China Chicken Scandal Hits Fast Food Chains

A growing number of fast food and cafe chains are becoming embroiled in a scandal linked to a single supplier accused of passing off "toxic meat".

Starbucks, McDonald's and Burger King are among the outlets that have taken action since a video came to light which was said to show staff at Shanghai Husi Food Co using expired meat and picking up meat from the floor to sell on to stores in China.

The supplier, which was shut down after the TV report was shown, is a unit of US-based OSI Group.

McDonald's said meat from the supplier had even been sold to its branches in Japan, where it was used in the firm's McNuggets.

The hamburger chain and KFC's parent firm Yum Brands apologised to Chinese customers while Starbucks said some of its stores previously sold products containing chicken originally sourced from Shanghai Husi.

KFC's owner has apologised to diners

Burger King and Dicos, China's third-ranked diner owned by Ting Hsin International, said they would remove Shanghai Husi food products from their outlets.

Pizza chain Papa John's International said on its Weibo blog that it had taken down all meat products supplied by Shanghai Husi and cut ties with the supplier.

Food safety is one of the top issues for Chinese consumers after a scandal in 2008 where dairy products tainted with the industrial chemical melamine led to the deaths of six infants and made many thousands sick.

Other food scandals have hit the meat and dairy industries in recent years, and many Chinese look to foreign brands as offering higher safety standards.

Starbucks said on its Chinese microblog site that it had no direct business relationship with Shanghai Husi but that some of its chicken acquired from another supplier had originally come from Husi for its "Chicken Apple Sauce Panini" products.

Burger King said in a Weibo statement that it had taken off its shelves all meat products supplied by Shanghai Husi and had launched an investigation.

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Russia Faces 'Hard-Hitting' Sanctions Over MH17

Europe's Russia Sanctions Avoid Self-Harm

Updated: 9:34pm UK, Monday 21 July 2014

Sanctions against Russia have now been in place since its annexation of Crimea in March - but following the flight MH17 disaster, all the signs are that they will soon be reinforced.

So what, precisely, do the current sanctions consist of, have they been at all successful, and what might they be followed up with?

In short, the current set of restrictions are, in the jargon, referred to as "stage-two" sanctions.

Rather than affecting the entire economy, or entire sectors, they are forensically focused restrictions on a few individuals and smallish companies.

Both the US and Europe have imposed visa restrictions and asset freezes on a number of influential Russians. The US list is longer and includes a number of President Vladimir Putin's most senior advisers.

Neither jurisdiction has yet added the president to the sanctions list, as was done with Robert Mugabe in Zimbabwe, for instance.

The US has also imposed financial blocks on two small banks, one of which Putin claimed never to have heard of.

The day before the crash last week, it also extended the restrictions to a couple of oil companies, including Rosneft, the country's biggest oil producer.

However, it's worth noting that these are purely financial restrictions, preventing the companies from raising cash in the US, rather than stopping them from pumping oil out of the ground and around the world.

While the EU has signalled it will stop European Investment Bank and European Bank for Reconstruction and Development programmes in Russia, it has stopped short of more severe sanctions.

Why? In large part because of its reliance on Russia for trade. A full 15% of Russia's gas exports end up in Germany. Some 17% of its trade goes to the Netherlands, though this is probably an over-estimate because much of that is merely passing through the port of Antwerp.

While Mediterranean parts of the continent have less direct economic exposure to Russia, save for Italy, which sucks in 9% of Russia's gas, they are also desperate not to upend any chances of an economic recovery following the euro crisis.

It's very difficult indeed to find any evidence that the sanctions themselves have made much difference.

The Russian economy is in a recession, but it was already heading in that direction before the Ukraine crisis.

And while investment and share prices have both fallen in Moscow, that seems due to fear of "proper" sanctions rather than the semi-sanctions now in place.

So what more can be done? The short answer is to extend the sanctions to some sectors, or some mega-companies, and individuals.

Open Europe's Raoul Ruparel thinks a three-pronged approach, involving roughly equal sacrifice from the continent's biggest players, would be most reasonable: Some financial sanctions (which would hurt Britain); some arms sanctions (which would hurt France) and some manufacturing and technology sanctions (which would hurt Germany).

But such system-wide sanctions - "stage three" measures, as they are called - are far from decided.

They would be deeply controversial, and raise the risk, feared by all in Europe, that Putin could retaliate by cutting off the gas supply to Europe.

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Royal Mail Warns Of Lower Parcel Revenues

Royal Mail has warned of a hit to its full-year revenue expectations because of growing competition for parcel deliveries.

In its first quarter results statement, the postal operator said that while total revenues had risen 2% - thanks to a 3% increase in cash from letters - UK Parcels revenue fell 1%.

It blamed growth among rivals for the performance and said it would have to rely on cost control measures and letters sales to meet full-year expectations.

The revenue growth from letters was put down to stamp price increases.

Letter volumes declined by 3%.

Chief executive Moya Greene said: "In the first three months of our financial year we have delivered low single digit revenue growth in line with our strategy.

"Trading has been characterised by a good performance in letters, with the decline in addressed letter volumes better than our expected range, but a weaker than expected performance in UK parcels, largely driven by the intensifying competitive environment in the account, consumer/SME and export channels.

"On costs, performance is better than expected. Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated.

"However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year.

"Our parcels revenue will be dependent on our performance in the second half, which includes the Christmas trading period, and on no further weakening in our addressable UK parcels market."

The results were released 24 hours before Royal Mail's AGM and four days after it warned it faces a possible fine in France for anti-competitive behaviour.

Ms Greene is now able to firmly focused on the day-to-day business following the highly controversial privatisation of Royal Mail.

A critical report by MPs earlier this month prompted the Government to announce a review of how state assets are sold in future amid accusations the listing did not deliver taxpayer value.

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BBA: City Sanctions Regime Needs Overhaul

By Mark Kleinman, City Editor

Procedures for punishing bankers who breach City rules require urgent changes, including the option of "part-settlement" of cases brought by regulators, the banking industry lobbying group has said.

In a submission to the Treasury obtained by Sky News, the British Bankers' Association (BBA) accused financial watchdogs of lacking objectivity and transparency.

It said the Regulatory Decisions Committee (RDC), which scrutinises judgements made by the Financial Conduct Authority (FCA) should be reformed to guarantee its independence.

"There are ... questions about the extent to which the RDC can be said to be truly independent of the FCA's enforcement function," the BBA said.

"This raises doubts over whether the arrangements can be said to provide a true 'check and balance' on the enforcement function's powers."

The RDC could be replaced by a body which sits within the FCA but is autonomous, "possibly with a lay majority and a chair with senior judicial experience", the BBA added.

The BBA was responding to a review launched in May by George Osborne.

The Chancellor has made toughening the sanctions regime a priority as he seeks to demonstrate that the Government is intent upon punishing past miscreants.

In a speech last month, he said he wanted to make the manipulation of financial benchmarks such as the gold-fix and foreign exchange rates a criminal offence.

The Sunday Times reported that the Serious Fraud Office was poised to announce a criminal probe into alleged forex-rigging as soon as this week.

The consultation on the use of enforcement powers follows a string of cases involving prominent bankers.

"For enforcement action to be effective, wrongdoers must believe that they face a real and tangible risk of being held to account and must expect to face meaningful and proportionate sanctions," the Treasury said in May.

Some of the FCA's actions, such as a decision to fine Ian Hannam, a former JP Morgan executive, for inappropriately disclosing inside information, have faced criticism in the City.

Decisions by the FCA's predecessor body, the Financial Services Authority, relating to the near-collapse of HBOS also face scrutiny as part of a probe of the bank's troubles.

The BBA said in its submission to the Treasury that an appeals process and enforcement panel set up by the energy industry could provide a model for the financial services sector.

The lobby group also said the enforcement process could be accelerated, with additional communication with those under investigation desirable.

Under the current system, cases can only be settled in full, but the lobbying group insisted that introducing scope for part-settlement could "significantly strengthen decision-making".

The BBA added that actual rather than potential losses to consumers should be taken into account by regulators when calculating punishments, and said that the self-reporting of misconduct "could be given a more positive emphasis and better incentivised".

And it criticised regulators for their approach to enforcement actions, accusing them of requesting information whose "relevance...is not always immediately apparent".

It said the subjects of investigation were also frequently left in the dark about the detailed reasons underlying the probes.

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Newly-Listed TSB Says Yes To £1.4bn UKAR Bid

State 'Bad Bank' Plots £1.5bn Mortgage Sale

Updated: 3:07pm UK, Tuesday 03 June 2014

By Mark Kleinman, City Editor

The state-owned 'bad bank' which holds the remnants of Bradford & Bingley and Northern Rock is to sell a £1.5bn mortgage portfolio that will attempt to exploit buoyant demand for UK housing market assets.

Sky News has learnt that UK Asset Resolution (UKAR) has hired investment bankers at Credit Suisse to market the loans, with the agency understood to be determined to secure a sale price at close to or better than the book's par value.

Prospective buyers are likely to include investment funds and a number of UK high street lenders, sources said on Tuesday.

The auction will represent the first such transaction since July 2012, when UKAR agreed the sale of £465m of Northern Rock Asset Management (NRAM) mortgages to Virgin Money.

The proceeds of that sale were used to repay part of NRAM's loan from the Government, which enabled it to stave off outright collapse in 2008.

Since then, the most significant deal involving UKAR took place last year, when NRAM's portfolio of standalone unsecured personal loans was sold to OneSavings Bank plc and Marlin Financial Group for a combined price tag of £400m.

News of the latest sale process emerged on the day that UKAR trumpeted its return to the taxpayer of roughly a quarter of the £38.3bn loan it took on six years ago.

Richard Banks, UKAR chief executive, said the results represented "good progress" for the taxpayer-backed organisation.

"It is also pleasing to see the significant reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes."

He went on to warn, however, that the prospect of rising interest rates would be a significant obstacle for many of its 467,000 customers.

"The signs are that the UK economy is continuing to recover, both in terms of growth and employment and in the housing and mortgage markets," UKAR said.

"House prices have increased faster than expected over the past 15 months, which, combined with continued low rates of interest, is good news for our customers and has driven increased redemption activity.

"However, despite the more positive conditions, many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers."

That warning echoes those of leading public figures in recent weeks, with representatives of major housebuilders due to meet Vince Cable, the Business Secretary, and George Osborne, the Chancellor, this week.

UKAR declined to comment on the new mortgage sale.

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Tesco Chief Philip Clarke To Step Down

Tesco's chief executive Philip Clarke is to quit after a string of poor results for the supermarket giant.

The group, which is seeing its worst sales performance in four decades, announced Mr Clarke's departure as it issued a fresh warning on profits.

He will stand down on October 1 and will be replaced by Dave Lewis from Unilever, who is a non-executive director of BSkyB, owner of Sky News.

Tesco's sales fell by 3.8% in the three months to May 24 on a like-for-like basis, an acceleration of the 3% slide in the previous quarter.

Mr Lewis will receive a basic salary of £1.25m, plus "standard" benefits. He will also receive £525,000 in lieu of his current year cash bonus from Unilever

Mr Clarke, who earned £1.14m in the role, will get a payoff worth 12 months salary.

The retailer is battling to stop a decline in sales figures

Tesco chairman Sir Richard Broadbent said: "Having guided Tesco through a substantial re-positioning in challenging markets, Philip Clarke agreed with the Board that this is the appropriate moment to hand over to a new leader with fresh perspectives and a new profile."

He added: "Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development."

Mr Clarke said: "Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us.

"Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey."

Mr Clarke, who had worked his way up from the shop floor to head Tesco, admitted last month the chain's sales figures were the worst he had known in 40 years.

But a trading update said conditions were more "challenging" than predicted.

The group said: "The overall market is weaker and, combined with increasing investments we are making to improve the customer offer and to build long-term loyalty, this means that sales and trading profit in the first half of the year are somewhat below expectations."

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Malaysia Airlines Offers Passenger Refunds

Malaysia Airlines is to refund fares for passengers no longer wishing to travel on the carrier, Sky News has confirmed.

Previously booked passengers due to fly up to and including July 25 can seek a refund without incurring any penalty.

The decision comes amid a wave of concern following the downing of MH17 over eastern Ukraine.

It is unclear how many passengers will cancel their flights.

Nevertheless, the refund will further harm the perception of the carrier both for passengers and investors.

Shares in Malaysia Airlines closed down more than 10% on Friday.

The Kuala Lumpur-listed company saw its stock fall more than 17% at one point before easing prior to the market close.

"Perception-wise it really hits home - It's very challenging. It's very difficult to fight against negative perception," Maybank aviation analyst Mohshin Aziz said.

"I can't comprehend of anything they can do to save themselves."

Many of the carrier's woes precede the loss of MH370 earlier this year

The company has struggled recently, and its accounts have been in the red for the last three years.

In 2013, the airline's full-year losses grew to £215m - up almost threefold on the 2012 loss of £80m.

The Malaysian government owns 69% of the firm.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes.

Budget rivals have adapted to the changing air market, particularly in Asia, with greater speed than legacy carriers such as Malaysia.

Many of its woes precede the mysterious loss of flight MH370 in the Indian Ocean.

Airline Weekly managing partner Seth Kaplan described it as being in "worse shape" financially than almost all other carriers - even before MH370 vanished.

"It's just hard to imagine that they could have even survived the first incident without a lot of government help and now they're going to need even more," Mr Kaplan said.

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Top City Banker To Pay £450,000 FCA Penalty

By Mark Kleinman, City Editor

One of the City's top financiers is poised to pay a £450,000 fine after deciding to accept a market abuse ruling by the Financial Conduct Authority (FCA).

Sky News understands that Ian Hannam, a banker who became known as the 'king of mining M&A' after engineering some of the world's biggest natural resources mergers, is to accept the watchdog's original verdict after losing an appeal in May.

An insider said on Friday that a statement from the FCA confirming that the original decision is to be upheld is expected as early as next week.

Mr Hannam, who had a long career at JP Morgan Cazenove before leaving in 2012, was accused by the FCA of inappropriately disclosing inside information in 2008 about Heritage Oil, a client, to a potential buyer.

He had argued that the FCA's ruling was erroneous and that he acted in accordance with City rules, vowing to fight the decision.

The regulator did not accuse or find Mr Hannam guilty of deliberately setting out to commit market abuse or accuse him of lacking honesty or integrity.

The Upper Tribunal of the High Court rejected his appeal in a judgement which was greeted by relief at the FCA but which raised questions about the clarity of guidelines about acceptable City conduct.

Both parties are understood to have made representations about the scale of the fine following the verdict of the Upper Tribunal, which said:

"Although the parties' written submissions did say something about the appropriate penalty if Mr Hannam had been engaged in market abuse, we consider that we cannot properly deal with this aspect of the case without giving the parties the opportunity to make further submissions in the light of our findings on the substantive issues.

The tribunal and the parties will need to consider the best way forward procedurally for dealing with the question of penalty."

The ruling left open the question of whether the penalty imposed on Mr Hannam should be increased or decreased.

Mr Hannam, who received backing from a number of prominent City figures and company bosses during his appeal, is said to have racked up legal fees of approximately £1m during his case.

Since leaving JP Morgan, he has rebuilt his career, taking control of a number of businesses in the mining and resources industries.

He has also given financial backing to Heathrow Hub, one of the shortlisted candidates for expanding runway capacity in south-east England.

Spokesmen for Mr Hannam and the FCA declined to comment on Friday.

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Newly-Listed TSB Says Yes To £1.4bn UKAR Bid

State 'Bad Bank' Plots £1.5bn Mortgage Sale

Updated: 3:07pm UK, Tuesday 03 June 2014

By Mark Kleinman, City Editor

The state-owned 'bad bank' which holds the remnants of Bradford & Bingley and Northern Rock is to sell a £1.5bn mortgage portfolio that will attempt to exploit buoyant demand for UK housing market assets.

Sky News has learnt that UK Asset Resolution (UKAR) has hired investment bankers at Credit Suisse to market the loans, with the agency understood to be determined to secure a sale price at close to or better than the book's par value.

Prospective buyers are likely to include investment funds and a number of UK high street lenders, sources said on Tuesday.

The auction will represent the first such transaction since July 2012, when UKAR agreed the sale of £465m of Northern Rock Asset Management (NRAM) mortgages to Virgin Money.

The proceeds of that sale were used to repay part of NRAM's loan from the Government, which enabled it to stave off outright collapse in 2008.

Since then, the most significant deal involving UKAR took place last year, when NRAM's portfolio of standalone unsecured personal loans was sold to OneSavings Bank plc and Marlin Financial Group for a combined price tag of £400m.

News of the latest sale process emerged on the day that UKAR trumpeted its return to the taxpayer of roughly a quarter of the £38.3bn loan it took on six years ago.

Richard Banks, UKAR chief executive, said the results represented "good progress" for the taxpayer-backed organisation.

"It is also pleasing to see the significant reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes."

He went on to warn, however, that the prospect of rising interest rates would be a significant obstacle for many of its 467,000 customers.

"The signs are that the UK economy is continuing to recover, both in terms of growth and employment and in the housing and mortgage markets," UKAR said.

"House prices have increased faster than expected over the past 15 months, which, combined with continued low rates of interest, is good news for our customers and has driven increased redemption activity.

"However, despite the more positive conditions, many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers."

That warning echoes those of leading public figures in recent weeks, with representatives of major housebuilders due to meet Vince Cable, the Business Secretary, and George Osborne, the Chancellor, this week.

UKAR declined to comment on the new mortgage sale.

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Malaysia Airlines Offers Passenger Refunds

Malaysia Airlines is to refund fares for passengers no longer wishing to travel on the carrier, Sky News has confirmed.

Previously booked passengers due to fly up to and including July 25 can seek a refund without incurring any penalty.

The decision comes amid a wave of concern following the downing of MH17 over eastern Ukraine.

It is unclear how many passengers will cancel their flights.

Nevertheless, the refund will further harm the perception of the carrier both for passengers and investors.

Shares in Malaysia Airlines closed down more than 10% on Friday.

The Kuala Lumpur-listed company saw its stock fall more than 17% at one point before easing prior to the market close.

"Perception-wise it really hits home - It's very challenging. It's very difficult to fight against negative perception," Maybank aviation analyst Mohshin Aziz said.

"I can't comprehend of anything they can do to save themselves."

Many of the carrier's woes precede the loss of MH370 earlier this year

The company has struggled recently, and its accounts have been in the red for the last three years.

In 2013, the airline's full-year losses grew to £215m - up almost threefold on the 2012 loss of £80m.

The Malaysian government owns 69% of the firm.

As a state-owned flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes.

Budget rivals have adapted to the changing air market, particularly in Asia, with greater speed than legacy carriers such as Malaysia.

Many of its woes precede the mysterious loss of flight MH370 in the Indian Ocean.

Airline Weekly managing partner Seth Kaplan described it as being in "worse shape" financially than almost all other carriers - even before MH370 vanished.

"It's just hard to imagine that they could have even survived the first incident without a lot of government help and now they're going to need even more," Mr Kaplan said.

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