Headlines

Bulgaria has committed to strengthening its banking sector, European Union officials said Tuesday, two days before a eurozone finance ministers meeting that could shed light on the Balkan country's progress toward joining the euro. Bulgaria meets the nominal criteria to adopt the European common currency, with its lev currency pegged to the euro, low inflation and healthy public finances. But it is also the EU's poorest country, and widespread graft and troubles at some of its banks have cast a shadow over its prospects of joining, VOA reported.

Almost one million Australian homeowners are set to default on their mortgages in the coming months, an independent analyst warns. Digital Finance Analytics principal Martin North explained that if the big four banks do go ahead and increase their standard variable rates by as little as 0.15 percentage points over the next few months, homeowners could default, the Daily Mail reported. A number of Australian banks have already begun the process of raising their interest rates, ABC News reported.

China Huarong Asset Management Co., the state-owned bad-debt manager whose former chairman has been embroiled in a graft probe, plans to restructure its overseas operations in a bid to cut costs, people with knowledge of the matter said, Bloomberg News reported. The company is targeting reductions of more than 50 percent in staff-related costs at its businesses in Hong Kong and other markets outside China, according to two of the people. Options being discussed involve cutting jobs and pay, said one of the people, who asked to remain anonymous discussing confidential information.

Stephen Poloz can’t hold off raising interest rates any longer. Economists are predicting the Bank of Canada governor will resume tightening policy this Wednesday in what would be the first increase in borrowing costs since January, Bloomberg News reported. More hikes are set to follow as businesses warn of wage pressures and inflation remains above the central bank’s target. Poloz, however, is still unlikely to be in a hurry. There remains a long list of reasons for prudence, starting with the real possibility Canada gets into a trade war with its biggest trading partner.

Asian bond investors reduced positions in June to the most underweight levels ever for the regional asset class, based on survey data by Bank of America Merrill Lynch, stretching back to 2009. Investors see China’s liquidity tightening and domestic bond defaults as the top two risks for the Asian credit market, followed by fund outflows, Bloomberg News reported. They cut Asian bond holdings to 24 percent net underweight in June from negative 13 percent in March as they raised cash levels and reduced risks, the survey, which was conducted from June 25-29, showed.

Baby goods retailer Mothercare is seeking to raise £32.5m from existing shareholders and will increase the number of store closures as it struggles to adapt to challenging conditions on the UK’s high streets. The capital raising, which is larger than originally planned, will be at 19p a share, well below Friday’s closing level of 28.6p, and the proceeds will be used to reduce debt, the Financial Times reported. Mothercare’s shares fell 9 per cent in early London trade to 26p.

A widely watched measure of eurozone capital flows suggests that Italy’s debts to the European Central Bank are set to hit €500bn this summer, reflecting the eurozone’s persistent financial imbalances, the Financial Times reported. The country’s Target 2 balance — the difference between incoming and outgoing cross-border payments — is €480bn in the red and growing rapidly, according to ECB data. Meanwhile, Germany’s Target 2 surplus is on track to reach €1tn.

Mario Draghi has delivered a bullish assessment of the eurozone’s economic prospects, saying monetary stimulus undertaken by policymakers had been and would continue to be “very effective” in boosting growth and inflation, the Financial Times reported. The European Central Bank chief told lawmakers at the European Parliament on Monday that the measures — which include negative interest rates and a €2.4tn bond-buying programme — would boost growth and inflation by 1.9 percentage points each between 2016 and 2020.

The collapse of Carillion exposed the risks of using private companies to cut the cost of delivering public services and its failure could be repeated if the government does not learn lessons, lawmakers said on Monday. Carillion, which employed 43,000 people to provide services in defense, education, health and transport, collapsed in January, becoming the largest construction bankruptcy in British history, the International New York Times reported on a Reuters story. It left creditors and the firm's pensioners facing steep losses and put thousands of jobs at risk.

Under Italian law a bankruptcy buy-out proposal can be filed by the debtor (after 1 year from the opening of the bankruptcy proceedings), any creditor and any third party, JD Supra reported. The proposal must be approved by the majority of (unsecured and impaired secured) creditors (in amount of claims) and the majority of classes, if any (this means that a subject filing a buy-out proposal votes on the proposal whenever it is a creditor of the debtor and is eligible to vote).