By Orhan Coskun and Jonathan Spicer

ANKARA (Reuters) – Former Turkish economy tsar Mehmet Simsek’s refusal to return to politics has left President Tayyip Erdogan’s ruling party scrambling to rebuild its economic credibility less than two months before landmark elections, insiders and analysts say.

Erdogan, who has led Turkey for two decades but is trailing in opinion polls ahead of the May 14 vote, had personally appealed to Simsek to return to the government and take up a top role, several people familiar with the matter said.

Some AK Party (AKP) members had wanted Simsek to champion the party’s latest rhetorical pivot to more free-market policies, after years of unorthodoxy under Erdogan that had hammered the lira currency and sent inflation soaring.

But after a Monday meeting at AKP headquarters, Simsek, well-respected by international investors, said on Twitter he was not interested in “active politics” after having stepped down as deputy prime minister in 2018.

Yet he is ready to provide any type of support in his area, he added.

Separately, in a televised interview on Wednesday, Erdogan downplayed the significance of the meeting with Simsek, saying such meetings were ordinary. He added that Simsek said he would gladly help ahead of the elections.

The episode shows the difficulty of rebranding a government whose policies have set off a cost-of-living crisis and left the economy and financial markets heavily state-managed, analysts and investors say.

“Simsek’s refusal to join the ranks is neither the first nor the final indicator of dwindling support for the government,” said Ertan Aksoy of Aksoy Research polling company.

AKP spokesperson Omer Celik said after the meeting that Erdogan did not offer Simsek a formal posting but that “all the mechanisms and duties of the party” were open to him.

A senior government official told Reuters the AKP was somewhat divided with some members opposed to Simsek’s return, and described the outcome of the Erdogan meeting as “undesirable”. The party may now need to revise its economic platform ahead of the election campaign, he added.

An AKP official who was not also authorised to speak publicly said Simsek’s return would have boosted the party’s polls. “We are having trouble regarding the economic picture right now. There is no arguing about that,” the person said, adding new steps are needed.

Another party official said its revised election manifesto could include more “balanced” or “mixed” policies, rather than the free-market orthodox approach that some had sought.

The AKP declined to comment on whether it was revising its economic strategy ahead of the vote. Simsek declined to comment on his meeting with Erdogan.

‘DWINDLING SUPPORT’

Erdogan’s determination to slash interest rates to stoke economic growth sent inflation above 85% last year. The lira has shed 80% of its value versus the dollar in five years, a period in which foreign investors largely fled the big emerging market.

The economic cost of the devastating earthquakes that struck Turkey’s south on Feb. 6 is estimated to be around $104 billion, adding to pressures on the economy.

The opposition bloc – which pledges to roll back Erdogan’s economic policies – received a boost on Wednesday when a big pro-Kurdish party said it would not run its own presidential candidate, raising prospects it could unite.

Two recent polls by MAK and Turkiye Raporu show the opposition presidential challenger Kemal Kilicdaroglu between 4 and 9 percentage points ahead of Erdogan.

“The AKP … is surprised and in a state of heavy panic. It is pressing all the buttons at the same time,” Turhan Comez, chief adviser to opposition IYI Party leader Meral Aksener, said on Halk TV on Tuesday.

Though a self-described “enemy” of interest rates, Erdogan has occasionally endorsed free-market policies in recent years. But he then shifted tone again and has adopted a model prioritising production, exports and targeted cheap credit.

Such pivots – including firing market-friendly central bank governor Naci Agbal after only four months in 2021 – have left investors deeply sceptical.

Investors are “extremely cautious” about any pivot by Erdogan’s government given “multiple past head-fakes”, said Blaise Antin, head of EM sovereign research at asset manager TCW in Los Angeles.

Polina Kurdyavko, head of emerging markets and senior portfolio manager at BlueBay Asset Management, said the economic challenge was “not easily solvable regardless of who comes to power and regardless of what policies you implement”.

(Additional reporting by Ece Toksabay and Ali Kucukgocmen in Ankara, and Rodrigo Campos in New York; Editing by Alison Williams)

By John O’Donnell and Alexandra Schwarz-Goerlich

VIENNA (Reuters) – The European Central Bank is pressing Austria’s Raiffeisen Bank International to unwind its highly profitable business in Russia, five people with knowledge of the matter told Reuters.

The pressure comes after a top U.S. sanctions official raised concerns about Raiffeisen’s business in Russia on a visit to Vienna last month, said another person familiar with the matter, asking not to be named due to its sensitivity.

The push from Washington and the ECB is upping the stakes for Austria and its second-biggest bank, which plays a key role in the Russian economy but also an increasingly contested one as Moscow’s year-long war in Ukraine drags on. Many Western companies, including French bank Societe Generale, have already left Russia.

While the ECB is not asking Raiffeisen to leave the country immediately, it wants a plan of action for unwinding the business, two of the people said. One person said such a plan could include the sale or closure of its Russian bank.

“We have been asking banks to keep closely monitoring the business in Russia, and ideally, reduce it and wind it down as much as possible,” a spokesperson for the ECB said, adding it had been doing the same with all institutions concerned since Moscow launched its invasion of Ukraine.

Raiffeisen, however, does not intend to present such a plan yet, the people said, and some Austrian government officials see the moves as unwarranted foreign meddling.

A Raiffeisen spokesperson said that it was examining options for its Russia business “including a carefully managed exit” and that it was “expediting” its assessment, adding that it had also reduced lending in the country.

The Austrian lender is now the most important Western bank in Russia, offering a payments lifeline and accounting for roughly one quarter of euro transfers to the country, although other banks, such as Italy’s UniCredit, are still present.

ECB officials are reluctant to pressure Raiffeisen into an immediate sale, fearing the financial hit it could trigger, one person said, after a week of global banking turmoil.

A spokesperson for Austria’s finance ministry said that while there could be no return to the status quo in relations with Russia, “most” international companies, including banks remained there.

“There is substantial trade going on between Russia and the rest of the world in commodities like grain, fertilisers, oil, gas, nickel and other metals, which…require payments,” said the spokesperson.

HIGH STAKES

In January, the U.S. sanctions authority launched an inquiry into Raiffeisen over its business related to Russia.

Two people with direct knowledge of the matter told Reuters that the probe concerned potential breaches of Western sanctions. Raiffeisen said the inquiry was of a general nature.

The inquiry, which has strained relations between Vienna and Washington, could prove perilous for Austria, which had modelled itself as a bridge between east and west, turning Vienna into a magnet for Russian money.

James O’Brien, a senior sanctions official with the U.S. Department of State, spelt out American concerns over Raiffeisen and its business with Russia during discussions in Vienna in February, one of the people said.

“Ambassador O’Brien and Austrians discussed our close cooperation on sanctions in response to Russia’s illegal further invasion of Ukraine,” a State Department spokesperson said when asked about the visit.

The Raiffeisen spokesperson said that the bank was in the “early stages” of collecting information to respond to the inquiry letter from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).

During Austrian President Alexander Van der Bellen’s visit to Kyiv last month, Ukrainian President Volodymyr Zelenskiy criticised Austrian businesses still operating in Russia, singling out Raiffeisen, for supporting Moscow.

The bank has also been sharply criticised by investors after participating in a Russian scheme to grant loan payment holidays to troops fighting in Ukraine.

Although the stakes are high, some Austrian officials hope they can hold out long enough for a negotiated resolution to the war, allowing for a resumption of normal business with Russia, three of the people familiar with the matter said.

Austria’s foreign minister Alexander Schallenberg has said that while it is “legitimate” for U.S. authorities to approach Raiffeisen, Austria had primary responsibility for enforcing sanctions.

U.S. authorities can go as far as preventing a bank from processing dollar transactions, a step that would deal a serious blow to Raiffeisen and that euro zone regulators fear could destabilise the bank.

Latvia’s ABLV Bank quickly unravelled after being placed under U.S. sanctions in 2018 due to concerns about illicit activity connected in large part to Russia.

Some Austrian lawmakers are also critical of the government’s stance.

“Supervisory authorities must examine the risks from Raiffeisen’s activity and that from day one of the war,” Stephanie Krisper, a lawmaker from the liberal Neos opposition party told Reuters last week.

“For many years, connections to Moscow permeated our political system – now, the economic and political dependence on Russia has finally become visible.”

(Additional reporting by Francesco Canepa in Frankfurt; Writing By John O’Donnell; Editing by Elisa Martinuzzi, Kirsten Donovan)

By Hannah Lang

WASHINGTON (Reuters) – The dollar pared earlier losses on Thursday after the U.S. Federal Reserve sounded close to calling time on interest rate hikes, while the Swiss National Bank and Bank of England pushed ahead with further rate increases.

The Fed raised its benchmark funds rate 25 basis points on Wednesday, but dropped language about “ongoing increases” being needed in favor of “some additional” rises.

The Fed’s hike was notable given that financial markets have been roiled by wavering confidence in banks globally following a run on Silicon Valley Bank two weeks ago and the sudden demise of Credit Suisse.

“If the banking crisis should meaningfully calm, and inflation remain stubbornly high, that could be a recipe to help revive the dollar because maybe the Fed could go back to fighting inflation at full steam, and not be as concerned about the banking crisis putting a meaningful dent in the economy,” said Joe Manimbo, senior market analyst at Convera.

The dollar index, which measures the currency against six major peers, was last up 0.078% at 102.510, set for its first winning day after five straight days of losses.

“There seems to be not necessarily a lot of flight to safety,” said Juan Perez, director of trading at Monex USA.

“It’s actually more like there’s a sense that if the banking world is doing OK, and the banking world is going to be bailed out every time it seems to be in trouble, that things in general are going to survive and be fine.”

Markets are betting on just one more quarter-point hike from the Fed, in contrast to Europe where markets see around 50 bps of further tightening.

The gap sent the euro surging to a seven-week high of $1.0930, before moving downward. It was last at $1.08480.

“It seems like the (European Central Bank) may be carrying the most hawkish baton right now because it just seems like they have more rate hikes on the table than other central banks at the moment,” said Manimbo.

The Bank of England raised borrowing costs by 25 bps on Thursday, in line with expectations, and said further tightening would be required if there were evidence of more persistent price pressures.

Sterling gained 0.13% against the dollar to $1.22845.

The Swiss National Bank (SNB) also raised its policy rate by 50 basis points as the central bank sought to balance tackling inflation with concerns about financial market turmoil.

The SNB said measures announced by authorities at the weekend regarding Credit Suisse had “put a halt to the crisis.”

The dollar fell against the franc after the decision and was last down 0.19% at 0.916.

========================================================

Currency bid prices at 3:03PM (1903 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.5000 102.4400 +0.08% -0.957% +102.6300 +101.9100

Euro/Dollar $1.0843 $1.0856 -0.09% +1.22% +$1.0930 +$1.0829

Dollar/Yen 130.8700 131.5000 -0.49% -0.19% +131.6550 +130.4150

Euro/Yen 141.96 142.67 -0.50% +1.18% +143.1900 +141.4600

Dollar/Swiss 0.9157 0.9175 -0.19% -0.96% +0.9180 +0.9120

Sterling/Dollar $1.2281 $1.2269 +0.13% +1.58% +$1.2343 +$1.2263

Dollar/Canadian 1.3709 1.3732 -0.18% +1.17% +1.3733 +1.3631

Aussie/Dollar $0.6684 $0.6685 +0.10% -1.83% +$0.6755 +$0.6674

Euro/Swiss 0.9930 0.9957 -0.27% +0.35% +0.9997 +0.9925

Euro/Sterling 0.8827 0.8847 -0.23% -0.19% +0.8865 +0.8822

NZ $0.6257 $0.6222 +0.64% -1.39% +$0.6294 +$0.6221

Dollar/Dollar

Dollar/Norway 10.3860 10.4500 -0.77% +5.67% +10.4620 +10.2770

Euro/Norway 11.2626 11.3537 -0.80% +7.33% +11.3675 +11.2025

Dollar/Sweden 10.3162 10.3068 -0.02% -0.88% +10.3461 +10.2175

Euro/Sweden 11.1885 11.1908 -0.02% +0.35% +11.2360 +11.1536

(Reporting by Hannah Lang in Washington; Additional reporting by Samuel Indyk in London; Editing by Susan Fenton, Marguerita Choy and Richard Chang)

By Marcela Ayres

BRASILIA (Reuters) -The Brazilian stock market deepened losses on Thursday after the country’s central bank decision to maintain a hawkish stance triggered further criticism from leftist President Luiz Inacio Lula da Silva.

Concerned with rising inflation expectations, policymakers held the benchmark Selic rate at a six-year high of 13.75% on Wednesday for the fifth consecutive time, dashing hopes of a more lenient signal for monetary easing amid global banking turmoil.

The benchmark Bovespa index fell below 100,000 points for the first time since July 2022, deepening losses to 2.9% after former President Lula stated that the central bank should “pay the price” for the high level of interest rates.

The index had opened the session with gains, which, along with other indicators, was seen as a mild market reaction to the central bank’s harsh statement.

Expectations embedded in the yield curve that initially continued to show rate cuts kicking off in June have started to point to the central bank acting only in August.

The U.S. dollar rose 0.97 against the Brazilian real after beginning the trading session with a decline.

Sergio Goldenstein, chief strategist at Warren Rena, said the central bank had dampened chances of a near-term cut. He noted that policymakers did not mention a potential credible fiscal framework as a downward risk for inflation, and indicated they could resume hikes if necessary.

“Furthermore, the various criticisms of government officials against the central bank generate uneasiness,” he added.

Finance Minister Fernando Haddad described the central bank’s statement as “very worrying” and said that maintaining the rate could negatively impact public accounts by creating difficulties for company sales and for collecting taxes.

Lula’s chief of staff, Rui Costa, called the central bank “insensitive,” while the president of his Workers Party (PT), Gleisi Hoffmann, said the central bank was “only benefiting renters and those who do not produce.”

Planning Minister Simone Tebet told reporters the government will demonstrate, by the next rate-setting meeting in May, that there are conditions for reducing interest rates after the government presents a long-awaited new fiscal framework. Lula has delayed its announcement until April.

The framework is crucial for addressing fiscal concerns after the president secured congressional approval for a multi-billion-real package to boost social spending that bypasses the constitutional spending cap.

(Reporting by Marcela AyresEditing by Marguerita Choy and Richard Chang)

By Shariq Khan

BENGALURU (Reuters) -Oil prices settled 1% lower on Thursday, reversing early gains after U.S. Energy Secretary Jennifer Granholm told lawmakers that refilling the country’s Strategic Petroleum Reserve (SPR) may take several years.

Granholm’s comments fed worries about potential oversupply, especially as the Energy Department plans to proceed with an additional release of 26 million barrel as part of its congressional mandate, UBS analyst Giovanni Staunovo said.

Brent crude futures fell by 78 cents, or 1%, to settle at $75.91 a barrel. U.S. West Texas Intermediate crude futures slid by 94 cents, or 1.3%, to end the session at $69.96 a barrel.

Oil benchmarks had pushed about 1% higher before Granholm’s comments, underpinned by a lower dollar and higher gasoline prices.

The dollar index traded at its lowest since Feb. 3, a day after the Federal Reserve hinted it was nearing a pause in interest rate hikes. A weaker greenback makes dollar-denominated oil more attractive to holders of foreign currencies.

Federal Reserve policymakers believe beating back inflation may require just one more interest-rate hike this year but less easing next year than most had expected just three months ago.

Also supporting crude prices, RBOB gasoline futures hit a 10-day high after the U.S. Energy Information Administration said stockpiles of the product fell last week by the most since September 2021. [EIA/S]

Higher gasoline demand will encourage refiners to use more crude oil to make fuel, Mizuho analyst Robert Yawger said.

“That large draw of 6 million barrels in EIA’s report has left a big impact on the market as the gasoline situation is looking a bit tight here,” Yawger said.

Also supportive, Goldman Sachs said commodities demand was surging in China, the world’s biggest oil importer, with oil demand topping 16 million barrels per day.

The bank forecast Brent would reach $97 a barrel in the second quarter of 2024.

(Reporting by Shariq Khan, additional reporting by Shadia Nasralla, Jeslyn Lerh; Editing by Mark Potter, David Gregorio and Mark Porter)

By Jody Godoy

(Reuters) -The U.S. Consumer Financial Protection Bureau’s funding structure is constitutional, a Manhattan appeals court ruled on Thursday, as the U.S. Supreme Court prepares to consider the issue next term.

The 2nd U.S. Circuit Court of Appeals said that Congress’ decision to fund the CFPB independently through the Federal Reserve, instead of annual appropriations bills, does not conflict with the U.S. Constitution’s separation of executive and legislative powers.

The question of the CFPB’s funding is before the U.S. Supreme Court in a closly-watched case that the CFPB says could threaten twelve years of financial regulation.

Congress created the agency in 2010 through the passage of the Dodd-Frank Act in response to the 2008 financial crisis, giving it authority to regulate payday lending, debt collection and other consumer financial businesses.

The CFPB has faced several legal challenges to its authority; the 2nd Circuit is not the first court to uphold the agency’s funding structure.

However, the ruling comes as the agency is asking the U.S. Supreme Court to overturn a ruling by the New Orleans-based 5th U.S. Circuit Court of Appeals finding the CFPB’s funding unconstitutional.

In seeking Supreme Court review, the CFPB said the ruling “raises grave concerns” for the financial industry, and could undermine “virtually every action” the agency has taken since its creation.

The court accepted the case and will hear arguments during its next term, which begins in October.

Writing for the 2nd Circuit on Thursday, U.S. Circuit Court Judge Richard Sullivan said the constitution only requires that expenditures be authorized by an act of Congress.

Sullivan, who was appointed by then-President Donald Trump in 2018, wrote that U.S. Supreme Court decisions and historical principles of congressional spending support that conclusion, he wrote.

The ruling denied a request by the Law Offices of Crystal Moroney to end a CFPB inquiry into the law firm’s work as a debt collector.

Richard Samp, an attorney who represents Moroney, said she plans to ask the U.S. Supreme Court to review the decision.

The case is Consumer Financial Protection Bureau v. Law Offices Of Crystal Moroney PC, 2nd U.S. Circuit Court of Appeals, No. 20-3471.

(Reporting by Jody Godoy in New York;Editing by Noeleen Walder)

(Reuters) -A Virginia debt collection company has agreed to pay $24 million over allegedly illegal practices, the top U.S. agency for consumer financial protection said on Thursday, adding that the company had violated a previous order.

Rohit Chopra, director of the Consumer Financial Protection Bureau, said Portfolio Recovery Associates had been “caught red handed” in 2015, but had persisted in “intimidation, deception and illegal … tactics” to collect on unsubstantiated and undocumented consumer debt in recent years.

“CFPB orders are not suggestions, and companies cannot ignore them simply because they are large or dominant in the market,” Chopra added.

Portfolio Recovery Associates said it had admitted to no wrongdoing.

In 2015 the CFPB ordered Portfolio Recovery Associates to cease collecting on debts without reasonable basis, selling debt, or threatening to sue or suing when it had no intent to prove the claims. The company agreed to pay $27 million to resolve the allegations.

The CFPB on Thursday said the company broke a number of provisions related to that order. The $24 million payment agreement includes a fine, as well as repayment to consumers harmed, pending court approval.

In a statement, Portfolio Recovery Associates said it was committed to dealing fairly and respectfully with its clients.

“Although we have admitted to no wrongdoing as part of the resolution, and we continue to disagree with the CFPB’s characterization of our conduct, we are pleased to have this matter resolved and behind us,” Kevin Stevenson, president and chief executive of parent company PRA Group Inc, said in a statement.

(Reporting by Douglas Gillison; Editing by Aurora Ellis and Leslie Adler)

By Manya Saini

(Reuters) – Hindenburg Research on Thursday disclosed short positions in Block Inc and alleged that the payments firm led by Twitter co-founder Jack Dorsey overstated its user numbers and understated its customer acquisition costs.

Block vowed to fight back, saying it would explore legal action against the short seller for its “factually inaccurate and misleading report” that was “designed to deceive and confuse investors”.

“Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price,” the payments firm said, adding that it would work with the U.S. Securities and Exchange Commission.

Block’s shares were last down 15% at $61.67, paring some losses after a 22% plunge earlier.

Hindenburg, which was behind a market rout of over $100 billion in India’s Adani Group, said in its report that former Block employees estimated that 40% to 75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

The move is seen as a challenge to Dorsey, who co-founded Block in 2009 in his San Francisco apartment with the goal to shake up the credit card industry, and is the company’s largest shareholder with a stake of around 8%.

The NYU dropout was just until two years ago splitting his time between the payments firm and Twitter, his other venture that went private in 2022 in a $44 billion buyout by Elon Musk that Dorsey supported.

“Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping,” Hindenburg said in a note published on its website.

The report comes at a time when the outlook for the payments industry has been clouded by worries over the strength of consumer spending in the face of elevated levels of inflation and expectations of an economic downturn.

Those concerns triggered a more than 60% slump in Block’s shares last year.

Hindenburg said that Block “obfuscates” how many individuals are on the Cash App platform by reporting “misleading transacting active metrics filled with fake and duplicate accounts”.

Reuters could not verify the claims raised in the report.

Cash App allows users to transfer money through a mobile application and is touted by the company as an alternative to traditional banking services.

The app had 51 million monthly transacting actives, a 16% year-over-year increase during December 2022, Block said in a fourth-quarter earnings letter.

The short seller added that co-founders Dorsey and James McKelvey collectively sold over $1 billion of stock during the pandemic as the company’s share price soared.

Other executives including finance chief Amrita Ahuja and the lead manager for Cash App Brian Grassadonia also dumped millions of dollars in stock, the report added.

“What I am really concerned about is the Cash App, accusations of fraud, multiple accounts, opening accounts and fake names. And it doesn’t seem like that would be something that they would allow,” said Christopher Brendler, senior analyst at D.A. Davidson & Co.

“(There is) some evidence in the report that this is happening. So, you know, I think that’s the most damaging part of the report,” he added. (Graphic: Year-over-year gross profit growth in Block’s Cash App, https://www.reuters.com/graphics/BLOCK-CASHAPP/CHART/znvnbljajvl/chart.png)

Based on the session’s 20% price move, as of 9:55 a.m. ET, short sellers have made over $400 million in paper profit, according to data from financial analytics firm Ortex. Short interest was 27.96 million shares, or 5.21% of free float.

The company’s ticker was the top trending on retail investor-focused forum StockTwits.

Block has also taken a hit from the upheaval in the cryptocurrency industry that forms a large chunk of its revenue base.

The company offers point-of-sales systems and an app that allows people to trade cryptocurrency.

Last month, Block said it was “meaningfully slowing” the pace of hiring this year to control costs.

Founded in 2017 by Nathan Anderson, Hindenburg is a forensic financial research firm that analyses equity, credit and derivatives.

Hindenburg invests its own capital and takes short positions against companies. After finding potential wrongdoings, the company usually publishes a report explaining the case and bets against the target company, hoping to make a profit.

Short sellers typically sell borrowed securities and aim to buy these back at a lower price.

(Reporting by Manya Saini, Akriti Sharma, Mehnaz Yasmin and Jaiveer Singh Shekhwat in Bengaluru; Editing by Nivedita Bhattacharjee, Sriraj Kalluvila and Shounak Dasgupta)

(Reuters) – Bankrupt cryptocurrency exchange FTX said on Thursday it would sell its stake in Web3-focused startup Mysten Labs for $95 million, as it strives to pay back its customers.

The exchange had paid nearly $101 million last year for preferred shares of Mysten and led a funding round that valued the platform which provides infrastructure for Web3 adoption at more than $2 billion.

Web3 refers to a version of the internet that is decentralized, and operates on blockchain technology.

The new management at FTX, which filed for bankruptcy protection in November, has been trying to recover assets to clear liabilities.

The company on Wednesday reached a deal to recoup more than $400 million in cash from hedge fund Modulo Capital.

(Reporting by Niket Nishant in Bengaluru; Editing by Vinay Dwivedi; Editing by Vinay Dwivedi)

By John Revill and Noele Illien

ZURICH (Reuters) -The Swiss National Bank raised its benchmark interest rate by 50 basis points on Thursday and said UBS’s takeover of Credit Suisse had averted a financial disaster, adding it was now critical the merger took place in a smooth and fast way.

The multi-billion Swiss francs rescue package brokered by the SNB, government and regulator on Sunday prevented a systemic crisis, SNB Chairman Thomas Jordan said.

“If this solution hadn’t worked, Credit Suisse would have failed, with extreme consequences for Switzerland but also the global economy,” he told a press conference. 

“In the last few weeks there was a real erosion in confidence in the banking world and in order to halt it – we needed another solution besides liquidity,” Jordan said.

The SNB Chairman said it was vital for UBS’s takeover of the 167-year-old Credit Suisse to go through as smoothly as possible in order to maintain financial stability.

“UBS made a full commitment to the takeover of Credit Suisse… now it is extremely important that both parties do everything possible that the takeover will be successful,” he said, adding the next two weeks would be crucial.

His SNB governing council colleague Martin Schlegel declined to comment on when he expected the deal to go through.

Schlegel also declined to comment on whether UBS and Credit Suisse had used any of the 200 billion Swiss francs in emergency liquidity offered by the SNB.

Jordan told Reuters in a separate interview he didn’t see the banks needing more liquidity, saying the current instruments were “very big, they are bold”.

Switzerland’s financial market regulator FINMA on Thursday defended its decision to impose steep losses on some Credit Suisse bondholders under the deal, saying the decision was legally watertight.

RATE HIKE

The dramatic events of the last 10 days overshadowed Thursday’s fourth interest rate hike in succession by the SNB as it seeks to battle stubborn Swiss inflation, which at 3.4% in February – remains outside the SNB’s target band of 0%-2%.

The central bank said further rises could not be ruled out.

“If you look at our newest inflation forecast, we see there is some necessity to continue to tighten monetary policy,” Jordan told Reuters. “Of course we will look in three months if this is still the case or not.

The SNB also said it was willing to be active in the foreign exchange market if necessary.

It recently switched from selling Swiss francs to buying the currency to increase its value as a way to dampen the effect of imported inflation.

Central banks around the world have been hiking rates in recent weeks to check inflation.

The Swiss move on Thursday matched the European Central Bank’s (ECB) 50-basis-point increase last week, while Norway’s central bank also raised its benchmark interest rate on Thursday

The U.S. Federal Reserve on Wednesday raised its main interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases.

The Bank of England is expected to increase its interest rate by a quarter percentage point later on Thursday.

The Swiss hike was in line with the majority of economist forecasts according to a Reuters poll.

Economists expect further hikes as the SNB fights Swiss inflation, which last year hit its highest since 1993.

“Further moves could be in the pipeline,” said Gero Jung, an economist from Mirabaud. “In sum, a hawkish hike from the SNB.”

(Reporting by John Revill and Noelle Illien, Writing by John O’Donnell and John Revill; Editing by Paul Carrel, Alexandra Hudson)

By Naomi Rovnick, Chiara Elisei and Kirstin Ridley

LONDON (Reuters) – Credit Suisse bondholders are seeking legal advice after the Swiss regulator ordered 16 billion Swiss francs ($17.5 billion) of Additional Tier-1 (AT1) debt to be wiped out under its rescue takeover by UBS.

These higher-yielding junior bonds emerged from the 2008-2009 crisis as a way to boost bank capital while shifting the risk of losses to investors and away from taxpayers.

Lawyers and dealmakers said the AT1s, which have dropped in value to just a few cents in the dollar following the move, are being traded by hedge funds in a so-called litigation play.

Here’s a look at the potential for litigation.

WHY IS THIS A BIG DEAL?

The Swiss regulator’s decision inverted the long-established seniority of bondholders over shareholders over the assets of a company in distress. Not only did bondholders expect protection, but UBS is paying $3.23 billion to Credit Suisse shareholders.

This angered some investors and has prompted lawyers to start investigating potential litigation.

Other AT1 bonds fell in price on Monday on fears about the prospect of losses should other banks get into difficulty.

The bonds in the $275 billion market are designed to be shock absorbers if a bank’s capital levels fall below a threshold. They are then converted into equity or written off.

WHO IS INVOLVED?

Law firms including Quinn Emanuel Urquhart & Sullivan, Pallas Partners and Korein Tillery say they are speaking to prospective bondholder clients about bringing claims.

In a call on Wednesday, which drew more than 750 attendees, Quinn Emanuel raised the prospect of pursuing claims in Switzerland and elsewhere, sources with knowledge of the matter told Reuters.

One Paris-based manager of a debt fund that held Credit Suisse AT1s said he had been “spammed” with emails from lawyers.

IS THERE AN OPPORTUNITY?

Some distressed debt-type funds have been buying Credit Suisse’s AT1s for a few cents on the dollar. The bonds were traditionally held by institutional investors.

Samuel Norris, special situations partner at law firm Ropes & Gray in London, said he had been instructed by a number of hedge funds interested in trading the debt on the back of litigation news.

But five European and UK-based asset managers, identified by fund tracker Morningstar as among the top 50 European holders of the debt, told Reuters they were reluctant to join a court case that could take years.

The owner of a Hong Kong-based distressed debt fund said he had been approached by U.S. law firms, but was not interested.

Facing any challenge could be Credit Suisse, its new owner UBS, Swiss regulator FINMA or the Swiss government.

WHAT HAVE THE SWISS SAID?

FINMA on Thursday defended its decision, saying the move was legally watertight because of both the bond prospectuses and emergency government legislation.

FINMA said the bonds contractually allow for a total write down in a ‘viability event’, “in particular if extraordinary government support is granted”, which occurred when Credit Suisse was given “extraordinary liquidity assistance loans secured by a federal default guarantee”.

It also cited an emergency March 19 ordinance which it said authorised FINMA to instruct Credit Suisse to write off the bonds.

Hong Kong, Singapore, the European Union and Britain all said this week they would stick to the traditional hierarchy of creditors claims in the event of a bank collapse.

HAS AT1 LEGAL ACTION HAPPENED BEFORE?     Yes.

A dispute over the write-off of around $1 billion AT1s issued by India’s Yes Bank in March 2020 after the Reserve Bank of India initiated a restructuring of the lender is currently subject to court proceedings.    In 2017, holders of Spain’s Banco Popular stocks and AT1 bonds were wiped out when the bank was taken over by Santander, although bondholders lost out alongside the shareholders.     Bondholders took legal action against the regulator but have been so far unsuccessful.

DOES LITIGATION STACK UP?

Lawyers, bondholders and banking analysts have been poring over the bond documentation to see if it allowed for the wipe-out.

The Swiss government on Sunday said that FINMA had been “provided with a clearer legal basis so that part of Credit Suisse’s regulatory capital can be written off”. FINMA believes both the contracts and the emergency ordinance are on its side.

But some lawyers are undaunted, although none thinks a claim would be resolved quickly.

London-based Pallas Partners said it was working on possible legal action with Swiss peers. Four other lawyers in London said they were also examining the potential for lawsuits – some on behalf of both bondholders and shareholders.

($1 = 0.9164 Swiss francs)

(Reporting by Naomi Rovnick, Chiara Elisei, Kirstin Ridley, Tommy Reggiori Wilkes, Marc Jones, Pablo Mayo Cerqueiro and Davide Barbuscia; Writing by Dhara Ranasinghe and Tommy Reggiori Wilkes, Editing by Alexander Smith)

By Jessica DiNapoli

HERSHEY, Pennsylvania (Reuters) -Hershey Co is looking to reduce “trace” amounts of lead and cadmium in its chocolate, chief financial officer Steve Voskiul told Reuters on Wednesday, after Consumer Reports found that some dark chocolate bars had potentially harmful levels of the heavy metals.

Consumer Reports, a nonprofit consumer group, tested chocolate bars including those made by Hershey late last year and found that some of them contained possibly harmful levels of lead, cadmium or both for people who eat more than one ounce per day.

The trace amounts of the metals found in some chocolate are “below any recommended level, any standard,” Voskuil said, adding that lead and cadmium are elements in soil and can naturally occur in the product.

“Depending on where you source, you may get relatively more lead or cadium in West Africa versus South America, but in both cases it’s a naturally occurring ingredient,” Voskuil said.

“We would love to eradicate it completely and continue to look for opportunities in the process, is there more we can do there,” he said on the sidelines of the Reese’s makers’ investor day.

A company spokesperson said “given the natural occurrence of minerals, it’s difficult to completely eliminate them from agricultural ingredients.”

Consumer Reports found that Hershey’s Lily’s extremely dark chocolate 85% cocoa bar was high in lead and cadmium. Its Hershey’s Special Dark mildly sweet chocolate and Lily’s extra dark chocolate 70% were also high in lead according to the report.

Voskuil said the manufacturing and cleaning process for cocoa beans removes the “vast majority” of lead and cadmium.

Hershey is “evaluating” if it can remove more of the metals through additional cleaning of cocoa beans or alternate sourcing, he said.

“Despite the cleaning process we’re also always looking, are there other things we can do to reduce it even lower,” Voskuil said.

Hershey faces multiple lawsuits from consumers who claim the chocolate maker should have disclosed the levels of heavy metals, and that they would have paid less for or not bought the products had they known. 

(Reporting by Jessica DiNapoli in Hershey, Pennsylvania; additional reporting by Jonathan Stempel in New YorkEditing by Marguerita Choy and Susan Fenton)