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Hong Kong and France join forces on CBDCs – Industry roundup: 4 July

Hong Kong and France expand cross-border CBDCs collaboration

The Hong Kong Monetary Authority (HKMA) has revealed that it is exploring a collaboration with the Banque de France for wholesale central bank digital currencies (CBDCs) with both regulators signing a Memorandum of Understanding (MoU).

Aware of the potential impact of CBDCs on cross-border trade, banking regulators are increasing their interest in the offerings by collaborating with their peers. Hong Kong and France’s bilateral efforts come soon after the second phase of the European Central Bank (ECB) experiments with wholesale central bank money.

The ECB has been making progress with CBDCs via its close-ended pilots involving several regional central banks. However, only the studies with the BdF border on wholesale CBDCs and tokenisation to make it the perfect partner for Hong Kong in the European Union.

France’s central bank has since achieved success with its DL3S (Distributed Ledger for Securities Settlement System) platform for real-time cross-border payments, which the ECB describes as a full-blockchain interoperability solution. Hong Kong’s efforts at wholesale CBDCs gained impetus with the March 2024 launch of Project Ensemble, an experiment involving the use of tokenised deposits for settlements.

Both countries will explore the interoperability of their wholesale CBDC systems via a regulatory sandbox to strengthen communication and collaboration. The experiments will focus on cross-currency payments and cross-border transactions involving financial institutions from both countries, but the difference in currency and financial market infrastructure stands as a potential stumbling block.

“As we have set the clear objective to improve cross-border payments, we have the opportunity brought by the Eurosystem exploratory work to collaborate with the HKMA on different use cases for payment versus payment between the tokenised form of the Hong Kong dollar and the Euro,” said Denis Beau, the BdF’s First Deputy Governor.

The press release did not mention the Bank for International Settlements’ (BIS) mBridge, the most advanced cross-border CBDC project to date, with Hong Kong as a major player in its development. However, the ECB and the BdF have previously stated they are keeping close tabs on mBridge’s development.

However, the experiments by the ECB and the French central bank differ from the model proposed by mBridge, fuelling speculation that the HKMA will explore a new model for CBDC settlement with its French counterpart.

France has been experimenting with the concept of wholesale CBDCs outside of the purview of the ECB, outlining three models for the offering in a 2023 report. The first is an interoperability model allowing tokenised assets to remain on their native distributed ledger while the second brings in the ECB via an integrated model.

The third, dubbed a distributed model, combines the benefits of the first two models with the bank pledging to remain technologically agnostic in the quest to develop wholesale CBDCs. A key driver of the French banking regulator experimenting with tokenisation is the need to prevent stablecoins from taking over the financial ecosystem.


EIB lends €1.2 billion for North Sea wind farm

The European Investment Bank (EIB) has agreed a -€1.2-billion (US$1.3 billion) loan to German energy company RWE AG to support the construction of the 1.1-gigawatt (GW) Thor offshore wind farm in the Danish North Sea.

The wind park will be Denmark’s largest, featuring 72 Siemens Gamesa wind turbines of 15 megawatts (MW) each. The project is situated off the west coast of Jutland, about 22 kilometres (13.7 miles) from Thorsminde in Holstebro municipality.

The main offshore installation activities are scheduled for 2025 and 2026, with plans for the wind farm to be fully operational by the end of 2027. Onshore cable works for the project started in April.  

The EIB said that its loan will help finance monopile foundations, turbines, inter-array cabling, an offshore converter station, export cables, a section of onshore cables and an onshore substation.

RWE chief financial officer (CFO) Michael Mueller said the loan is at attractive terms and helps to further diversify the company’s funding sources. RWE plans to invest €55 billion in renewables, batteries, flexible generation and hydrogen projects between 2024 and 2030.

“A large offshore wind farm that can provide power to more than a million households supports the transition to a net zero economy in Europe, fostering one of the big priorities of European Union for a better and resilient future of citizens,” commented EIB vice-president Nicola Beer.

RWE secured the concession to build the Thor offshore wind farm in December 2021.

 

MSCI and Moody’s partner to enhance ESG and sustainability solutions

Research provider MSCI and global ratings agency Moody’s Corporation, have entered a strategic partnership aimed at enhancing transparency in environmental, social and governance (ESG) issues and sustainability and improving decision-making capabilities by leveraging each other’s strengths.

Under the agreement, MSCI will provide its ESG ratings and content, which evaluate how companies manage financially significant ESG risks and opportunities. Moody’s plans to gradually integrate MSCI’s sustainability content into its existing ESG data and scores, thereby offering a range of tailored solutions to customers in the banking, insurance, and corporate sectors.

MSCI will also access Moody’s Orbis database, a comprehensive source of firmographic information covering over 500 million entities, to expand its ESG coverage for private companies.

Additionally, the partnership will explore collaborative solutions using Moody’s private company data and credit scoring models to deepen insights into the private credit market.

Commenting on the partnership Rob Fauber, President and CEO of Moody’s, said: “Moody’s is excited to partner with MSCI, a leader in solutions for the global investment community and a pioneer in ESG and sustainability.

“This is a real win-win, as Moody’s customers gain access to MSCI’s renowned ESG content and MSCI customers will gain access to Moody’s world-class risk assessment expertise, data and insights.”

Henry A. Fernandez, Chairman and CEO of MSCI, stated, “Sustainability remains one of the most important trends reshaping the global investment landscape, and the shift to private assets is another. This agreement will help MSCI expand our private company ESG coverage and deliver enhanced solutions across client segments and asset classes.”

 

IFC and Deutsche Bank facility provides €215 million to enhance Africa trade

The World Bank Group’s International Finance Corporation (IFC) has established a risk-sharing facility with Deutsche Bank worth up to €215 million (US$231 million) to assist in providing essential financing for importers and exporters of crucial goods in Africa, particularly in smaller, fragile, and conflict-affected states,

In 2022, African nations imported and exported goods and services worth US$1.1 trillion, representing 54% of the continent’s gross domestic product (GDP). Despite this, banks in Africa face cashflow challenges that hinder their ability to satisfy the demand for trade finance, as indicated by IFC annual bank surveys and a joint IFC-WTO (World Trade Organisation) study of West Africa.

The partnership aims to address these challenges, allowing Deutsche Bank to sustain its provision of trade finance to African countries during a period when many global banks are reducing their involvement—thereby supporting continuous trade activities across the continent. 

Enhanced trade within Africa and other regions could aid in climate adaptation and fortify food security by improving the supply and affordability of food, as noted by the International Monetary Fund (IMF).

Through the facility, IFC will participate in risks associated with a portfolio of trade transactions initiated by Deutsche Bank alongside local issuing banks in Africa.

The initial portfolio will mitigate risks for 40 issuing banks in 18 African countries, 14 of which are identified by the International Development Agency (IDA) as small, fragile and/or conflict-affected.

“IFC’s risk participation with Deutsche Bank leverages our issuing bank network to enable trade flows in Africa with our Global Hausbank clients and echoes a shared commitment to ongoing economic growth in emerging markets,” stated Borislav Ivanov-Blankenburg, Global Head of Documentary Trade Finance for Deutsche Bank.

“IFC’s partnership with Deutsche Bank comes at a time when traders in Africa are finding it increasingly difficult to access credit, with demand for trade finance from banks on the continent greatly outstripping supply,” mentioned Mohamed Gouled, IFC Vice President for Industries. “This risk-sharing facility will help African importers and exporters participate in global value chains, creating jobs and driving economic growth.”

IFC expects this initiative to inspire other financial institutions to offer trade finance to credit-issuing banks in Africa, leading to expanded support for trade in essential goods across the continent. The project marks the first Global Trade Liquidity Programme (GTLP) facility under the IFC Africa Trade and Supply Chain Recovery Initiative (ATRI) supported by the IDA Private Sector Window (PSW) Blended Finance Facility, aimed at increasing credit availability to emerging market issuing banks in Africa.

 

SMBC Aviation Capital raises US$1.5 billion via global finance facility

Aircraft leasing giant SMBC Aviation Capital has raised US$1.5 billion having completed a five year global syndicated finance facility.

The financing came from 29 financial institutions, 13 of which are new banking relationships for the group.

The senior syndication phase of the transaction included participation from 10 banks, while the general syndication phase saw a further 19 banks participate.

The syndicated finance facility comprises a US $375 million term loan and a US$1.125 billion revolving credit facility with a consortium of American, Asian, Australian, European and Middle East banks.

Aisling Kenny, chief financial officer, SMBC Aviation Capital, said: “This transaction represents a further milestone in our syndicated banking programme and demonstrates our ability to raise large scale, competitively priced capital.

“The deal is global in nature and further increases the diversification of our banking relationships, as we welcomed 13 new banking partners as part of the syndication.

“The revolving credit facility which forms 75% of this transaction will provide further operational flexibility for the future liquidity needs of SMBC Aviation Capital.”

Citigroup Global Markets Asia (Citi) acted as global co-ordinator, and together with eight banks, including Bank of China, Caixabank, Cathay United Bank, DBS Bank, Emirates NBD Capital, Oversea-Chinese Banking Corporation, Taipei Fubon Commercial Bank and Taishin International Bank acted as senior mandated lead Arrangers and bookrunners.

Australia and New Zealand Banking Group, Singapore branch acted as mandated lead arranger and bookrunner.

 

Fed hints at US rate cut in September

Officials at the US Federal Reserve indicated at their June meeting three weeks ago that the US economy was moving in the right direction for an interest rate cut, but said they needed more evidence that inflation was cooling.

Minutes from the two-day central bank’s rate setting federal open market committee (FOMC) meeting that ended on June 12 showed that officials acknowledged that the economy appeared to be slowing and that “price pressures were diminishing”.

While they opted to hold rates steady in a range of 5.25% to 5.5% , a 23-year high, the Fed’s rate setters discussed “a variety of factors that were likely to help contribute to continued disinflation in the period ahead”, according to the just-released minutes from the meeting.

FOMC members noted a weak reading in the US consumer prices index for May as being among “a number of developments in the product and labour markets” that supported a view that inflation was in decline. Officials also discussed the possible deflationary impact of “businesses’ deployment of artificial intelligence (AI)-related technology”, which could boost productivity.

“Participants noted the uncertainty associated with the economic outlook and with how long it would be appropriate to maintain a restrictive policy stance,” according to the minutes. Some officials emphasised the need for patience before cutting rates, while “several” cited the possible need to raise rates further should inflation resurge.

 

Sri Lanka reaches restructuring agreement with bondholders

Sri Lanka has struck a deal to restructure US$12.6 billion of bonds with its creditors, bringing the South Asian nation closer to completing its debt overhaul two years after it defaulted.

Investors agreed to take a 28% nominal reduction on the bonds’ principal and an 11% reduction on past interest, according to a statement released Wednesday. It came at the conclusion of the second round of talks, which followed an unsuccessful first round in April. The deal included the issuance of notes whose payouts are linked to economic growth and a potential governance-linked structure.

“At the conclusion of the meetings, Sri Lanka is pleased to report that, following the negotiations, the parties agreed on the core financial terms of a restructuring of the International Sovereign Bonds (ISBs), the terms of which are embodied in a joint working debt treatment framework (the Joint Working Framework),” the notice said. 

The parties have agreed to include the Governance-Linked Bond features in terms of one or more series of the plain vanilla bond instruments that form part of the Joint Working Framework. 
 

Noda extends open banking network to Brazil

UK-based open banking payment provider Noda has expanded its network to Brazil to unlock new opportunities for merchants.

Merchants collaborating with Noda from any jurisdiction can now benefit from cross-border multichannel payment services, unified reconciliation, single onboarding process, and instant banking and money transfers across Brazil, Europe, the UK, and Canada (Noda’s operational markets). The expansion enhances the convenience for merchants, enabling them to conduct business seamlessly across different regions.

Officials from Noda said that adding Brazil to their list is valuable for merchants that aim for global reach. They are committed to doing everything possible to ensure their convenience and success

Currently, Brazil is using the Pix network, an instant payments (IP) scheme that enables users - people, companies, and government entities - to send and receive money instantly. However, while there are many Pix providers, only few can allow access to European markets. Similarly, European payment providers rarely offer Pix payments across Brazil. Noda aims to bridge this gap.

Meanwhile, open banking payments, which are also provided by Noda, have seen rapid adoption in Europe, offering instant account-to-account transactions without card networks involved. Users can pay via their trusted bank’s interface without having to manually enter lengthy card details.

Noda’s advanced open banking application programming interface (API) helps online businesses to integrate direct bank payments, offering their customers seamless payments with lower fees. The company partners with 16,500 banks across 27 countries, spanning over 30,000 bank branches. In addition to open banking, Noda also assists online merchants with end-user know your customer (KYC), payment processing, lifetime value (LTV) forecasting, and user experience (UX) optimisation.

 

PayPal Ventures-backed Mesh partners with Italy’s crypto wallet Conio

US fintech Mesh, whose investors include PayPal Ventures, will provide customers of Italian digital asset wallet Conio access to several leading crypto exchanges, such as Binance or Coinbase, the two companies announced.

The partnership will allow Conio's 430,000 Italian customers to access 10 leading crypto currency trading platforms through the Conio App, the companies said. Customers will be able to instantly transfer any bitcoin they buy on the exchanges into their Conio wallet, rather than having to scan a QR code or go through other measures as at present.

Conio is backed by Italian postal service Poste Italiane and asset manager Banca Generali.

By using open banking technology which allows the sharing of financial data, a single Mesh account can authenticate users into more than 300 centralised crypto exchanges and self-custody wallets.

Conio currently only provides custody services for digital assets such as bitcoin.

“With our partnership with Conio, we are deploying the infrastructure to make safe and seamless aggregation and crypto transfers possible for hundreds of thousands of users in the region,” Mesh founder Bam Azizi said.

 

SkySparc acquires Denmark’s infiniance

Swedish business consultancy SkySparc has joined forces with infiniance, a treasury management consultancy for the corporate finance sector, in a move that it says will make the combined firm one of the leading treasury consultancies in the Nordic region.

Established in 2013 and headquartered in Copenhagen, infiniance “provides independent, high-quality financial advisory and best-practice solutions within financial processes and systems. Working predominantly with corporate treasuries, the firm also maintains close partnerships with recognized software providers such as SAP, FIS, and Kyriba, infiniance has clients across the Nordics, the Netherlands, and the UK, with a subsidiary based in India.ʺ

SkySparc said that the combination advances its strategic growth objectives. ʺThe newly formed alliance will broaden the geographical and technological reach of both companies. Together, the two companies are better equipped to serve their client base by combining their treasury management expertise with infiniance’s significant market presence in Denmark and experience dealing with robust technology platforms including SAP, FIS, and Kyriba.

ʺThis synergy enhances the ability to offer comprehensive, senior-level insights and solutions to treasurers in the Nordics, the UK, and beyond, strengthening its role as a trusted partner in the financial industry.ʺ

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