BoE and ECB keep interest rates unchanged

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6–3 to maintain the bank rate at 5.25%. Three members preferred to increase bank rate by 0.25 percentage points to 5.5%.

Meanwhile, the ECB’s Governing Council kept the three key European interest rates unchanged. According to the latest Eurosystem staff projections for the euro area, inflation will decline gradually over the next year before approaching the Governing Council’s 2% target in 2025. Overall, the projections show headline inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026. Compared with the September staff projections, this amounts to a downward revision for 2023 and especially for 2024.

In the UK, the MPC’s November Monetary Policy Report projections were conditioned on a market-implied path for bank rate that remained around 5.25% until Q3 2024 and then declined gradually to 4.25% by the end of 2026. UK GDP was expected to be broadly flat in the first half of the forecast period, in part reflecting relatively weak potential supply, and an increasing degree of economic slack was expected to emerge from the start of next year. In the most likely, or modal, projection, UK inflation returned to the 2% target by the end of 2025 and fell below the target thereafter. The Committee continued to judge that the risks to its modal inflation projection were skewed to the upside, such that the mean forecast for CPI inflation was 2.2% and 1.9% at the two and three-year horizons.

UK GDP was flat in Q3 2023, in line with the November Report projection, and fell by 0.3% in October. Based on the latest official and survey data, BoE staff expect GDP growth to be broadly flat in Q4 and over the coming quarters. The Committee continues to consider a wide range of data on developments in labour market activity. Employment growth is likely to have softened, and there has been further evidence of some loosening in the labour market.

Twelve-month CPI inflation in the UK fell sharply from 6.7% in September to 4.6% in October. Services price inflation declined to 6.6%, although much of the downside news relative to the November Report reflected movements in components that may not provide a good signal of underlying trends in services prices and persistence in headline inflation.

CPI inflation is expected to remain near its current rate around the turn of the year. In particular, services price inflation is projected to increase temporarily in January, related to base effects from unusually weak price movements at the start of this year, before falling back gradually thereafter. The near-term path for CPI inflation is somewhat lower than projected in the November Report, in part reflecting recent declines in energy prices.

In Europe, underlying inflation has eased further. However, domestic price pressures remain elevated primarily due to strong growth in unit labour costs. Eurosystem staff expect inflation excluding energy and food to average 5.0% in 2023, 2.7% in 2024, 2.3% in 2025 and 2.1% in 2026.

According to an ECB statement, past interest rate increases continue to be transmitted forcefully to the economy. Tighter financing conditions are dampening demand, helping to push down inflation. Eurosystem staff expect economic growth to remain subdued in the near term. Beyond that, the economy is likely to recover because of rising real incomes – as people benefit from falling inflation and growing wages – and improving foreign demand. Eurosystem staff, therefore, see growth picking up from an average of 0.6% for 2023 to 0.8% for 2024 and to 1.5% for both 2025 and 2026.

 

BOCHK launches “corporate e-CNY cross-boundary transaction pilot”

Bank of China (Hong Kong) (BOCHK) has launched a “corporate e-CNY cross-boundary transactions pilot”, supporting a local pilot enterprise to trade cross-boundary bulk commodity using e-CNY for cross-boundary settlement for the first time.

In collaboration with its parent bank, Bank of China, BOCHK completed the first-ever e-CNY cross-boundary bulk commodity transaction through its digital service channel. First, BOCHK set up an e-CNY wallet on its iGTB NET Corporate Internet Banking platform for Bao-Trans Enterprises to facilitate trading with e-CNY. Baosteel Group Corporation, a significant customer of Bank of China, then used e-CNY to pay Bao-Trans Enterprises for imported iron ore, marking the first cross-boundary settlement of a bulk commodity trade to use e-CNY across the entire process. The cumulative transaction amount was nearly RMB24m.

“e-CNY’s technical features can be leveraged to create greater value in corporate cross-boundary transactions, apart from being useful for individual customers in cross-boundary payment scenarios,” commented Xing Guiwei, Deputy Chief Executive of BOCHK. “BOCHK has established an infrastructure to provide local enterprises with a digital channel to set up e-CNY wallets and take advantage of e-CNY transfer, withdrawal and exchange services. This reduces the cost of cross-boundary fund settlement and improves transaction efficiency for enterprises.” 

The bank says that the successful completion of this trial transaction has laid the foundation for the normalisation of e-CNY usage among corporate customers trading between the Chinese mainland and Hong Kong, contributing to developing an e-CNY ecosystem and further promoting RMB internationalisation. Moving forward, BOCHK  says it will continue to enhance its iGTB NET Corporate Internet Banking platform, extend support to more corporate customers in using e-CNY for cross-boundary settlement and explore further e-CNY cross-boundary scenarios.

 

EPI executes first cross-border instant payment transactions in Europe 

The European Payments Initiative (EPI) has successfully completed its first account-to-account instant payment transactions with wero, EPI’s newly developed instant payment solution. This was achieved through a proof of concept between customers from Sparkasse Elbe-Elster in Germany and Banque Populaire and Caisse d’Epargne (Groupe BPCE) in France. 

The technology employed by the teams at both banks ensured the transfer was instant. Subsequently, the bank teams conducted several additional transactions throughout the day, seamlessly moving various amounts of euros between the designated accounts. 

EPI said in a statement that the successful demonstration highlighted its progress in building an account-to-account (A2A) payment means based on SCT Inst and its digital wallet. Looking ahead, EPI plans to extend the use of wero to the first pilot users within its member banks in Belgium, France, and Germany in the new year. 

 

2024 outlook is neutral for global money market funds

The neutral sector outlook for global money market funds (MMFs) is driven by the overall neutral credit environment, the expectation of manageable industry flows, and the limited impact from regulatory changes, Fitch Ratings says in a report. Drivers are expected to have different impacts in the US, Europe and China.

Fitch expects MMF managers to selectively increase duration to lock in yields, potentially exposing funds to valuation volatility in an uncertain macroeconomic environment. The neutral outlooks on French, Canadian, Japanese, UK, German and western Europe banks indicate a neutral credit environment, which directly affects the assets in which MMF invest. 

The deteriorating outlook on the US banking sector is mitigated by the higher-quality investments for prime MMFs. Fitch anticipates central banks globally to hold rates until the second half of 2024, with any subsequent reduction varying by magnitude and pace. Fitch expects this to result in manageable MMF flows.

MMF regulatory changes in China only affect the large MMFs. Structural US reforms that increase liquidity thresholds and introduce mandatory liquidity fees may result in flows from prime MMFs to treasury or government MMFs or further consolidation of the prime MMFs. The EC recommended no regulatory reform, while the UK regulator published a consultation paper setting out proposals to update the UK MMF regulatory regime in December.

 

FOMO Pay and Zand Bank to facilitate cross-border payments between Asia and MENA

FOMO Pay, a Singapore-based digital payment firm, has joined forces with Zand Bank, a UAE digital bank, to facilitate seamless cross-border payments between the markets of Asia and the Middle East and North Africa (MENA). This collaboration aims to enhance cost-effectiveness and time efficiency in B2B cross-border transactions, providing businesses with streamlined digital payment and digital banking solutions for collections and payouts in the regions.

The MENA region is experiencing steady economic growth driven by innovation across diverse sectors, focusing on deepening trade ties with Asia. To facilitate cross-border business, FOMO Pay and Zand Bank collaborate to streamline B2B transactions and international remittances across the two regions. 

Leveraging their local networks and banking partnerships, this partnership is designed to ensure swift and secure payment processing and enable FOMO Pay and Zand Bank to extend more competitive rates to their clients. As a result, businesses should benefit from improved cost-efficiency in sending and receiving payments between these two regions. This is the first of many steps in the two organisations’ strategy to create an ecosystem that allows their clients to connect financially with the rest of the world while remaining committed to security, privacy, and customer-centricity.

 

ACI Worldwide to support real-time payments in Colombia

Colombia’s central bank, Banco de la República, has announced it is partnering with ACI Worldwide to build a new domestic real-time payments ecosystem as part of a nationwide banking transformation project.

The central bank will use ACI’s Digital Central Infrastructure, part of the ACI Enterprise Payments Platform to build the central infrastructure of an interoperable, countrywide scheme that includes centralised settlement and addressing services for the existing real-time payments schemes. The project is set to go live in 2025. All current and future schemes will need to connect to the new real-time payments ecosystem to be built.

Like other countries in the region, Colombia is primed to realise significant economic benefits for businesses and consumers from adopting real-time payments. Real-time payments improve overall market efficiencies and boost economic growth. Countries that successfully adopt real-time payments can expect additional annual GDP growth of up to 2%, according to a report published by ACI in partnership with GlobalData and the Centre of Economics and Business Research (Cebr).

“We are excited about the real-time payments modernisation journey we have embarked upon jointly with ACI Worldwide…,” said Leonardo Villar, Governor of the Central Bank of Colombia. “It will be the first scheme in Latin America that will be built through collaborative consensus by all stakeholders in the payments ecosystem – government, regulators, private banks and the Central Bank have all been working together with the aim to bring the benefits of real-time payments modernisation to Colombian consumers and businesses.”

 

Fnality commences initial phase of UK blockchain wholesale payment system

Fnality has announced the initiation of the Sterling Fnality Payment System (£FnPS), which brings together the safety and institutional quality of central bank funds in a systemic wholesale payment system with the innovative functionality and resilience of blockchain technology. 

Lloyds Banking Group, Banco Santander and UBS are all initial participants in the £FnPS. The inaugural live payments in this first phase of the new digital financial market infrastructure (FMI) and regulated payment system have taken place leveraging an Omnibus Account held by £FnPS in the Bank of England RTGS service.  

Fnality says the launch evidences the first foundations of a broader multi-jurisdictional vision; one that enables a seamless global liquidity management ecosystem by empowering new digital payment models for payment (P), payment versus payment (PvP), and delivery versus payment (DvP) transactions in both wholesale financial markets and emerging tokenised asset markets.

The firm says its focus now turns to scaling £FnPS operations in a managed and phased approach. This initial phase, focused on ensuring system resilience and functionality in a live environment, is subject to limits set by the Bank of England. Scaling operations will be subject to the £FnPS meeting the Bank of England’s operational and supervisory expectations for the next managed phase. This should pave the way for establishing FnPSs in other core currencies, including USD and EUR, onboarding more participant banks, and rolling out a range of value-adding functionalities, including conditional payments, digital securities settlement, intraday repos, and intraday FX swaps.

 

X9 and Cloud Security Alliance partner to enhance cloud computing standards

The Accredited Standards Committee X9 (X9) and the Cloud Security Alliance (CSA) have entered a formal liaison agreement. The CSA is a not-for-profit organisation that promotes best practices to help ensure a secure cloud computing environment. X9 is accredited by the American National Standards Institute (ANSI) to develop standards for the US financial services industry. The agreement is effective immediately.

Under the agreement’s terms, X9 will share its draft cloud computing standards with the CSA, whose experts will review, evaluate and deliver feedback to X9. The organisations will hold periodic discussions to assess issues and needs related to cloud computing standards. CSA will also provide input on new cloud computing standards, which X9 will seek to address where possible.

“We look forward to working with the CSA to help optimise X9 standards associated with cloud computing,” said Steve Stevens, Executive Director, X9. “This liaison agreement is a milestone on the road to secure and effective cloud computing, and all - X9, the CSA, the financial services industry and consumers - will reap the benefits."

 

Melio launches real-time payments

Melio, a B2B payments-as-a service platform for small businesses, has announced the launch of real-time payments, which allows payors to deliver funds instantly to their vendors. This new capability to deliver funds faster will enable businesses to hold on to their funds for as long as possible, rather than paying days ahead of an invoice’s due date to ensure the payment arrives on time.

Compared to ACH transfers – which have strict timeframe restrictions and can take up to three business days to process – Melio’s real-time payments feature, supported by J.P. Morgan Payments, can process payments within seconds, even on weekends and bank holidays.

Real-time payments can currently support approximately 60-70% of US domestic B2B transactions, and with the recent launch of the Federal Reserve's FedNow instant payments infrastructure many more banks are expected to support this capability. Melio supports The Clearing House’s real-time payments and FedNow networks.

 

Apex Group invests in Tokeny

Apex Group, a global financial services provider, has become a strategic lead investor in Tokeny, an enterprise-grade tokenisation solutions provider. This move aims to solidify Apex’s dedication to leading the digitisation of finance, with tokenisation at its core. With Tokeny’s expertise, Apex says it is strategically positioned to provide its single-source solution in the tokenisation era to lead digital transformation and drive positive change in the financial services space.

Apex Group's global reach and commitment to providing cross-jurisdictional services are central to its business approaches. With over 12,000 employees in 112 offices worldwide, Apex offers a single-source solution, delivering a wide array of services to a diverse clientele. This includes asset managers, capital markets, corporates, and family offices.

Tokeny has a complete tokenisation rail that covers the entire lifecycle of tokenised securities, has tokenised €28bn in assets and created the ERC3643 technical market standard for tokenisation.

The collaboration between Apex and Tokeny is aimed at ushering institutions into the tokenised financial market. Tokeny acts as an enabler for Apex to allow their clients to tokenise assets on the blockchain, thereby reducing operational costs and increasing revenues by reaching broader investors compliantly and seamlessly. Tokeny’s integration into Apex’s single-source solution is pivotal in this strategy.