By Marc Jones

LONDON (Reuters) -The European Union’s lending arm, the European Investment Bank, is to temporarily override its near 4-year long ban on financing in Turkey to provide 500 million euros ($540 million) for the country’s post-earthquake rebuilding efforts.

The EIB stopped virtually all lending in Turkey after a row over oil and gas drilling off Cyprus in 2019, but the severity of last month’s earthquake, which killed nearly 56,000 people in Turkey and neighbouring Syria, has prompted it to make an exception.

“We are working together with the European Commission on a joint comprehensive package, of which up to 500 million euros is to be delivered by the EIB,” the bank’s vice president, Lilyana Pavlova, said in a statement.

“We will shortly present it to our board of directors for approval.”

Speaking at an international donor conference, Commission President Ursula von der Leyen, said the overall package by the Commision and EIB would add up to 1 billion euros ($1.1 billion).

While it is understood that all EU countries, including Cyprus, will give the green light for the EIB funding, formal approval might not come until June as the plans still need to be fleshed out and the timing is sensitive.

“It goes without saying that it is our absolute priority to make sure the financing goes to those who need it most in the context of the reconstruction efforts,” the EIB’s Pavlova said.

“It does not include budget support for the national government to support investments outside the scope of the recovery.”

Turkey is set to hold pivotal presidential and parliamentary elections on May 14 and EU members are wary of the 500 million euros, while not a long-term resumption of EIB lending, being seen as some kind of indirect backing of incumbent president Tayyip Erdogan’s re-election campaign.

The EU has long accused Erdogan of human rights violations and the bloc’s ties with Turkey are tense over Ankara’s crackdown on dissent following a 2016 coup attempt as well as the oil and gas row in the Eastern Mediterranean.

More recently, Turkey has blocked a bid by Sweden – an EU member – to join NATO in the wake of Russia’s war against Ukraine although it has just given Finland’s membership its blessing.

The EIB lent around 2 billion euros a year in Turkey between 2009 and 2016 before the concerns about Ankara’s domestic crackdown first saw the bank scale back its lending in the country.

($1 = 0.9328 euros)

(Reporting by Marc Jones; Editing by Andrea Ricci and Alison Williams)

By Howard Schneider

WASHINGTON (Reuters) – Utah homebuilder Ivory Homes still has a pipeline of several hundred houses under construction, but CEO Clark Ivory isn’t pulling permits for any more at this point, and in a year of retrenchment for the single-family home industry, he has laid off just under 10% of his workers.

But don’t look for that to be reflected in overall U.S. construction employment or spending data, a canary that is very much still breathing inside what would usually be the toxifying air of rising U.S. interest rates.

While housing starts are falling, “there is still a fair amount of completion happening,” Ivory said, adding that contractors can move on to other jobs once finished with his company’s projects. “There are other areas of construction – public works, industrial, roads and infrastructure. There is so much money out there,” he said, from pandemic spending programs as well as recent federal government initiatives like the Inflation Reduction Act.

Graphic-Nonresidential building takes over (https://www.reuters.com/graphics/USA-FED/ANNIVERSARY/lbpggjbmapq/chart.png)

A year after the Federal Reserve began a historic drive to arrest inflation with rapid interest rate hikes, Fed officials meeting this week face a wildly confusing economy that by some measures continues operating beyond capacity – a recipe for rising prices – and by others seems to be approaching a serious fissure given how a banking crisis has rattled markets in the last two weeks.

Is the economy really standing firm against the Fed’s aggressive rate moves? Rate increases have averaged more than half a percentage point at each of the eight Fed meetings since March of 2022, and pushed the benchmark overnight interest rate from the near-zero level to the current 4.50%-4.75% range.

Or are businesses and consumers just slow to respond, with the full impact perhaps developing now?

As the tightening orchestrated by Fed Chair Jerome Powell hits the one-year mark, the extent of the influence depends on where you look.

A MIXED INFLATION SCORECARD

The Fed’s purpose throughout its aggressive tightening cycle has been to reduce inflation from the 40-year-high reached last summer down to the 2% annual rate the central bank regards as consistent with its generic goal of “price stability.”

Inflation has slowed.

But recent progress has been less than hoped. As of March 8, in his last public comments before the Fed’s March 21-22 meeting, Powell said recent data had “reversed the softening trends” the central bank had hoped were becoming established, and that meant higher interest rates might be needed to slow an economy that doesn’t want to buckle.

GRAPHIC: Rates and inflation (https://www.reuters.com/graphics/USA-FED/INFLATION/gkvlgnaywpb/chart.png)

DOGS THAT DIDN’T BARK (YET)

Construction: The status of the construction industry shows the Fed’s pandemic-era dilemma.

Monetary policy works on the economy through many different channels, but housing is an important one. As interest rates rise, buying slows, spending that would have taken place on home building supplies and new home furnishings plummets, and existing homeowners shy away from financing major improvements.

Since the 1970s, declines in housing starts have been followed by drops in construction employment, and been associated with the onset of recession.

It is not happening the same way this time.

Graphic-U.S. housing starts and construction jobs (https://www.reuters.com/graphics/USA-ECONOMY/ANNIVERSARY/zdpxdqnwapx/chart.png)

Employment: The job market overall in fact has shown only initial signs of slowing – and the Fed has put a lot of weight on tempered job and wage growth as a necessary condition for inflation to fall.

Between ongoing demand and the difficulty of hiring, many businesses seem to be holding on to existing workers and adding headcount when they can to try to stay fully staffed. The number of job openings for each available worker has barely budged from the record levels set during the COVID-19 pandemic, and monthly job growth remains in the hundreds of thousands.

Graphic-Mo GRAPHIC:

re jobs Job gains

than remain

jobseekers strong https://www.reuters.com/graphics/USA-FED/POWELL/xmvjkrbdgpr/chart.png

in the US

(https://www.reuters.com/graphics/USA-FED/JOBS/egvbkmeoepq/chart.png)

Income: For households, that means the pump is still primed. Even after adjusting for inflation, after-tax income – the amount of money left to spend or save – has been rising.

GRAPHIC: Graphic-Real disposable personal income https://www.reuters.com/graphics/USA-FED/ANNIVERSARY/akpeqemrlpr/chart.png

SIGNS OF STRESS?

The Fed’s rate increases have had an impact.

Manufacturing: A broad index of industrial output published by the Fed is among the top-line data that economists watch for signs the U.S. is entering recession. It is currently declining.

GRAPHIC: Industrial production dips https://www.reuters.com/graphics/USA-ECONOMY/RECESSIONTEMPLATE/gkvlwbdelpb/chart.png

Capital expenditures: Business investment is also weak, and detracted from overall economic output last year – also a common precursor to recession and a sort of proxy vote by firms about the outlook and a sign they are delaying spending.

GRAPHIC: Business investment lags https://www.reuters.com/graphics/USA-FED/ANNIVERSARY/zgpobakdevd/chart.png

Credit: Tighter monetary policy is starting to show up in measures of credit as well, and recent stress among midsized banks may add to that if financial firms become more cautious in their lending.

As long as it remains orderly, a credit crunch could be positive for the Fed. If businesses and households are less free to borrow, they are likely less free to spend – and demand for goods and services will fall, as should the pressure to raise prices.

GRAPHIC: Tighter business credit conditions https://www.reuters.com/graphics/USA-FED/ECONOMY/egpbyjagzvq/chart.png

(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)

By Foo Yun Chee

BRUSSELS (Reuters) – Microsoft Corp’s remedies to address European Union antitrust concerns over its $69 billion acquisition of Activision focus only on cloud gaming services, with no mention of rival Sony, people familiar with the matter said on Monday.

The U.S. software giant has been trying to allay the Commission’s concerns that the deal may reduce competition for console and personal computers, PC operating systems and cloud game streaming services. However, the absence of a Sony solution suggests the Commission no longer has concerns about competition in the console market.

Microsoft submitted its proposal to the European Commission last week but did not disclose details.

The sources said Microsoft has offered 10-year licensing deals for cloud gaming services, citing Nvidia, Ukraine-based cloud gaming provider Boosteroid and Japan’s Ubitus as examples.

The EU competition enforcer has given rivals and customers until the end of this week to provide feedback before it decides on the deal by May 22, they said.

Microsoft’s EU offer is narrower than that to the UK competition agency, which includes licensing deals to cloud gaming services and a 10-year deal with parity on content and quality for Activision’s Call of Duty franchise to critic and PlayStation owner Sony.

The Commission is likely to accept such licensing deals and clear the deal, other people with direct knowledge of the deal have told Reuters, but it is not clear if the UK watchdog will accept such so-called behavioural remedies.

(Reporting by Foo Yun Chee; Editing by Josie Kao)

By Jonathan Stempel

NEW YORK (Reuters) – A U.S. judge said on Monday JPMorgan Chase & Co and Deutsche Bank AG must face lawsuits accusing them of enabling Jeffrey Epstein’s sex trafficking.

The decision by U.S. District Judge Jed Rakoff in Manhattan could expose the banks to additional financial and reputational damage for keeping Epstein as a client, even after the late financier registered as a sex offender.

In a six-paragraph order, Rakoff said JPMorgan must face a lawsuit by the U.S. Virgin Islands accusing it of missing red flags about Epstein’s abuse of women on Little St. James, a private island he owned there.

The judge also ruled that both banks must face proposed class actions by women who said Epstein sexually abused them. He said he would explain his reasoning in due course.

Rakoff’s decision gives the plaintiffs a chance to prove that JPMorgan and Deutsche Bank knowingly benefited from involvement in Epstein’s sex trafficking.

The women can also try to show that the banks were negligent and obstructed enforcement of a federal anti-trafficking law.

Brad Edwards, a lawyer for the women, said damages in a scheduled October trial covering more than 300 Epstein victims could total billions of dollars.

The JPMorgan cases drew added attention when Jes Staley, formerly JPMorgan’s private banking chief, was accused of swapping sexually suggestive messages about young women with the financier, and committing sexual assault himself.

‘LANDMARK DECISION’

Both banks have said they had no legal duty to protect women from Epstein and denied accusations they knew about his abuses.

Epstein had been a client of JPMorgan from 2000 to 2013, and Deutsche Bank from 2013 to 2018.

JPMorgan spokeswoman Trish Wexler and Deutsche Bank spokesman Dylan Riddle declined to comment on Rakoff’s ruling.

“It’s a landmark decision,” Edwards said an interview.

“To my knowledge, it’s the first time a class of victims can pursue sex trafficking cases against two major financial institutions,” he added. “Complicity of the banks was a necessary ingredient of Epstein’s abuses, and this provides a final layer of accountability.”

Carol Thomas-Jacobs, the U.S. Virgin Islands acting attorney general, in a statement said her office’s case would help ensure that banks act as “a first line of defense in identifying and reporting potential human trafficking, as the law expects.”

The territory previously recovered more than $105 million from Epstein’s estate in a settlement in November, while about 138 Epstein accusers were in 2021 awarded more than $121 million from a compensation fund, also funded by the estate.

Epstein killed himself at age 66 in a Manhattan jail cell in August 2019 while awaiting trial on sex trafficking.

He had pleaded guilty to a Florida state prostitution charge in 2008, and later registered as a sex offender.

STALEY DEPOSITION

The lawsuits accused JPMorgan and Deutsche Bank of turning a blind eye to Epstein’s abuses because he was an important client, and letting him make numerous wire transfers to pay victims.

In its complaint, the U.S. Virgin Islands also suggested that JPMorgan Chief Executive Jamie Dimon was aware of Epstein’s crimes and the bank’s role in advancing them.

The plaintiff in one of the JPMorgan cases, known as Jane Doe 1, said she was a ballet dancer whom Epstein trafficked from 2006 to 2013.

In the Deutsche Bank case, the plaintiff, also known as Jane Doe 1, said Epstein sexually abused her from 2003 to 2018.

JPMorgan is separately suing Staley for concealing what he knew about Epstein, and wants him to return eight years of pay and cover losses in the other lawsuits.

Staley has admitted having been friendly with Epstein but expressed regret for the relationship and denied knowing about Epstein’s alleged crimes.

He became Barclays Plc’s chief executive after leaving JPMorgan, but resigned in November 2021 amid regulatory concerns about his relationship with Epstein.

Brendan Sullivan, a lawyer for Staley, did not immediately respond to requests for comment .

JPMorgan lawyers are expected to question Staley under oath on Thursday and Friday, and Edwards said he has asked Dimon to submit to questioning.

The cases in the U.S. District Court, Southern District of New York are: Jane Doe 1 v Deutsche Bank AG et al, No. 22-10018; Jane Doe 1 v JPMorgan Chase & Co, No. 22-10019; Government of the U.S. Virgin Islands v JPMorgan Chase Bank NA, No. 22-10904; and JPMorgan Chase Bank NA v Staley, in Nos. 22-10019 and 22-10904.

(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama, Richard Chang and Cynthia Osterman)

By David Lawder

WASHINGTON (Reuters) – The World Bank on Monday said the February earthquakes are expected to have caused Syria’s real GDP output to contract by 5.5% in 2023, with recovery and reconstruction needs estimated at $7.9 billion over three years.

The World Bank said its Rapid Damage and Needs Assessment report estimates the earthquakes that hit northern and western Syria on Feb. 6 and Feb. 20 caused physical damage of $3.7 billion in the country, with another $1.5 billion in economic losses for a combined damage impact of $5.2 billion.

The World Bank had previously projected a 3.2% contraction in Syria’s 2023 economic output, due to continuing conflict, high grain and energy prices and shortages, along with water scarcity that is limiting crop output.

The earthquakes will cause that GDP contraction to widen by another 2.3 percentage points to 5.5% for the year, exacerbating the effects of 12 years of conflict in Syria.

“The additional contraction is primarily driven by the destruction of physical capital and disruptions in trade activity,” the World Bank said in a statement. “Inflation is expected to increase substantially, primarily driven by the reduction in goods available, an increase in transport costs, and a rise in overall demand for reconstruction material.”

The World Bank estimates recovery and reconstruction needs across the six assessed regions at $7.9 billion, $3.7 billion of that in the first year. It estimates $4.2 billion will be needed over the two subsequent years.

The bank said the agriculture sector registered the largest needs (27% of the total), followed by housing (18%), social protection (16 %) and transport (12%).

(This story has been corrected to fix first-year recovery estimate to $3.7 billion, not $33.7 billion, in paragraph 6)

(Reporting by David Lawder; Additional reporting by Andrea Shalal; Editing by Chris Reese and Bill Berkrot)

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices rebounded and rose over 1% on Monday after diving to their lowest levels in 15 months as the market worried that risks in the global banking sector could spark a recession that would sap fuel demand.

In volatile trade, Brent crude futures for May rose 82 cents, or 1.1% to $73.79 a barrel. U.S. West Texas Intermediate crude futures for April gained 90 cents, or 1.4%, at $67.64 on the eve of the contract’s expiry. The more actively traded May futures rose 89 cents, or 1.3%, at $67.82 a barrel.

Oil prices rebounded as Wall Street posted gains. Earlier, Brent and WTI fell about $3 a barrel to the lowest since December 2021, with WTI sinking below $65 a barrel at one point. Last week, both benchmarks shed more than 10% as the banking crisis deepened.

Oil’s early slide occurred despite an historic deal in which UBS, Switzerland’s largest bank, agreed to buy Credit Suisse in an attempt to rescue the country’s second-biggest bank.

After the deal was announced, the U.S. Federal Reserve, European Central Bank and other major central banks pledged to enhance market liquidity and support other banks.

“There’s a lot of fear-based movement (in oil prices),” Price Futures Group analyst Phil Flynn said. “We’re not moving at all on supply and demand fundamentals, we’re just moving on the banking concerns.”

The S&P 500 and the Dow Jones gained, helping lift oil prices off session lows on bets the Fed will probably pause on rate hikes on Wednesday to ensure bank sector troubles do not snowball. [.N] Traders and economists remain split on whether the Fed will raise its benchmark policy rate.

Some executives are calling on the central bank to pause its monetary policy tightening but be ready to resume raising rates later.

“Volatility is likely to linger this week, with broader financial market concerns likely to remain at the forefront,” ING Bank analysts said in a note, adding the looming Fed decision adds to uncertainty in markets.

Meanwhile, Group of Seven Nations are not likely to revise a $60-per-barrel price cap on Russian oil this week, two European Union officials and one official from a coalition member told Reuters on Monday.

The G7 was due in mid-March to revise the price cap put in place in December, but the officials said EU countries’ ambassadors were told by the European Commission over the weekend there is no appetite among the G7 for an imminent review.

A ministerial committee of OPEC and producer allies including Russia, together known as OPEC+, is set for a meeting April 3. The group agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023.

(Reporting by Stephanie Kelly in New York; additional reporting by Noah Browning in London, Florence Tan and Emily Chow in Singapore; Editing by Paul Simao, Chris Reese and David Gregorio)

By Manya Saini

(Reuters) -The Federal Deposit Insurance Corporation on Monday decided to break up Silicon Valley Bank (SVB) and hold two separate auctions for its traditional deposits unit and its private bank after failing to find a buyer for the failed lender last week.

It will seek bids for Silicon Valley Private Bank until March 22 and for the bridge bank until March 24. The private bank, which is housed within SVB’s retail operations, caters to high net-worth individuals.

Bank and non-bank financial firms will be allowed to bid on the asset portfolios, the regulator said.

First Citizens BancShares Inc , one of the biggest buyers of failed U.S. lenders, has submitted a bid for all of Silicon Valley Bank, one source with knowledge of the matter said. If the FDIC decides to receive bids for parts of SVB, First Citizens also expects to bid. Bloomberg reported earlier on their interest on SVB.

First Citizens said in a statement it “does not comment on market rumors or speculation.”

Last week, sources told Reuters that the FDIC was planning to relaunch the sale process for SVB, with the regulator seeking a potential break-up of the failed lender.

The parent company of the lender SVB Financial Group had on Friday filed for a reorganization under Chapter 11 bankruptcy protection and sought buyers for its assets after steps to shore up investor confidence failed.

The FDIC, which insures deposits and manages receiverships, had informed banks mulling offers in the auctions for SVB and Signature Bank that it was considering retaining some of the assets that are underwater.

Reuters reported on Sunday that the efforts of some U.S. regional banks to raise capital and allay fears about their health are running up against concerns from potential buyers and investors about looming losses in their assets.

The run on the bank was sparked by balance-sheet concerns after the lender sold a portfolio of treasuries and mortgage-backed securities to Goldman Sachs at a $1.8 billion loss and then attempted to plug that hole through a $2.25 billion fundraising.

(Reporting by Manya Saini in Bengaluru; Editing by Arun Koyyur and Nick Zieminski)

WASHINGTON (Reuters) – President Joe Biden maintains confidence in Federal Reserve Chair Jerome Powell, the White House said on Monday, amid criticism about the multiple rate increases the Fed has approved in recent months and its handling of the banking crisis.

Democratic Senator Elizabeth Warren told NBC’s “Meet the Press” on Sunday that Powell has failed and should not be in his job.

(Reporting by Jeff Mason and Steve Holland; Editing by Leslie Adler)

By Jeffrey Dastin and Tiyashi Datta

(Reuters) – Amazon.com Inc on Monday said it would axe another 9,000 roles, piling on to a wave of layoffs that has swept the technology sector as an uncertain economy forces companies to get leaner.

In a remarkable turn for a company that has long touted its job creation, Amazon will have eliminated 27,000 positions in recent months, or 9% of its roughly 300,000-strong corporate workforce.

The latest cuts focus on Amazon’s highly-profitable cloud and advertising divisions, once seen as untouchable until economic concerns led business customers to scrutinize their spending.

The layoffs will affect Amazon’s streaming unit Twitch as well. Dan Clancy, who was named as CEO of Twitch last week, said the platform will lay off more than 400 employees.

Amazon aims to finalize whom it will terminate in the new round of job cuts by April.

The company’s stock fell 1.8%.

The decision follows a near-endless drumbeat of layoff news in the technology sector that has seen some of the world’s most valuable corporations, among them Microsoft Corp and Alphabet Inc, sever ties with staggering numbers of employees they once courted in droves.

“I don’t think this means much for other companies, except that all will be more careful before allowing their headcount to balloon in the future,” Wedbush Securities analyst Michael Pachter said.

In what now seems a harbinger, Facebook’s parent Meta Platforms Inc said last week it would cut 10,000 jobs this year, kicking off a second round of layoffs for the sector following its elimination of more than 11,000 roles in 2022.

GRAPHIC-Amazon announces fresh layoffs of 9,000 employees (https://www.reuters.com/graphics/TECH-LAYOFFS/META/byprlmorqpe/graphic.jpg)

In a note to staff that Amazon posted online, its CEO Andy Jassy said the decision stemmed from an ongoing analysis of priorities and uncertainty about the economy.

“Some may ask why we didn’t announce these role reductions with the ones we announced a couple months ago,” he wrote. “The short answer is that not all of the teams were done with their analyses in the late fall.”

“Given the uncertain economy in which we reside, and the uncertainty that exists in the near future, we have chosen to be more streamlined in our costs and headcount.”

Amazon last month said operating profit may continue to slump in the current quarter, hit by the financial impact of consumers and cloud customers clamping down on spending.

The Athena Coalition, a labor and activist group that is critical of Amazon, said in a statement: “None of these layoffs have to happen. Jassy is choosing to make them happen to pad Amazon’s bottom line.”

The company has scaled back or shut down entire services like its virtual primary care offering for employers in recent months.

(Reporting by Jeffrey Dastin in Palo Alto, Tiyashi Datta in Bengaluru; Additional reporting by Akash Sriram in Bengaluru; Editing by David Gaffen, Nick Zieminski and Devika Syamnath)

By Hannah Lang

WASHINGTON (Reuters) – The dollar slid on Monday as investors reacted to UBS’ cut-price takeover of its beleaguered rival Credit Suisse CSGN.S.

UBS UBSG.S agreed to buy Credit Suisse on Sunday for 3 billion Swiss francs ($3.23 billion) and assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities. The U.S. dollar index =USD – which measures the currency against six major peers – was last down 0.501% at 103.270 the day after the merger was announced, touching its lowest level since Feb. 15.

Meanwhile, growth assets such as bitcoin BTC= enjoyed a bounce. The world’s largest cryptocurrency hit a nine-month high on Monday and last rose 4.62% to $28,065.00.

“I think whenever people feel like you don’t have to do a flight to quality, the dollar is going to take a hit,” said Thomas Anderson, managing director at moneycorp North America.

Also weighing on the dollar are concerns about regional U.S. banks, despite several large banks depositing $30 billion last week into First Republic Bank FRC.N, the U.S. lender drawing the most unease from investors. First Republic shares tumbled as much as 50% on Monday and were last down about 39%.

“In particular, there are risks developing, or at least some degree of uncertainty, with the regional U.S. banks that I think are weighing on U.S. assets at this point as well,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets in Toronto.

Under the UBS-Credit Suisse deal, holders of $17 billion of Credit Suisse Additional Tier-1 (AT1) bonds will be wiped out. That angered some of the holders of the debt, who thought they would be better protected than shareholders, and unnerved investors in other banks’ AT1 bonds.

The euro was last up 0.54% against the dollar at $1.0724, while the British pound GBP= was last trading at $1.2281, up 0.87% on the day.

The dollar CHF= rose 0.24% against the Swiss franc at 0.928.

Graphic: Fed currency swaps have seen little recent use https://www.reuters.com/graphics/USA-FED/SWAPS/jnpwyjwonpw/chart_eikon.jpg

ALL EYES ON THE FED

The Federal Reserve’s latest decision on interest rate hikes is due on Wednesday and adds an additional layer of uncertainty for investors.

Rates currently stand at 4.5% to 4.75%. Traders now expect a peak in rates in May at around 4.8%, followed by a steady series of cuts into the end of the year, but will be closely watching the forecast for future rate moves that the Fed is expected to unveil on Wednesday.

“The path of least regret, at least from our view, is to keep (forecasts) consistent with where they were in December. Given that the risks have now risen to the domestic financial sector, I think that’s probably the prudent course of action for them,” Rai said.

The Japanese yen JPY= – long seen as a safe haven at times of stress – strengthened 0.28% versus the greenback at 131.47 per dollar.

Australia’s dollar AUD= rose 0.33% versus the greenback at $0.672, while the Canadian dollar rose 0.52% versus the greenback at 1.37 per dollar.

(Reporting by Hannah Lang in Washington; Editing by Ed Osmond, Christina Fincher, Andrea Ricci and Alison Williams)

WASHINGTON (Reuters) -U.S. President Joe Biden on Monday rejected a Republican proposal to prevent pension fund managers from basing investment decisions on factors like climate change, in the first veto of his presidency.

“I just signed this veto because the legislation passed by the Congress would put at risk the retirement savings of individuals across the country,” Biden said in a video posted on Twitter.

The bill cleared Congress on March 1, when the Senate voted 50-46 to adopt a measure to overturn a Labor Department rule making it easier for fund managers to consider environmental, social and corporate governance, or ESG, issues for investments and shareholder rights decisions, such as through proxy voting.

The outcome highlighted Republicans’ willingness to oppose their traditional allies in Wall Street and corporate America that adopt what party lawmakers characterize as “woke” liberal practices.

Two Democratic senators, Joe Manchin of West Virginia and Jon Tester of Montana, voted with Republicans. Both face re-election in Republican-leaning states in 2024. The Republican-controlled House of Representatives passed the bill in February.

Republicans claim the rule, which covers plans that collectively invest $12 trillion on behalf of 150 million Americans, would politicize investing by allowing plan managers to pursue liberal causes, which they say would hurt financial performance.

“It is clear that President Biden wants Wall Street to use your hard-earned money not to grow your savings, but to fund a far-left political agenda. That will hurt seniors and workers,” Republican House of Representatives speaker Kevin McCarthy said in a statement on Monday.

Senate Democratic leader Chuck Schumer accused Republicans of interfering with private investing decisions, saying on the Senate floor that they are “forcing their own views down the throats of every company and every investor.”

Manchin countered that it was the Biden administration that was pushing its “radical policy agenda” on this issue.

“Despite a clear and bipartisan rejection of the rule from Congress, President Biden is choosing to put his administration’s progressive agenda above the well-being of the American people,” Manchin said in a statement.

(Reporting by Katharine Jackson, Ismail Shakil, David Morgan and Kanishka Singh; Writing by Doina Chiacu; Editing by Bill Berkrot and Mark Porter)

By Divya Rajagopal

TORONTO (Reuters) -Canada’s top six lenders have ample liquidity and manageable credit risks which will help them to emerge largely unscathed from the crisis of confidence that has rocked the global banks over the last two weeks, analysts said on Monday.

The collapse of two the U.S. regional banks- the Silicon Valley Bank and Signature Bank this month –and the Swiss government-brokered deal for UBS to buy Credit Suisse has raised concerns about the health of global banking sector.

“The U.S. contagion is unlikely to spill over to Canadian banks as the issues in U.S. are unique and specific to certain business models or lending activities,” said James Shanahan, banking analyst with Edward Jones to Reuters.

Still, the six big banks have collectively lost 9% or C$57 billion ($41.7 billion) in market capitalization in the past two weeks, according to DBRS Morningstar. In comparison, the U.S. bank index has fallen 21.5% in last two weeks.

Canada’s Finance Minister Chrystia Freeland also defended the country’s financial institutions on Monday saying they have capital to withstand “periods of turbulence” and prudent risk management.

Freeland said the government is monitoring the situation closely and Canadians should be confident that at a time of global uncertainty, there is no better place to be than Canada.

On Monday, the Canada’s financial sub-index rose 0.7%.

Central Banks across the world, including the Bank of Canada have set up daily dollar taps to bolster the cash flow to banks dealing with liquidity issues.

Canadian banks generally have lower exposure to fixed-income securities diversified and stable funding, capital buffers that “should enable these banks to navigate current market turbulence,” said Carl De Souza senior vice-president, DBRS Morningstar.

Canadian Banks have not experienced deposit outflows in March and, as such, “we do not see imminent signs that deposit trends will force the premature sale of bond holdings.”

The positive assurances from market analysts and the government comes after more than a week of market fears and uncertainty. In Canada, the financial regulator took permanent control of the assets of Silicon Valley Bank’s Canadian branch, meanwhile financiers told Reuters that Canada’s technology start-ups would find it more difficult to get funding.

REGIONAL BANK SCRUTINY

Canadian banks emerged stronger from the 2008 global financial crisis due to prudent regulations and since built a reputation for financial stability. The six big banks – including Royal Bank of Canada Toronto Dominion Bank, and Bank of Montreal – account for about 80% of Canada’s banking assets and have avoided scandals or failures that have plagued banks their European and U.S. peers.

The Canadian banks have kept their focus on domestic lending and majority of their earnings come from serving local clients. But in recent years, Royal Bank, BMO, TD Bank and CIBC have expanded into the United States by buying regional lenders to benefit from strong growth in second-tier U.S. cities.

That strategy is now under scrutiny since the current bank crisis in the United States was triggered by problems at the regional lenders.

TD Bank, for instance, launched a $13.4 billion bid for Memphis-based First Horizon Corp, more a year ago that is still awaiting regulatory approval. However, last week the regional bank’s stock was hit after the SVB collapse.

By Monday late morning, TD shares rose 0.2% and First Horizon was up 3% at $15.28 — still 38% lower than TD’s offer price.

“The market is thinking that TD is in a good position to re-negotiate the deal considering First Horizon is in a tough spot now,” Shanahan said.

TD and First Horizon have pushed the closing date of the acquisition to end of May, with an potential for an extension.

TD was unavailable for an immediate comment.

($1 = 1.3662 Canadian dollars)

(Reporting by Divya RajagopalEditing by Denny Thomas)