Some of Russia’s top banking executives have concluded that the quality of their loan books is much worse than what official data show and have privately discussed the prospect of seeking a state-funded bailout should the situation worsen, we’re told. 

At least three lenders the central bank has identified as systemically important have considered the possibility that they may need to be recapitalized in the next 12 months. Executives have discussed internally how they would raise the prospect with the Bank of Russia if needed. 

Officially, the banking system is in relatively good health and levels of bad debt remain well below what they were in past crunches the authorities managed to defuse. Yet some top bankers including Sberbank Chief Executive Herman Gref have have started flagging concerns about the prospect for the next year.  — Philip Lagerkranser
 

What You Need to Know Today

The European Union has suggested that the €400 billion ($463 billion) crisis tool it proposed this week would be financed using joint borrowing, we’re told. The EU’s executive branch’s new budget instrument for the period 2028-2034 would provide loans to countries so they can react faster to adverse events. The fund is likely to prove one of the most controversial aspects of the bloc’s budget plans, since several countries oppose pooled liabilities.

Some traders have started placing bets that could net a more than 1,000% return if the Bank of England cuts interest rates more than expected. They are buying option strategies tied to the Sterling Overnight Index Average rate, a proxy for policy rates. The bets would pay off if the BOE ignores inflation that’s at an 18-month high and cuts its benchmark rate to 3.5% this year. 

Benjamin Netanyahu has been politically weakened by the departure of two ultra-Orthodox parties from his government just as he seeks a ceasefire in Gaza, military dominance in southern Syria and influence over US policy toward Iran. While the Israeli premier will helm a minority administration from next week, his government isn’t likely to be dissolved until at least late October. The two parties bolted over a bill ending exemption from military service of their community’s young men.

A heat wave in France has pushed electricity prices higher as demand for air conditioning rises, a trend that’s expected to continue. Power prices for today jumped to the highest since early July, while local authorities say temperatures could reach as high as 39C near the Mediterranean coast. Combined with intense winds, that’s also making dangerous wildfires more likely in the area, the national forecaster says.

The younger co-pilot on the Air India flight that crashed last month in Ahmedabad asked his more experienced colleague why he turned off the plane’s fuel-supply switches, a cockpit voice recording indicates, we’re told. A preliminary report from Indian authorities last week first mentioned the exchange, without identifying the speakers. The report had shown two fuel switches in the cockpit were moved to a cut-off position, causing the Boeing  787 Dreamliner to lose lift and crash 32 seconds after takeoff. 

The crash site of Air India flight AI171 in Ahmedabad on June 12. Photographer: Siddharaj Solanki/Bloomberg

Hungary should adopt the euro and end the ad-hoc policymaking under Prime Minister Viktor Orban that has sapped investor confidence, the new CEO of the country’s biggest bank said. Orban, who has dragged his feet on euro adoption, has doubled down on interventions, including a handful of financial-sector special taxes, to plug the budget deficit. His Fidesz party is now trailing an opposition movement after 15 years in power.

Iraq approved a plan for its semi-autonomous Kurdish region to transfer oil to Baghdad, a key step toward resuming exports. The Kurdistan Regional Government will supply Iraq’s state oil marketer SOMO at least 230,000 barrels a day for export, the federal government said. Additional shipments would likely add to a global supply surplus forecast for later this year.

What You’ll Need to Know Tomorrow

For Your Commute

They were rich, obsessed with watches and determined to get their hands on a rare timepiece from Patek Philippe. But Tiffany’s decision to offer a limited edition Patek Philippe Nautilus 5711 to wealthy watch fanatics a few years ago has evolved into a cautionary tale about how exclusivity, if mishandled, can backfire. 

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