EU regulators plan stress checks for non-banks | Invesloan.com

Good morning and welcome to FirstFT. Here’s what is on today’s agenda:

• Greenland says it will turn to China if the US and EU shun its mining sector

• European companies hail Japan’s embrace of non-US defence deals

• Toyota mounts software challenge to Tesla and Chinese rivals

• The rise of robot dogs

We begin with an exclusive story on EU regulators planning their first stress test to look for vulnerabilities in the financial system outside banks. The move reflects fears about the rapid growth of less regulated groups such as hedge funds and private equity.

What are regulators proposing? European authorities plan to examine the impact on the wider financial system of a potential market crisis, including pension funds and insurers. Officials at the EU’s main financial watchdogs are still discussing the details of such a system-wide stress test of non-bank institutions, but they are optimistic that it could be launched next year, according to two people involved in the talks. The plans follow a similar exercise by the Bank of England last year.

Why does it matter? Since the 2008 financial crisis, the provision of loans has shifted from banks’ balance sheets towards other firms that behave like traditional lenders but are more lightly regulated. Supervisors are growing increasingly concerned about the opacity and potential risks these firms could present.

The plans for a stress test would probably raise serious concerns among hedge funds, private credit groups and money market funds that they could be subjected to greater scrutiny and restrictions by European regulators in the future. Read the full story.

Here’s what else we’re keeping tabs on today:

• EU: The General Affairs Council meets in Brussels. The agenda includes Spain’s request to recognise Catalan, Basque and Galician as official languages of the bloc.

• Canada: King Charles addresses the state opening of parliament in Ottawa, the first time a reigning monarch has conducted this duty in person in 50 years.

• Economic data: The Conference Board releases its US consumer confidence index.

• Results: US car parts retailer AutoZone reports results.

Join Financial Times experts tomorrow to get clear-sighted analysis of the most consequential geopolitical rivalry of our time: the US-China showdown. Register for the webinar now and put questions to our panel.

Five more top stories

1. US and European mining companies need to hurry up and invest in Greenland, otherwise it will have to look elsewhere for help exploiting its minerals, including from China, the Arctic territory’s business minister has warned. Nuuk would prefer to work with “allies and like-minded partners”, but Greenland was “having a difficult time finding our footing” in the changing nature of the western alliance, the minister added.

2. European defence companies say Japan has accelerated its opening to non-American suppliers of military equipment since the election of US President Donald Trump. Tokyo’s increasing willingness to look beyond its traditional defence partner for procurement comes after Trump rattled US allies by raising questions about Washington’s commitment to joint defence.

3. Toyota has promised to install a homegrown operating system within its best-selling RAV4 sport utility vehicle by next March, in a bid by the world’s largest carmaker to catch up with Tesla and Chinese rivals’ software lead.

4. Several EU governments have signalled they want a quick deal with the US to head off Donald Trump’s threat of 50 per cent tariffs on the bloc, urging the European Commission to keep talking to Washington rather than taking the path of confrontation.

5. Police said a 53-year-old man has been arrested after a car collided with crowds at Liverpool Football Club’s Premier League victory parade. British Prime Minister Sir Keir Starmer described the scenes emerging from the incident as “appalling”. Here are more details.

News in-depth

Germany’s efforts to swell the ranks of its armed forces have hit a snag as the country has lost contact with almost 1mn potential reservists due to strict data protection laws, its reservists’ association has said. The setback comes as Berlin seeks a stronger role in European defence and security.

We’re also reading . . . 

• ‘Task discretion’ decline: Digital productivity tools may sap employees’ sense of control of their work and reduce scope for trying new ways of doing things, writes Sarah O’Connor.

• US-South Korea: Trade tensions are building, the military alliance is under pressure and Korean domestic politics are fraught. Can Seoul negotiate a way out?

• Eurozone bonds? The EU now has a unique chance to capitalise on investor doubts about the US and promote the euro as a reserve currency, writes Marieke Blom, chief economist at ING.

• Nick Candy, the treasurer of Nigel Farage’s Reform UK, has racked up more than £100mn of financial losses after the property developer’s Luxembourg-based investment portfolio backed a number of failed ventures, including an augmented reality start-up and a high fashion house, an FT analysis found.

Chart of the day

Four of Europe’s oldest industrial groups, Schneider Electric, Siemens AG, ABB and Legrand, have added more than €150bn to their market caps on the back of soaring demand for data centres driven by the boom in artificial intelligence since the launch of ChatGPT in November 2022.

Take a break from the news

Robot dogs are multiplying fast around the world, metamorphosing from amusing playthings to trusted companions deployed in a wide range of terrains from production plants to battlefields. Michael Peel takes a look at the growing use of caninoids as part of the FT’s special report on robotics.

Additional contributions from Irwin Cruz and Benjamin Wilhelm