45% of US firms moved deposits to large banks in the past year

Nearly half (45%) of organisations moved deposits to large banks, seeking safety in systemically important financial institutions, according to the 2024 Association for Financial Professionals (AFP) Liquidity Survey, underwritten by Invesco. To further reduce counterparty risk, 35% of organisations diversified their deposits among a greater number of banks.

Some 44% of treasury professionals report an increase in their organisations’ cash holdings within the US in the past 12 months (through March 2024). This figure is up 8% from 2023 (36%). Around one-third (31%) of respondents predict their companies’ current cash and short-term investment holdings will increase through the third quarter.

Elsewhere, the survey found that larger organizations (>US$1bn annual revenue) consider safety a key objective of their investment policy more often (69%) than smaller organisations (58%).

Banks remain major depositories for companies’ US-based cash and short-term investment holdings. The percentage of cash and short-term investments maintained at banks is 47%, the same level as in 2023. However, allocations to Treasury securities (12%) increased by 5% over the same time period.

Over two-thirds of respondents reported that their companies’ earnings credit rate (ECR) did not increase as rapidly as rising interest rates, with non-investment-grade companies most impacted (75%).

When selecting a bank, the most important determinant for treasury professionals is the overall relationship with the bank, cited by 89% of respondents. This figure is up 6% from 2023 and surpassed credit quality and counterparty risk, highlighting the value placed on relationships with banking partners.

Finally, money market fund reform has had minimal impact on corporate investing, according to the survey, which found that 4% of current allocations are in prime/diversified money funds. With the mandatory liquidity fee requirement going into effect on 2 October this year, 32% of those exposed to prime funds are taking a “wait and see” approach.

The 2024 AFP Liquidity Survey was conducted in March 2024 and received responses from 239 treasury professionals from organisations of varying sizes representing a broad range of industries.

 

European SMEs display positive sentiment towards instant payments regulation

Swift has published the findings of research that shows small and medium enterprises (SMEs) in the European Union feel positive about the EU’s Instant Payments Regulation, with many expecting it to save them money, improve their cash flow, and increase their competitiveness.

Swift asked more than 2,000 decision-makers at SMEs in France, Germany, Italy, and Spain who had already transacted cross-border within the EU for their views on the regulation that came into force in April. Almost nine in ten expect to be impacted by the change, while 44% of respondents say the regulation will save their business money, and 27% think it will help improve their cash flow. One in five expect to be more competitive.

Over four out of every five respondents (83%) say upfront beneficiary checks are important to them. The regulation mandates Verification of Payee (VoP) for cross-border payments within the Single European Payment Area (SEPA) by October 2025. Many countries use VoP at a domestic level, but interoperability between these schemes is critical to its success on an international scale.

One survey respondent said the regulation would allow them to “gain time and be more efficient” because their suppliers often wait to receive funds before shipping goods. Another said the regulation was “a great incentive to work with suppliers from abroad” as “it will make it much easier to manage payments and reduce expenses”, while a third respondent said that if invoices aren’t dealt with immediately upon arrival, “it can quickly lead to late payments.”

Currently, instant credit transfers across Europe account for less than 13% of the total. The regulation is the latest initiative focused on improving the European cross-border payments ecosystem, following on from the introduction in November of the European Payments Council’s One-Leg-Out Instant Credit Transfer scheme (OCT Inst), for which Swift connects domestic instant payment systems within and outside of Europe, providing full transparency and end-to-end tracking.

 

BIS and Bank of England test FX synchronised settlement 

The Eurosystem and London Centres of the BIS Innovation Hub, together with the Bank of England, have launched Project Meridian FX to build on the findings of Project Meridian by focusing on foreign exchange (FX) transactions. The starting point is the concept of the “synchronisation operator” (SO) developed in the first Meridian project. Meridian FX will test the SO's usability for different types of assets and technologies. It will also explore additional features that could form part of an SO's offering, such as those that could help reduce participants' liquidity needs. 

The project will provide insights on how real-time gross settlement (RTGS) system operators could enable interoperability with new payments technologies, such as distributed ledger technology (DLT). It will highlight the opportunities the synchronisation model could unlock, including more innovative and efficient settlement services for a broader range of assets settled in central bank money. 

By focusing on FX transactions, the project could also offer potential solutions to long-standing issues in settling FX trades, such as the costs, risks and time involved in cross-border transactions.

To achieve its objectives, Meridian FX will build on the technology behind the SO, allowing it to connect two RTGS systems based in different jurisdictions. Meridian FX will also connect an RTGS system with a DLT-based settlement platform, testing how the SO could support interoperability between existing and new ledger technologies. In both scenarios, the aim will be for the SO to successfully orchestrate the settlement of a payment versus payment (PvP) FX transaction. 

The experiments will take place towards the end of 2024. They will involve connecting Meridian FX's SO to the three solutions being explored as part of the Eurosystem's broader exploratory work on wholesale settlement: 

• The Trigger Solution, developed by Deutsche Bundesbank.
• The TIPS Hash-Link, developed by Banca d’Italia.
• The DL3S DLT Interoperability Solution, developed by the Banque de France. 

The project aims to report on its findings in Spring 2025.

 

EBA report explores embedded finance trends

The Euro Banking Association (EBA) has released a report, ‘Navigating the path to embedded finance’. This is based on research by the EBA’s Open Finance Working Group (OFWG) and aims to provide guidance for EBA members to understand the fundamental mechanisms of embedded finance, grasp the opportunities it offers, identify promising embedded finance use cases, and shape their own journey towards embedded finance.

Embedded finance integrates financial services into non-financial platforms, offering seamless customer experiences and monetisation opportunities for providers. BaaS and open banking are closely linked with embedded finance, providing the technological foundation for its implementation.

Financial institutions can play various roles in the embedded finance value chain, including providers, enablers, and distributors of financial services. Embedded finance benefits all stakeholders, enabling financial institutions to extend their reach, platforms to enhance their offerings, and consumers to enjoy integrated services.

The embedded finance market is projected to grow significantly, emphasising consumer payments, POS lending, and B2B payments. Financial institutions must understand the dynamics of embedded finance, its market impact, and the strategic implications of shifting from traditional to embedded finance channels.

The scope for embedded finance is broad, with potential applications across payments, accounts, lending, saving, and investing insurance and use cases to be uncovered in various vertical spaces. Financial institutions need to choose from various value chain scenarios and identify strategic areas to engage in embedded finance based on their strengths, market presence, and customer needs. Developing embedded finance capabilities requires financial institutions to adopt customer-centric product development, an API-first approach, agile innovation processes, and effective partnership development. Financial institutions also need to foster a culture of innovation, collaboration, and customer centricity.

Leading financial institutions are shifting their API programmes to embedded finance use cases or to develop complete Banking-as-a-Service (BaaS) offerings. This strategic focus on collaboration aims to enhance overall service delivery.

A collaborative approach to embedded finance could offer participating financial institutions cost efficiencies and innovation synergies. Existing collaborative models and initiatives provide precedents for joint efforts in embedded finance enabling. Benefits of a collaborative approach include cost savings, shared innovation, control over the enabling layer, and while the challenges of such an approach include agreeing on a common vision, managing complex stakeholder interests, and addressing data security concerns. Further exploration of collaborative models in embedded finance could offer financial institutions a pathway to innovate and serve their customers in the evolving financial services landscape more effectively.

The report aims to spark, structure, and inform a discussion about how financial institutions will likely be affected by the embedded finance trend and what a strategic response could look like. 

 

BTG Pactual to provide Microsoft with 8 million carbon removal credits

The BTG Pactual Timberland Investment Group (TIG) has announced the execution of a carbon offset credit transaction with Microsoft. Under the terms of the agreement, TIG will provide Microsoft with up to 8 million nature-based carbon removal credits through 2043.

The transaction is the largest known carbon dioxide removal credit transaction to date, according to MSCI Carbon Markets data. The credits will be delivered from TIG’s US$1bn reforestation and restoration strategy in Latin America, for which Conservation International serves as Impact Adviser to help TIG achieve positive environmental, climate, and social impacts.

The strategy focuses on the conservation, restoration, and planting of deforested and degraded properties in selected regions in Latin America, including the Cerrado biome in Brazil, one of the most biodiverse seasonally dry ecosystems in the world. Approximately half of the Cerrado has already been converted to other uses, and the biome continues to face high rates of commodity-driven deforestation.

With Conservation International’s support, the strategy aims to protect and restore approximately 135,000 hectares (more than 330,000 acres) of natural forests in deforested landscapes. The strategy also seeks to plant millions of trees in sustainably managed commercial tree farms, independently certified to Forest Stewardship Council (FSC) standards, on another approximately 135,000 hectares of previously deforested and degraded land. To date, TIG has invested in 37 thousand hectares, and has already planted more than 7 million seedlings and initiated restoration of approximately 2,600 hectares of natural forest.

This purchase is part of Microsoft’s commitment to be carbon negative by 2030, and by 2050 to remove from the environment all historical operational emissions since the company was founded in 1975. Microsoft has a portfolio of negative emission technologies including carbon removal credits.

 

DZ Bank to upgrade trade finance customer service with Surecomp

Surecomp has announced that DZ Bank has taken the next step in its plans to use the collaborative trade finance platform RIVO to enhance its digital customer service delivery further. 

The Frankfurt-based bank - which serves as a trade finance hub to corporate customers in its commercial bank function and those of the German cooperative financial network sector - will use RIVO for real-time corporate communication, transaction status transparency and accelerated trade finance issuance. The platform should let the bank facilitate smoother and faster funding transactions to buyers and suppliers, enhancing liquidity and fostering stronger supply chain resilience for its customers.

With native integration to Surecomp’s back-office DOKA-NG solution and centralised access to a host of trade tech partner applications, RIVO offers DZ Bank and its customers a holistic trade finance experience. For example, the bank will use blockchain-based Enigio AB for immutable digital guarantee exchange and another partner solution for document validity and verification.

 

Citi Commercial Bank targets mid-sized corporates in Japan

Citi Commercial Bank (CCB) has opened its doors in Japan. This is part of Citi's strategy to launch CCB in key growth markets across specific clusters where it can grow at scale. CCB will focus on supporting mid-sized corporates in Japan through every stage of their growth journey by offering clients products and solutions that meet their strategic needs, while leveraging Citi's global network.

The launch complements the bank’s existing banking capabilities in Japan, which currently support large Japanese corporates and global multinational companies operating in Japan. Through CCB, Citi says it will serve and support the growth ambitions, day-to-day operations and cross-border needs of mid-sized corporates in Japan. This follows the launch of CCB in France and Ireland in 2023, as well as Germany, Switzerland, and Canada in 2022.

Citi recently appointed Yutaka Naito as Head of CCB for Japan. In this role, Yutaka will oversee CCB's business and operations in the country. He is responsible for driving the business's growth and financial performance and building new client relationships. He will also work closely with our Markets, Services, and broader Banking businesses to deliver Citi's products and solutions to CCB clients. 

Following the launch in Japan, CCB now serves clients in 12 Asian markets, including Australia, mainland China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand, and Vietnam.

 

Buy-side traders want better sell-side coverage but are split on what this looks like 

More than half of buy-side traders globally struggle to get proper coverage from their brokers - a problem that reflects less on brokers’ commitment to deliver high-quality service, and more on traders’ rapidly evolving coverage needs at a time of technological advancements and changing market structures. This is according to a new report from Coalition Greenwich.

Almost all buy-side trading desks now use electronic execution for some part of their trading volumes, and individual traders usually have at least some say about which trading channels they use for specific trades.

“In this new market environment, partnership with brokers and fintech providers is more important than ever to buy-side trading desks,” says Jesse Forster, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of ‘Global Equities Trading: Broker, Algo and EMS Selection’. “Unfortunately, many traders see their brokers as falling short in terms of basic, day-to-day coverage.”

One reason that 54% of traders say they struggle to get proper coverage is that traders do not entirely agree on what proper coverage looks like. Almost half the traders participating in a Coalition Greenwich study want separate coverage relationships with their brokers’ high- and low-touch desks. Some traders in this group cite the need for specialisation, arguing that the younger professionals who generally staff sell-side algo trading desks often lack overall trading knowledge, and the more experienced sell-side cash traders lack expertise with algos.

Other traders participating in the study suggest differences in coverage preference are sometime age-related, with older buy-side traders often preferring separate coverage for high-touch and low-touch trades, and younger traders recognising the value of an integrated, hybrid model.

 

Nexi and Engineering Group launch digital banking platform

Nexi and Engineering Group are partnering to create a digital banking platform called NOVA. The technology platform is designed for different business segments, from SMEs to large corporates, and is characterised by a configurable service portfolio and a modular, natively open and cloud-oriented architecture.

A statement from the pair says that enterprises - through their financial institutions of reference - will be able to benefit from advanced digital corporate banking functionalities through a single platform capable of responding to the needs of every sector and business scale. 

NOVA will also enable financial institutions to personalise the management of digital corporate banking solutions through the accelerated implementation of new services and an ecosystem of offerings based on their own and partner products, optimising management costs.

Thanks to a data-driven architecture based on APIs and micro-services, the platform is designed to ensure continuous innovation, high scalability and multi-country operations. It also offers the opportunity to open digital banking to seamless integration with partner services, extending the value chain to the end customer. The pair say that using the cloud also makes the solution scalable.