EU regulators plan stress tests for non-banks

Today’s agenda: UK government shifts to shorter-term borrowing; exploiting Greenland minerals; Japan opens up defence procurement; Nick Candy’s start-up fund; and robot dogs

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Good morning. 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 we know: 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 it matters: 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 and French semiconductor materials company Soitec report.

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. The UK government is shifting to shorter-term borrowing to lower its interest bill as a global debt sell-off adds to the pressure on its tax and spending plans. The Debt Management Office was softening a reliance on long-term borrowing amid falling demand from institutional investors, the agency’s head has said. More from Ian Smith in London.

2. 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.

3. 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 has rattled US allies by raising questions about Washington’s commitment to joint defence.

4. Exclusive: 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. Read the full report.

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. UK 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.

• Post Office dilemma: As the UK institution tries to move on from the Horizon scandal, an Oxfordshire village branch illustrates the profitability problem, writes John Gapper.

• 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.

Chart of the day

UK food inflation rose at an annual rate of 2.8 per cent this month, up from 2.6 per cent in April and the fastest pace since May last year, driven by fresh food prices, according to industry data that suggests an ongoing squeeze on household finances.

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.