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