte dei Paschi, are also trying to raise new capital | :01:48. | :01:50. | |
to strengthen its books, so that the bank can better cope | :01:51. | :01:53. | |
Associate professor of finance at Henley Business School. | :01:54. | :02:03. | |
Good to see you again. Good morning. So this has been kind of hanging | :02:04. | :02:12. | |
over us now for a few weeks, but those who are in the know would say | :02:13. | :02:16. | |
for many, many months. Talk us through what they may be doing in | :02:17. | :02:20. | |
terms of bailing out his big banks. I'm not even sure if we need to talk | :02:21. | :02:25. | |
about these big banks, it might just be one or two. So essentially you | :02:26. | :02:30. | |
have a situation where there is different levels of systemic risk at | :02:31. | :02:35. | |
stake, for instance, UniCredit is a globally, systemically important | :02:36. | :02:39. | |
rank, and UniCredit being in trouble could have contagion effects on | :02:40. | :02:44. | |
other banks in Europe, for instance. Banca Monte dei Paschi di Siena is | :02:45. | :02:47. | |
probably systemically important within an Italian context, on its | :02:48. | :02:51. | |
own problems come from not handling its risk very well. So Monte dei | :02:52. | :02:58. | |
Paschi probably didn't manage its risk too well, being the world's | :02:59. | :03:04. | |
oldest bank doesn't mean having the best databases, and being kind of a | :03:05. | :03:09. | |
modern financial tuition for the 21st century -- financial | :03:10. | :03:12. | |
institution. So we have different situations, one is UniCredit and its | :03:13. | :03:15. | |
systemically important addition for Europe, the other is the world's | :03:16. | :03:21. | |
oldest bank, having taken out way too many bad loans. And we have to | :03:22. | :03:25. | |
put this in the context of the politics in Italy, haven't we? | :03:26. | :03:33. | |
Because of course Renzi has gone, a new prime minister is about to be | :03:34. | :03:37. | |
put in position, and it is a very tricky time for these banks hanging | :03:38. | :03:40. | |
in the balance, because it is very politically difficult to sort them | :03:41. | :03:44. | |
out. Yes, I think we have to certainly put this in perspective of | :03:45. | :03:48. | |
politics in Italy and in Europe, because there is a thing in interest | :03:49. | :03:51. | |
for other European politicians to avoid extremist tendencies in Italy | :03:52. | :03:55. | |
as we have seen them elsewhere in the world in 2016 and so in many | :03:56. | :03:59. | |
ways I think there is a political imperative at the moment to | :04:00. | :04:03. | |
basically ensure the survival of the banks, and ensure that there is no | :04:04. | :04:06. | |
fallout on normal citizens and on Europe generally speaking. That is | :04:07. | :04:11. | |
certainly true in Italy's government party, and it is likely to support | :04:12. | :04:16. | |
and underwrite banks if needed. It is important to understand that | :04:17. | :04:22. | |
Monte dei Paschi is about 25 times smaller than UniCredit, so although | :04:23. | :04:25. | |
it is one of the top five institutions, it is significantly | :04:26. | :04:30. | |
smaller than the largest in -- institution. And in terms of the | :04:31. | :04:36. | |
bailout itself, they have talked about 5 billion euros worth of money | :04:37. | :04:41. | |
coming in. It is unclear where it is coming from. There is talk about the | :04:42. | :04:44. | |
cutup investment fund helping, and various others. Are we any clear on | :04:45. | :04:49. | |
how they are going to support these banks -- Qatar investment fund. | :04:50. | :04:54. | |
First of all, 5 billion in terms of the bailout is huge, when you | :04:55. | :04:59. | |
compare the Monte dei Paschi one, which was in the hundreds of | :05:00. | :05:03. | |
millions. So there is a hope they can get one or two billion from | :05:04. | :05:08. | |
equity, and there is a suggestion that Qatar might back up to 1 | :05:09. | :05:11. | |
billion euros if the previous steps are taken in a good manner. The | :05:12. | :05:16. | |
understanding is then if the government would simply back the | :05:17. | :05:19. | |
remainder and I would probably on this moment, given the political | :05:20. | :05:22. | |
situation, think that the government is going to back the remainder | :05:23. | :05:26. | |
regardless of how well the previous steps are taken care of. We have to | :05:27. | :05:30. | |
watch this space, clearly. Thank you for coming in and giving us a sense | :05:31. | :05:34. | |
of what is happening and we will update you through the day. Any news | :05:35. | :05:36. | |
on those banks' financial health. Cuba's state-run telecommunications | :05:37. | :05:39. | |
company has signed an agreement with the internet provider | :05:40. | :05:41. | |
Google in Havana. Under the deal the company can | :05:42. | :05:43. | |
install servers in Cuba, which should significantly | :05:44. | :05:46. | |
improve connectivity speeds Cuba currently has some | :05:47. | :05:47. | |
of the lowest online connectivity The agreement reached | :05:48. | :05:51. | |
between the Cuban government and the Internet giant should pave | :05:52. | :06:02. | |
the way towards something many Cubans have wanted for years - | :06:03. | :06:05. | |
faster Internet speeds. By allowing Google to install | :06:06. | :06:13. | |
servers on the Communist-run island, their key content, such as Gmail, | :06:14. | :06:16. | |
Google Drive and YouTube, should be much quicker for users | :06:17. | :06:19. | |
inside Cuba to access. The deal does not, however, | :06:20. | :06:23. | |
either expand Cuba's aged and obsolete Internet infrastructure | :06:24. | :06:25. | |
nor improve the connectivity rates Most Cubans are still not permitted | :06:26. | :06:28. | |
to have the Internet at home and instead must rely on expensive | :06:29. | :06:33. | |
public-access Wi-Fi points Still, for most Cubans, | :06:34. | :06:36. | |
any such step with a major Internet provider, like Google, | :06:37. | :06:42. | |
seems like a step forward. TRANSLATION: I think it is important | :06:43. | :06:46. | |
for us Cubans to have more access It is good that Google | :06:47. | :06:49. | |
and Cuba made an agreement, it will make it easier for us | :06:50. | :06:55. | |
to have communications. As the deal has been reached | :06:56. | :07:12. | |
in the final weeks of the Obama Administration, | :07:13. | :07:17. | |
officials on both sides seem keen the cement their months | :07:18. | :07:19. | |
of negotiations into hard contracts As a candidate, Mr Trump | :07:20. | :07:22. | |
made arguments both for and against improved | :07:23. | :07:25. | |
ties with Cuba. And there is some uncertainty | :07:26. | :07:27. | |
on the island as to what his The big palm oil company Olam has | :07:28. | :07:30. | |
been accused of using suppliers that may use unsustainable practices | :07:31. | :07:37. | |
in parts of South East Asia and West The claims against the agricultural | :07:38. | :07:41. | |
commodities trader were made in a report by a US-based | :07:42. | :07:47. | |
environmental lobby group called The Singaporean state investment | :07:48. | :07:49. | |
fund Temasek has a majority share in Olam, but insists that it has | :07:50. | :07:59. | |
always been in support of ethical land-clearance practices, | :08:00. | :08:02. | |
and Olam itself has vehemently Rico Hizon is in our Asia | :08:03. | :08:04. | |
business hub in Singapore. Nice to see you. This is a | :08:05. | :08:13. | |
complicated story. Talk us through the detail. It is quite complex, but | :08:14. | :08:21. | |
the BBC spoke with the Olam chief executive officer on Monday, and he | :08:22. | :08:25. | |
says that the company is dealing with cleaning up their supply chain, | :08:26. | :08:30. | |
but that it would take some time, maybe about two to three years. Olam | :08:31. | :08:38. | |
at this point is 52% owned by the city-state's sovereign wealth fund, | :08:39. | :08:43. | |
Temasek Holdings, and they have also denied these allegations by the | :08:44. | :08:48. | |
lobby group from Washington called Mighty. Earlier I spoke with Glenn | :08:49. | :08:53. | |
Horowitz, a chief executive of the firm making these allegations, and | :08:54. | :08:57. | |
asked for his reaction to Temasek's statement. That is disappointing to | :08:58. | :09:03. | |
hear, because Temasek represents the Singapore people, and it has been | :09:04. | :09:08. | |
financing Olam, a company that was in keeping up with its competitors. | :09:09. | :09:11. | |
The much every major trader in the palm oil industry, including | :09:12. | :09:18. | |
Singapore -based rivals, have adopted very strong no deforestation | :09:19. | :09:24. | |
policies. Olam was the one trader holding out who still had this lack | :09:25. | :09:28. | |
box approach. They would ride palm oil with no questions asked, without | :09:29. | :09:32. | |
revealing the identity of those suppliers. Singapore and Malaysia | :09:33. | :09:40. | |
regularly suffer from haze caused by slash and burn practices from | :09:41. | :09:44. | |
small-scale farmers and rogue palm oil traders in Indonesia, and | :09:45. | :09:48. | |
Indonesia is often charged with not doing enough to tackle the fire is | :09:49. | :09:52. | |
used to clear vegetation for palm oil and paper plantations, and they | :09:53. | :09:56. | |
are allegedly owned by some Singaporean and Malaysian companies. | :09:57. | :10:04. | |
Let's quickly look at financial markets. Focus is very much now on | :10:05. | :10:09. | |
the Federal Reserve in the United States, which begins its two day | :10:10. | :10:12. | |
meeting to decide on interest rates, and everyone agrees a hike in | :10:13. | :10:16. | |
interest rates is expected. Market is very much focused on that, and | :10:17. | :10:20. | |
some really good news out of China today about retail sales up | :10:21. | :10:23. | |
significantly, and industrial production numbers up in November. | :10:24. | :10:28. | |
Retail sales, let's not forget, really boosted by the Singles Day | :10:29. | :10:33. | |
shopping bonanza in China in November. Looking at the US, a mixed | :10:34. | :10:38. | |
close. That is all from me for now. Will be back in a few minutes to | :10:39. | :10:43. | |
look through the papers. I will see you then. | :10:44. | :10:52. | |
The former BBC weather presenter Ian McCaskill, | :10:53. | :10:55. |