China’s Belt and Road Initiative marks 10th anniversary at summit

World leaders are gathering in Beijing for China’s belt and road initiative (BRI) forum hosted by President Xi Jinping, who launched the programme 10 years ago.

The two-day event commences today and is the third since the trademark global development drive was launched. It will offer a high profile forum with a clear set of goals that lauds China’s role in backing economic development over the past decade and project its expanding ambitions as an alternative global leader to the United States.

That goal has assumed a heightened significance as renewed conflict in Israel and Gaza threatens to trigger broader instability in the Middle East, a region where the US is the traditional power broker, but China has been growing its influence and efforts to play a role in restoring peace.

The BRI was originally envisioned as a vast physical and digital infrastructure project to connect China with central Asia, south-east Asia, Europe and the rest of the world. It later broadened into a mammoth infrastructure financing vehicle for Chinese lenders to support projects in many regions of the world, particularly in the global south. With that support came China’s mounting influence on the world stage, even as western countries became increasingly sceptical of the BRI.

This week’s summit marks one of the biggest international conferences since China abandoned its zero-Covid policy last December and reopened borders. Leaders, representatives and delegations from more than 140 countries, including in the Middle East and many global south nations, are expected to meet in the Chinese capital for the carefully choreographed two-day gathering.

Beijing has been notably secretive in the lead-up to the event as to which leaders are attending. Officials only announced the dates last week and did not release a list of attendees in advance as of Monday morning, a day before the event.

Likely to be missing from the guest list are top leaders from major Western powers, at least some of whom, a Chinese state-run media outlet earlier this year implied, were not invited.

Russia’s Vladimir Putin, whose on-going assault on Ukraine is another major point of global instability and division, is expected to attend. The last time he was in Beijing was for the Winter Olympics opening ceremony in February 2022, three weeks before Russian tanks and troops invaded Ukraine.

The forum will signal the future path for the BRI initiative, which in its first decade has funnelled hundreds of billions in Chinese financing toward building ports, bridges, highways and power plants largely in the world’s poorer regions, expanding China’s global influence along the way.

But Chinese officials, experts say, will also use the gathering of friendly countries to pitch a much broader vision for how China wants to impact the world, as it promotes an alternative to the liberal world order championed by democratic countries.

Xi’s bid comes at a critical time for Beijing, which faces stark economic challenges at home from a deepening property sector crisis, high unemployment and slowing growth – and sees its rise increasingly threatened by what it believes are American efforts to contain and stifle its development.

As for the BRI initiative, the verdict on its first 10 years is mixed. It can be credited with providing the funding for the construction of much-needed infrastructure and development projects in poorer countries across the world to the tune of what Beijing has said is “up to one trillion dollars of investment.”

It has also pushed other powers to beef up their own efforts. Last month, the US and its partners pitched the latest of those rival programmes on the sidelines of the G20 summit in New Delhi.

But BRI  projects have also sparked backlash over accusations of lax environmental and labour standards, as well as saddling some countries with unmanageable levels of debt. That issue is now compounded by a shifting financial environment in the wake of the pandemic and by the conflict in Ukraine and Gaza.

 

Israel’s banks offer financial relief package

Israel's banks and credit card companies have agreed a financial relief package to ease the credit, mortgage and fee burden for households and businesses located near the Gaza Strip, first-degree relatives of those killed or abducted during last week’s onslaught by Hamas terrorists, and mobilised reserve soldiers, the central bank announced.

In response to the country’s war footing, the Banking Supervision Department asked the country’s lenders and credit card companies to adopt a broad relief package to ease the credit and fee burden for a group of four types of customers: households and businesses living within a 30-kilometer (19-mile) range of the Gaza Strip border, Israelis who have been evacuated from their homes, reserve soldiers, and first-degree relatives of Israelis who have been killed or abducted or are missing.

As part of the relief package, homeowners who are among the designated groups will be able to freeze their mortgage payments for a period of three months and bear no interest or other fee charges. The measure also includes a three-month deferral of repayments of consumer loans of up to shekels (NIS) 100,000 (US$24.850) and business credit of up to NIS 2 billion.

Homeowners will have an option to either add the delayed payments at the end of the mortgage period or spread out the amount throughout the remaining mortgage period. Consumers and businesses who freeze their loans will need to pay the deferred amount at the end of the loan period.

In addition, the designated four groups of customers will also be exempt for a three-month period from paying current account or other fees other than transactions involving foreign exchange, securities, and foreign trade.

“During these difficult times, we all must get involved, and it is important that the banks continue providing solutions to the public in dealing with the economic difficulties resulting from the war,” said Bank of Israel Governor Amir Yaron . “We brought together the heads of the banking system in order to formulate a uniform plan, with an emphasis on assisting the population that has been harmed, the security forces, and those who have to evacuate their homes.”

“I am certain that this plan will help the public get through this challenging period,” said Yaron.

The set of relief measures will take effect by October 31, the central bank confirmed.

 

Tokenised assets could save markets A$17 billion a year, claims RBA

The Reserve Bank of Australia (RBA) says creating real-world financial assets in a “tokenised” form could unlock billions of dollars in annual savings for banks and other financial institutions by streamlining settlement processes and automating registries.

The RBA is in the early stages of planning for a project to assess how different forms of digital money, including central bank digital currencies (CBDCs) and bank-issued stablecoins, could support the development of tokenised asset markets in Australia.

A tokenised asset is a digital version of a physical one which can be programmed and traded on blockchain platforms. This could transform existing markets which use legacy financial infrastructure that is slow and expensive, or for new markets for carbon or biodiversity credits.

RBA assistant governor Brad Jones told The Australian Financial Review Crypto Summit that the bank had made hypothetical estimates of the cost savings that could be delivered to Australian companies and financial institutions by real-world asset tokenisation.

It suggested potential annual savings of up to A$13 billion (US$10.8 billion) or issuers in the Australian capital markets, including around A$6 billion for equities, A$4 billion for corporate debt, and A$3 billion for government debt.

These could come from reducing the cost of capital and transaction costs. The calculations are based on a fraction of the benefits which emerged when trading went electronic, the RBA said.

Estimated cost savings for Australian financial markets sit in the range of A$1 billion to A$4 billion per year. These could be created by tighter bid-ask spreads, reflecting higher trading volumes as tokenised assets are made available to a wider range of investors. There could also be gains from “atomic” (instant) settlement, such as for cross-border payments without needing to rely on corresponding banks. Savings could also come from lower collateral requirements, and reduced costs relating to failed settlements.

Commonwealth Bank of Australia (CBA) managing director of blockchain and digital assets Sophie Gilder said the RBA’s estimates were “very aligned to what we’re seeing in terms of the potential for cost savings”. These would come from operational efficiencies and reduced levels of regulatory capital. “We’ll get more and more refined in terms of understanding what those cost savings actually are,” she added.

CBA is exploring use cases in debt capital markets and if digital currencies could be combined with tokenised assets to create instant settlement, that would produce some huge benefits.

David Lavecky, co-founder of Canvas Digital, said its focus was foreign exchange markets. It has been working alongside the RBA in one of its pilots to test a CBDC in Australia, known as the eAUD.

“In some cases, it may be quicker to take cash out of the ATM, get on a flight and take it to another country rather than using your regular bank accounts,” he said. “Using a CBDC presents an entirely new way of doing foreign exchange. We were able to show that an hour-long process went down to seconds and became atomically settled across blockchains.”

 

South Korea’s watchdog to fine HSBC and BNP Paribas for naked short sales

South Korea’s financial watchdog is to impose its largest-ever fine for illegal short selling on two Hong Kong-based banks, reports The Korea Economic Daily.

The paper says that it has learned that the Financial Supervisory Service (FSS) will fine HSBC and BNP Paribas the largest-ever penalties for illegal short selling in the country's public stock market,

Both banks conducted illegal short sales worth a combined won (KRW) 56 billion (US$41.3 million), the FSS said on Sunday. It is the first time that the financial watchdog has confirmed global investment banks’ intentional illegal short selling; most of the previous cases were hedge funds' mistakes, it added.

The agency did not disclose the names of the two banks, but the paper identified them as being HSBC and BNP Paribas.

The FSS said one bank ordered KRW40 billion in naked short selling of 101 listed stocks in Korea, including shares of mobile platform giant Kakao Corp., between September 2021 and May 2022. That bank is BNP Paribas, banking sources said.

Naked short selling, a practice that short-sells stocks without first making borrowing arrangements, is unlawful in Korea. The financial watchdog saw the number of such illegal cases increase from 14 in 2021 and 28 in 2022 to 30 over the nine months January to September 2023.

Global investment banks can make short-sale orders of Korean stocks when providing prime brokerage services to overseas institutional investors, the paper reported. BNP Paribas was found to have ordered short sales for its foreign investor clients, based on double counting of borrowed securities.

The day after the trade, the bank made it aware that the borrowed stocks were insufficient for settlement. But it did not take appropriate action at the time and postponed borrowing.

Another bank also ordered 16 billion won worth of short sales from August to December 2021. It ordered sales of nine companies' stocks, including Hotel Shilla, the FSS said. That bank is HSBC, according to banking sources.

HSBC is understood to have made the short-sale orders based on the number of shares that could be borrowed in the future, not the number that had been confirmed for borrowing.

“We can’t assume that the global IBs made illegal short sales in Korea due to a lack of understanding of the local investment system,” said FSS Deputy Governor Kim Jungtae. “We recognise that the investment banks have made the cases intentionally as they shorted stocks without borrowing over a long period,” he added.

The largest financial penalty imposed by the FSS to date is KRW3.9 billion, imposed on Austria-based Erste Asset Management in March. The firm ordered battery materials maker EcoPro stocks worth KRW 25.1 billion that they had not borrowed, and executed a KRW4.9 billion transaction in August 2021.

From January to September this year, the FSS’ short selling investigation unit imposed a total of KRW10.7 billion in fines on 30 financial services firms, 21 of which were foreign firms.

The amount fined for illegal short sales in Korea is increasing, rising from KRW700 million in 2020 to KRW900 million in 2021 and KRW3.2 billion last year. The financial watchdog plans to expand its probe to include alleged naked short sales by other global investment banks.

 

First industrial park set up dedicated to the digital yuan

China has inaugurated its first industrial park committed to the growth of its central bank digital currency (CBDC), also known as the digital yuan or e-CNY.

Situated in Shenzhen's Luohu district, adjacent to Hong Kong, the park aims to bolster the digital currency's ecosystem through a series of initiatives involving payment solutions, smart contracts and hard wallets.

Last week, the Luohu district government unveiled plans that include up to three years of free rent for residents and financial incentives for commercial banks and startups to set up in the area. Commercial banks could be entitled to up to yuan (CNY) 20 million (US$2.7 million) for locating there, while startups could secure up to CNY50 million.

Among the inaugural residents of the industrial park are payment card producers Hengbao and Wuhan Tianyu Information, as well as payments processor Lakala Payment.

Zeng Zhaoxiang, the executive deputy director of Wuhan Tianyu Information, told China Daily: “We hope to achieve synergistic effects in the industrial chain and jointly promote the development of the park."

Despite being in its pilot stage and accepted by 5.6 million merchants across 26 cities, the e-CNY has seen relatively slow adoption, with 261 million digital wallets created as of 2022. The government is hopeful that persistent encouragement and technological developments are poised to stimulate growth in usage.

 

For banks, the regime requires them to review default and loss probabilities, as well as the risk weights that go into determining how much capital they set aside for each client account. The development may have major implications for high-emitting sectors such as oil, gas, cement, steel and mining.

Cracking down on such risks will be “a key area” for banks under the new framework, said Jacob Gyntelberg, director of economic and risk analysis at the EBA. Current rules already allow banks to “take a forward-looking perspective,” and this is “one of the areas where we should be able to move a little bit faster,” he said in an interview.

Global banking and financial stability organisations are all reviewing reporting and capital frameworks, though none has moved as fast as the EU in setting firm requirements. The Basle Committee on Banking Supervision (BCBS) expects to publish a proposed framework for reporting climate-related financial risks before the end of the year that will help guide regulators across jurisdictions.

The EBA is aware that it’s “the first authority publishing specific suggestions on how to practically incorporate E&S risk considerations into the prudential framework,” Gyntelberg said.

 

South African government plays down privatisation option for Transnet

South Africa’s government has insisted that a draft plan to improve the fortunes of the ailing state-owned freight logistics group Transnet would centre on arresting decline by opening up the market to competitors rather than privatisation.

Last week, the state’s plan for Transnet were revealed through its draft Roadmap for the Freight Logistics System in South Africa, a 124-page document outlining the various reforms that will be undertaken to rehabilitate the beleaguered port and rail operator.

The document, which is marked confidential but has reportedly been circulated among South African business and labour leaders, sets the scene for the private sector’s broader participation in the country’s rail network.

Transnet’s board plan to meet the Ministry of Public Enterprises and the Ministry of Finance this week to discuss its own turnaround plan, it said in an emailed statement at the weekend. Once approved by Public Enterprises Minister Pravin Gordhan’s department, it will be discussed with labour unions, employees, customers and lenders, the company said.

Both sides are seeking to reverse the collapse of Transnet which has cost Africa’s most-industrialised economy US$26.7 billion since 2010. Volumes of iron ore and coal shipped through the company’s freight rail network for export have dropped because of issues including vandalism, idle locomotives and cable theft.

The government has begun talks with the World Bank for a US$1 billion loan to upgrade Transnet’s rail infrastructure and support state power utility Eskom Holdings’s transmission unit, Johannesburg-based newspaper Business Day reported last week.

Transnet’s turnaround plan sets out operational and financial initiatives that must be implemented over the next six, 12 and 18 months to stabilise the business, according to the statement. It is prioritized the filling of three executive positions, following the resignations of its chief executive officer Portia Derby and head of its freight-rail division three weeks ago. Former Chairman Popo Molefe also quit the board last week.

 

Ferrari adds crypto to US payment options

Ferrari has started to accept payment in cryptocurrency for its luxury sports cars in the US and will extend the scheme to Europe following requests from its wealthy customers, its marketing and commercial chief confirmed.

Most blue-chip companies have steered clear of crypto as the volatility of bitcoin and other tokens renders them impractical for commerce. Patchy regulation and high energy usage have also prevented the spread of crypto as a means of payment.

These include electric carmaker Tesla, which in 2021 began to accept payment in bitcoin, before CEO Elon Musk halted it because of environmental concerns.

Ferrari’s Chief Marketing and Commercial Officer Enrico Galliera told Reuters that cryptocurrencies had made efforts to reduce their carbon footprint through the introduction of new software and a larger use of renewable sources. “Our target to reach for carbon neutrality by 2030 along our whole value chain is absolutely confirmed,” he said in an interview.

He added that the decision came in response to requests from the market and dealers as many of its clients have invested in crypto. “Some are young investors who have built their fortunes around cryptocurrencies, others are more traditional investors who want to diversify their portfolios.”

While some cryptocurrencies, such as the second-largest, ether, have improved their energy efficiency, bitcoin still attracts criticism for its energy-intensive mining.

Ferrari shipped more than 1,800 cars to its Americas region, which includes the US, in the first six months of 2023. Galliera did not say how many cars Ferrari expected to sell through crypto, but confirmed the company’s order portfolio was strong and fully booked well into 2025 and it wanted to test a growing crypto market. “This will help us connect to people who are not necessarily our clients but might afford a Ferrari,” he added.

The Italian company, which sold 13,200 cars in 2022, with prices ranging from over €200,000 (US$211,000) to €2 million, plans to extend the crypto scheme to Europe by the first quarter of next year and then to other regions where crypto is legally accepted.

Europe, the Middle East and Africa (EMEA) is Ferrari’s largest region, accounting for 46% of its total car shipments in the first half of this year. “Interest is the same in the US and Europe, we don’t see huge differences,” Galliera said. “Prices will not change, no fees, no surcharges if you pay through cryptocurrencies.”

 

Binance stops accepting new UK users

Binance has stopped accepting new UK users starting Monday in order to comply with the country's crypto marketing rules, the cryptocurrency exchange said in a blog post.

Under the new regime, effective from October 8, firms that are registered with UK regulator the Financial Conduct Authority (FCA) can approve their own ads. Failing that, companies can enlist authorised entities to approve ads for them.

While Binance partnered with a firm called Rebuildingsociety.com ahead of the rules coming into effect to have its promos and ads approved in the UK, the FCA said last week that the latter was not authorised to greenlight crypto ads

“We are working closely with the FCA to ensure that our users are not harmed by these developments and are looking to find another suitable FCA authorised firm to approve our financial promotions as soon as possible,” the exchange said.

Existing UK users will still have access to services if they have completed the “Investor Declaration and Appropriateness Test” but will not be allowed to access any new products and services during this period, it added.

 

Tadhamon Bank ready for open banking with Azentio's iMAL

Singapore-based Azentio Software announced that Yemen’s Tadhamon Bank is now live with the upgraded and latest version of iMAL, Azentio’s digital Islamic core banking platform.

A press release stated that this version of iMAL, with its functionalities and agile core processing engine, seeks to accelerate Tadhamon Bank’s transformation into a digitally advanced bank. iMAL’s multi-threading proficiencies at various levels, will deliver high data volume processing capabilities and enable parallel processing of records while its web service features will enable integration with multiple connected channels.

These features will help maximise agility in the bank’s internal operations, enable interoperability across systems, facilitate business scalability, and speed up time to market for new products. The main focus is that the bank would be able to drive digital innovation and resource efficiency to create new opportunities for its business.

The press release further notes that the bank has been running on iMAL since 2010. With the upgrade to iMAL R14.5, it intends to leverage the digital banking features to meet the ever-rising expectations of its customers. The upgrade also includes several specific features to help adhere to the evolving regulatory regime governing Islamic finance. 

Digital transformation is at the core of this upgrade. Tadhamon Bank can now serve more regions in Yemen without adding new physical branches and can better its service standards by offering frictionless customer experiences. 

iMAL is a software certified by the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI). The R14.5 version is cloud-enabled, fully scalable with n-tier architecture, and supports open banking and digital transformation, providing an omnichannel experience by leveraging artificial intelligence, blockchain, and other technologies.