G7 launches ‘Global Shield’ climate finance at COP27 summit

Pakistan, Ghana and Bangladesh will be among the first recipients of funding from a G7 'Global Shield'' initiative to provide funding to countries suffering climate disasters, under a new programme announced on at the COP27 summit in Egypt. Germany will provide €170 million ($172 million) to the initiative to help low-income and vulnerable countries to recover in the event of weatherf-related disasters.

Other contributors include Ireland, Canada and Denmark, which are giving €10 million, €7 million and €4.6 million respectively. President Joe Biden confirmed in a COP27 speech last week that the US will also support the initiative.

The initiative has been months in preparation and was officially launched by the G7 and the V20 group of 58 climate vulnerable nations at the summit. Global Shield aims to strengthen social protection schemes and climate risk insurance so that in the wake of an extreme weather event such as flooding, communities can access aid quickly and recover, said Germany's ministry for economic development and cooperation (BMZ). 

"If there is no protection scheme in place, a drought can mean that a smallholder farmer loses not only her harvest but also her entire livelihood because she cannot afford to buy new seeds," the ministry announced. A protection scheme that "kicks in automatically in the case of a crisis" frees up money for new seeds immediately, limiting the damage, the statement continued. 

The BMZ said Global South countries have contributed little to global emissions yet face the heaviest impact of a warming world, while lacking the resources to protect their citizens. At the same time, industrialised countries like Germany need to "honestly address" climate-related loss and damage as major emitters.

"Germany stands by its responsibility to support poor and vulnerable people and countries in dealing with loss and damage," said Germany's development minister Svenja Schulze in a statement. 

Elsewhere at the summit however, countries are still far from agreement on the technical details for running global trading in carbon offset credits after one week of talks according to negotiators and observers, with delays meaning that a 2023 deadline may not be achieved.

Spanish banks to pilot digital euro for contactless payments 

Around 30 banks and payment services providers (PSPs) in Spain, including BBVA, Banco Sabadell, Banco Santander, ING, Deutsche Bank and Iberpay, have set up a working group to test the use of a digital euro for contactless in-store payments as well as ecommerce transactions and peer-to-peer (P2P) transfers.

The working group will conduct proof-of-concept trials of the retail central bank digital currency (CBDC) to assess the technical, operational and business implications of its implementation and how it might coexist with currently existing digital payment infrastructures.

“The project aims to test the inclusion of a possible digital euro in the current payment ecosystem, promoting innovation, and doing so in line with the objectives of the euro system,” reports Spanish business news service Diario Abierto.

“The tests will cover the simulated sending of digital euros person to person, payment in online commerce and payment in physical commerce, based on a model in which, as is the case with the current euro, the banks would be the depositories of the accounts of this digital currency of their customers.

“The initiative arises after the beginning of a research phase by the euro system on the possible characteristics of the digital euro as a means of payment complementary to cash in retail payments made in euros.”

Other banks and PSPs participating in the trials include Abanca, Arquia, Banca March, Banca Pueyo, Banco Caminos, Banco Mediolanum, Bankinter, Bizum, Caixa Guissona, Caixa Ontinyent, Caja d’Enginyers, Cajalmendralejo, Cecabank, Eurocaja Rural, EVO Banco, Grupo Caja Rural, Grupo Cajamar, Ibercaja, Kutxabank, Laboral Kutxa, N26, Openbank, Orange Bank, Redsys, Targobank and Unicaja Banco.

The European Central Bank (ECB) announced in September that it is to trial five prototype digital euro payment solutions developed in partnership with Spain’s  CaixaBank, the European Payments Initiative, Worldline, Nexi and Amazon.

Five ASEAN central banks to cooperate on cross border payments

Five Southeast Asian central banks have signed  a memorandum of understanding on regional cross border payments at an event ahead of a G20 summit in Bali. The five ASEAN (Association of Southeast Asian Nation) countries are Indonesia, Malaysia, Thailand, Philippines and Singapore.

At the signing ceremony, Indonesia's central bank governor Perry Warjiyo said that regional connectivity will work using a quick response (QR) code and that local currency settlements would be used, thus eliminating the need to convert to US dollars.

Indonesia connected its payment system using the QR code with Thailand in August 2021 and this would shortly be extended the other countries, Warjiyo said.

The governor said the agreement covers connecting retail payment systems, though there were plans to step up the partnership to the wholesale level and the central bank digital currencies (CBDCs).

Previously, Warjiyo said that the cross border payments between the five ASEAN countries will be connected next year.

In a statement via video at the ceremony, Indonesian President Joko Widodo said he expected the cross border payment initiative to be extended to the global level.

South Korea reports corporate debt liquidity squeeze

South Korea is experiencing a deepening corporate debt liquidity crunch, as companies struggle to raise money in the bonds market amid investor concerns, reports Nikkei Asia.

As an example of the country’s corporate debt squeeze, it cites the problems of Korea Electric Power Corp., the country's biggest power company, which despite its AAA credit rating, managed to raise only Won (KRW) 590 billion (US$432 million), just half of the KRW1.2 trillion it aimed for in the bond market last month.

Experts believe that the recent crisis was triggered by Gangwon province’s announcement that it would not repay debt of Gangwon Jungdo Development Corp., which is owned by the province and developed the Legoland Korea Resort amusement park.

At a 28 September news conference, the province's new governor, Kim Jin-tae, said that Gangwon had decided to make a court filing for bankruptcy for Gangwon Jungdo Development “to avoid paying back KRW 205 billion that the company borrowed from BNK Securities”. Taken aback by the market’s adverse reaction, he subsequently promised to repay the debt by 15 December, but this came too late to alleviate investors’ jitters.

Nikkei Asia reports that investors also have concerns over the creditworthiness of corporate borrowers, leading to a loss of liquidity in the market and raising yields sharply. The average yield for three-year corporate bonds with AA- credit ratings reached 5.69% last week, up from 4.537% two months ago, according to Korea Financial Investment Association data.

To calm market nerves, on 23 October the government of President Yoon Suk-yeol and the Bank of Korea (BOK) announced plans to inject at least KRW 50 trillion into the bond market after Finance Minister Choo Kyung-ho hosted an emergency meeting along with BOK governor Rhee Chang-yong and other policymakers.

With the liquidity supply programme, the government started to buy corporate bonds and commercial papers through a KRW 20 trillion fund, while it also doubled the size of a state-run bond-buying programme to KRW 16 trillion.

HSBC opens new Singapore office

HSBC has officially opened its new Singapore headquarters on the top floors of the 50-storey Marina Bay Financial Centre (MBFC) Tower 2, and confirmed plans to ramp up its presence in the city state via international corporate and wealth banking as it expands its Asia footprint outside its regional hub in Hong Kong.

Chief Executive Officer Noel Quinn said the city state is a “critical” market for Europe’s biggest bank. “We have every ambition to grow our business substantially here in Singapore,” he said. “We know there is very strong competition.

“Singapore is one of the pillars of HSBC’s growth strategy in Asia and this move reflects our ambitions for our business. We will leverage on Singapore’s strengths to serve our customers’ present and future needs.”

Quinn was joined by Singapore's deputy prime minister, Heng Swee Keat, to officiate the opening ceremony and celebrate this important milestone alongside HSBC Singapore CEO, Wong Kee Joo. HSBC Singapore's new head office includes over 140,000 sq ft of space over the top floors of the 50-storey MBFC Tower 2 building, complementing its offices at Mapletree Business City.

HSBC Group’s history in Singapore dates back to 1877 when its founding member, The Hongkong and Shanghai Banking Corporation Limited, opened its first branch on the island. The opening of the new HQ follows the UK lender’s allocation of US$3 billion investment for expansion in South and Southeast Asia.

India looks to expand trade in the rupee

The Reserve Bank of India (RBI) has announced guidelines on overseas trade in the Indian Rupee (INR) aimed at curtailing India’s dependence on the US dollar for trade and indirectly strengthen the domestic currency.

On the lines of an arrangement being tabled with Russia, India is in talks with Sri Lanka, the Maldives and multiple Southeast Asian, African and Latin American countries to initiate trading in INR. The first country to open a special Rupee Vostro account is Russia which has increased its supply of discounted crude oil to India in the wake of curtailed demand and sanctions from Europe following its invasion of Ukraine.

Under the INR arrangement, banks in India will open Vostro accounts (an account that an Indian bank will hold on behalf of another bank) of correspondent bank/s of the partner country for trading. Indian importers can pay for their imports in rupees into these accounts. These earnings from Indian imports can then be used to pay Indian exporters in INR. Unlike regular Vostro accounts, INR balances can be held in these Special Vostro Accounts rather than them being only transit accounts like normal Vostro accounts.

Any rupee trade arrangement between India and a country which has a trade deficit with India, may not be feasible in the long run. Russia is an exception in this case since the country is under sanctions and could use the INR to invest here to fulfil their offset obligations under defence contracts.

“Given the rise in interest in internationalisation of Indian Rupee, the given Policy amendments have been undertaken to facilitate and to bring ease in international trade transactions in Indian Rupees,” India’s Ministry of Commerce & Industry said in a statement.

Russia “seeking to reconnect its agrarian bank to SWIFT”

Russia has discussed with United Nations officials in Geneva the possibility of reconnecting Rosselkhozbank, the Russian Agricultural Bank, to the SWIFT payment system, with the former saying it was ready to solve the problem, claims Russian Deputy Foreign Minister Sergey Vershinin.

Following the invasion of Ukraine last February Russian banks were excluded from the SWIFT interbank payment system by the European Commission and its allies. The action aimed to hit the country’s banking network and its access to funds via SWIFT which is pivotal for the smooth transaction of money worldwide.

“From my point of view, reconnecting Rosselkhozbank [to SWIFT], which processes the majority of agricultural transactions, is a key issue,” said the top Russian diplomat commenting on the results of talks late last week

UN chiefs held discussions with Russian officials on Friday, eight days before one of the agreements was set to expire, regarding the Black Sea agreement on exporting grain and fertilizers. The mid-afternoon discussions were held behind closed doors at the UN Palais des Nations headquarters in Geneva.

UN trade and development agency chief Rebeca Grynspan, UN humanitarian chief Martin Griffiths, and a delegation from Russia led by Vershinin discussed “steps taken to facilitate payments, shipping insurance, and access to EU ports for grains and fertiliser” during their meeting.

The UN-brokered deal, signed by Turkey, Russia, and Ukraine on 22 July, is set to expire at the end of this week. It established a humanitarian maritime corridor for ships transporting food and fertiliser from the Ukrainian Black Sea ports.

“Without this, we simply cannot move forward. We have been discussing this issue before; we talked about it very substantively and at length yesterday,” Vershinin added. He claimed that the UN representatives assured the Russian delegation that they see the issue at hand as vital, noting that his country will seek to reconnect Rosselkhozbank to SWIFT.

Switzerland’s Klarpay expands international payments via USD and GBP accounts

Swiss fintech start-up Klarpay has announced “a significant expansion of its international payment capabilities” with the launch of dedicated US dollar (USD) and British pound sterling (GBP) accounts. This addition” enables digital companies, including online merchants, ad networks, marketplaces, and influencers, to collect and disburse USD and GBP payments globally via their corporate Klarpay account”.

With Klarpay's Swiss IBAN accounts, businesses can transact through SEPA and SWIFT in more than 90 countries and 70+ currencies via its Dashboard and APIs. Klarpay's international accounts are ideal for companies looking to expand globally through cross-border transactions.

“As we continuously try to advance our offerings, adding dedicated USD and GBP accounts to our list of services opens numerous new doors for our merchant clients and us,” said Klarpay’s CEO, Martynas Bieliauskas. “Our clients can now store funds, accept payments, and send payouts in USD and GBP in addition to using Klarpay's extensive cross-currency payments and FX network.”.