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IMF works on a central bank digital currencies platform – Industry roundup: 20 June

IMF to launch global digital currencies platform

The International Monetary Fund (IMF) is developing a platform for central bank digital currencies (CDBCs) to enable transactions between countries, says its Managing Director Kristalina Georgieva.

“CBDCs should not be fragmented national propositions,” she told a conference attended by African central banks in Rabat, Morocco. “To have more efficient and fairer transactions we need systems that connect countries: we need interoperability. For this reason, at the IMF we are working on the concept of a global CBDC platform.”

Georgieva said that the IMF wants central banks to agree on a common regulatory framework for digital currencies that will allow global interoperability. Failure to agree on a common platform would create a vacuum that would likely be filled by cryptocurrencies, she warned.

The IMF chief noted that 114 central banks worldwide are already at some stage of CBDC exploration, with about 10 “already crossing the finish line.”

“If countries develop CDBCs only for domestic deployment we are underutilising their capacity,” she added. CBDCs could also help promote financial inclusion and make remittances cheaper, given that the average cost of money transfers stands at 6.3% amounting to US$44 billion annually.

Georgieva stressed that CBDCs should be backed by assets, adding that cryptocurrencies are an investment opportunity when backed by assets, but when they are not they are a “speculative investment.”

The Central Bank of Nigeria (CBN), which in October 2021 announced the introduction of its own digital currency, the eNaira, as a payment option to recipients of diaspora remittances, said the move is part of its efforts to liberalise the payout of diaspora remittance.

In a report titled ’Nigeria’s eNaira, One Year After’, the IMF said that network effects suggest the initial low adoption rate would require a coordinated policy drive to break it. The report suggests that if the adoption of digital currency is to be significant, then it requires some form of strategy between the bank and mobile money infrastructures.


CHAPS transitions to ISO 20022

The Bank of England has announced that, working closely with the payments industry, it has successfully migrated CHAPS, the UK’s high-value payments system, to ISO 20022 – the latest global financial messaging standard.

“This marks a significant milestone in the multi-year programme to renew the Bank’s Real Time Gross Settlement (RTGS) service: a programme whose objectives are to increase resilience, competition and innovation within the payments landscape,” a BoE release stated

It also marks a key milestone in the global transition of payments to the ISO 20022 standard, which allows more data to be sent with payments, and in a more structured format. ISO 20022 is an open international standard, which has the potential to create a single common language for most payments globally and deliver a wide range of benefits.

In addition to the UK, many major jurisdictions have or are intending to implement ISO 20022 by November 2025, when SWIFT is scheduled to retire its existing MT message standard for cross-border payments. Pay.UK’s New Payments Architecture, which will replace the UK’s Faster Payments system in due course, will also use ISO 20022.

The BoE said that consumers and businesses are unlikely to need to change the way they send CHAPS or cross-border payments for now. However, they might start to see options to add further information or specific references (such as invoice numbers) with CHAPS payments towards the end of this year. “We encourage consumers and business to contact their bank, building society or payment service provider if they have any queries,” it added.

Executive Director of Payments Victoria Cleland said: “The introduction of the ISO 20022 financial messaging standard marks a major milestone in our mission to enhance our RTGS and CHAPS services: critical infrastructure at the heart of the financial system.

“In an increasingly globalised payments world, harmonisation of messaging through ISO 20022 will enable more systems to speak the same language and ultimately enhance cross border payments. The move to ISO 20022 is a key element in the Bank’s RTGS Renewal Programme and meets one of our commitments to the Financial Stability Board’s Roadmap to Enhance Cross Border Payments

“ISO 20022 also provides great benefits for individual firms: I would encourage them all to embrace these benefits.

“I am very grateful to the teams in the Bank, to Accenture (our Technology Delivery Partner) and also to our CHAPS Direct Participants and the broader payments industry whose strong collaboration and commitment has made this transformational change possible.”


Hong Kong’s US$1.9 trillion stocks expect boost from yuan trading

Hong Kong is pinning its hopes on a new programme that enables investors to trade equities in the yuan (CNY) on top of its local currency, and also aims to revive its flagging stock market and boost turnover currently hovering at a four-year low.

Hong Kong Stock Exchanges and Clearing (HKEX) launched the so-called ‘HKD-RMB Dual Counter Model’ on Monday to give traders the option to buy and sell some of the financial hub’s biggest-listed stocks using both CNY and the Hong Kong dollar (HKD), including Tencent Holdings, Alibaba Group Holdings and China Mobile. There are 24 companies on the list with a combined market value equivalent to US$1.9 trillion.

The new programme aims to attract overseas investors with CNY holdings and eventually mainland Chinese investors, according to Reuters.

Investors with CNY holdings in countries such as Russia, which has relied heavily on China’s currency since being largely shut out of the global financial system over the past 16 months by Western sanctions, could also be potential participants.

HKEX will also launch a market-maker programme that aims to minimise the price differences between the two currencies. Investors can choose to trade using HKD or CNY, which has seen significant volatility lately. Investors trading with CNY could thus limit conversion and hedging costs.

The CNY currently languishes at its lowest against the US dollar since November amid a sluggish economic recovery since China abandoned its zero-Covid lockdown and restrictions last December. Based on the real effective exchange rate against another currency basket from the Bank of International Settlements (BIS), CNY is actually at its lowest level since 2014.

The new Hong Kong trading programme comes as China attempts to internationalise the CNY and challenge the US dollar’s dominance on the world stage. For example, in March China and Brazil agreed to conduct trade in their own currencies and bypass the US dollar, which is the main currency in international trade, especially commodities.

Meanwhile, Argentina also said it will pay for imports from China in CNY instead of US dollars, and Beijing has been trying to persuade Middle East countries to price oil in yuan instead of dollars.


IFC subscribes to Thailand’s first green and blue bond

The International Finance Corporation (IFC) – a member of the World Bank Group – said that to protect Thailand’s blue economy and scale up financing for green projects, it is subscribing to a US$400-million green and blue bond issued by Bank of Ayudhya, aka Krungsri, which aims to further support climate action and sustaining ocean health.

The ‘blue economy’ is the term for an economic system or sector that seeks to conserve marine and  freshwater environments while using them in a sustainable way to develop economic growth and produce resources such as energy and food.

IFC’s support will help Krungsri, which is Thailand’s fifth largest commercial bank, to dedicate US$50 million towards extending loans for eligible blue assets, such as water supply, fisheries, aquaculture, and others, as well as to deploy the remaining amount toward financing eligible green assets, such as retail electric vehicles.

The entire bond will adhere to the International Capital Market Association’s (ICMA) Green Bond Principles, with the blue portion following IFC's Guidelines for Blue Finance.

“With this maiden blue and green bond issuance, we hope to scale up our climate finance portfolio, thus significantly contributing to the achievement of our interim sustainable finance target of US$1.5 billion – US$3 billion aimed for 2030,” said Kenichi Yamato, Krungsri President and Chief Executive Officer.

“With IFC’s support, we will continue to assert our robust leadership in thematic bond issuance while positioning ourselves as a trusted partner when it comes to sustainable finance solutions.”

In addition to the investment, IFC will help Krungsri develop its green and blue bond framework and update its environmental and social risk management system related to green and blue assets.

“Sustainable finance and promoting a circular economy continue to be strategic priorities for IFC in Thailand and we are honoured to collaborate with Krungsri, one of our most important strategic partners, on this important initiative,” said Jane Yuan Xu, IFC Country Manager for Thailand and Myanmar. “This landmark investment will help mobilise more private capital for green and blue financing, which is crucial for the country’s climate goals.”

In recent months, Thailand has been one of several countries in Asia experienced record-breaking heatwaves. According to Joint Standing Committee on Commerce, Industry and Banking (JSCCIB), drought, floods and other extreme weather exacerbated by climate change could cause damage to the Thai economy of up to baht (THB)36 billion (US$1.04 billion) this year.

A further major climate challenge for Thailand is the threat to its blue economy, which contributes to approximately 30% of GDP (gross domestic product). According to the Thailand Development Research Institute Thailand has an average of 1.03 million tonnes of mismanaged waste each year, of which nearly half flows into the sea. The country is also one of the top six contributors globally to marine plastic pollution.


European Investment Bank hit by cyber attack

Pro-Russian hacktivists have attacked European banking institutions, claiming the European Investment Bank (EIB) as one of their victims.

Early on Monday, the pro-Russian Killnet hackers group claimed on their Telegram to have targeted the inter-network infrastructure of the EIB. Later in the day, the bank tweeted that it was currently facing a cyberattack that affected the availability of its website.“We are responding to the incident,” it added.

The latest attack is likely related to a series of high-scale cyberthreats against European financial institutions by pro-Russian hackers in response to European support for Ukraine.

"Hello Europe! How are things with the IBAN banking system? I feel like something is wrong with her. Perhaps the transfer system is affected by bad weather. And also the weather forecasters say that not only IBAN will be dead, but also SEPA, WISE, SWIFT,” the Killnet gang wrote on its Telegram channel.

Three well-known hacker gangs — Killnet, Anonymous Sudan, and REvil, proclaimed themselves as the Darknet Parliament on June 16. The phrase almost instantly emerged as a trending keyword on Twitter among threat analysts.

“72 hours ago, three heads of hacker groups from Russia and Sudan held a regular meeting in the DARKNET Parliament and came to a common decision: SOLUTION №0191. Today we are starting to impose sanctions on the European banking transfer systems SEPA, IBAN, WIRE, SWIFT, WISE,” wrote Killnet.

Cyberattacks by Anonymous Sudan recently caused an outage at Microsoft and Microsoft 365 software suites, including Teams and Outlook, were down for a couple of hours for thousands of US users.


AstraZeneca drafts plan to spin off China business: report

AstraZeneca is reviewing a possible spin-off off its business in China and listing it in Hong Kong or Shanghai to shield the multinational drugmaker from geopolitical tensions.

The Anglo-Swedish pharmaceuticals group and the UK's largest stock-market-listed company has drawn up the plans in attempt to protect its business from the fallout from increasing tensions between China and the US and its allies

Executives  have been discussing the move with bankers for several months, although it could still be abandoned, the Financial Times reported.

The spin-out would mean Astra separates its division in China into a new legal entity and lists it on a stock market in Asia while retaining control of the business.

If AstraZeneca, which is valued at about £180 billion (US$230 billion) presses ahead, it could shield the business from any potential crackdown on overseas businesses by Chinese authorities.

China has become a big market for AstraZeneca, best known in the UK for its Covid-19 vaccine that was developed in conjunction with Oxford University during the pandemic.

China accounted for 13% of AstraZeneca’s global sales last year, bringing in revenues of nearly US$6 billion of a total US$44 billion, making it the biggest overseas pharmaceuticals company by sales. Revenues from the US, its largest market, were nearly £18 billion.


Amundi launches euro government-tilted green bond ETF

Amundi, Europe’s largest asset manager based on assets under management (AUM), has launched a new euro government-tilted green bond exchange traded fund (ETF), designed to enable investors to shift their core euro government bonds towards a responsible exposure. It has done so b effectively turning a eurozone government fixed income ETF into a green bond ETF after switching the index.

Following the change a fortnight ago, the Amundi Euro Government Tilted Green Bond Ucits ETF (CB3) provides exposure to euro-denominated investment-grade government bonds with a higher proportion of sovereign green bonds. It is classified as Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR).

CB3, which has a total expense ratio (TER) of 0.14%, went from tracking the FTSE Eurozone Government Broad IG index to the Bloomberg Euro Treasury Green Bond Tilted index.

The new index is based on the Euro Treasury €50 billion Bond index, measuring the performance of investment grade euro-denominated fixed rate government debt. The index achieves its tilt by allocating at least 30% of the index to securities classified as green bonds.

As a result, the ETF has been reclassified from Article 6 to Article 8 under SFDR. CB3 currently houses €521.7 million assets under management and has returned 2.5% so far this year.

Arnaud Llinas, head of ETF, indexing and smart beta at Amundi, said: “Clients have asked for innovative solutions combining sovereign bond investments with an ESG stance and we believe this new ETF is a great addition to our product range and a concrete investment tool to finance the transition to a low carbon economy.”

Dave Gedeon, CEO, Bloomberg Index Services Limited, said: “The Bloomberg Euro Treasury Green Bond Tilted index is a new index solution that we believe can be the standard for inclusion of ESG factors in treasuries.”

It is the latest switch to an ESG index by Amundi after it changed the index on its oil and gas ETF to one that includes an ESG screening methodology. Last month, Amundi switched the indices on four ETFs to ones that track ESG metrics including the €396 million Amundi STOXX Global Artificial Intelligence UCITS ETF (GOAI).

The asset manager aims to have 40% of its ETF range made up of ESG products by 2025, almost double the 23% it currently housed when it announced the targets in December 2021.


BNP Paribas Asset Management CEO Sandro Pierri is new Efama president

Sandro Pierri, the chief executive of BNP Paribas Asset Management, has been elected president of Europe’s main fund management trade body.

The news came several months after the Brussels-headquartered European Fund and Asset Management Association (Efama) brokered a compromise to win back German members by removing corporates from its board.

Pierri, who before joining BNP Paribas Asset Management in 2016 spent almost a decade at Pioneer Investments, replaces Naïm Abou-Jaoudé, New York Life Investment Management boss. Abou-Jaoudé had been president of Efama since 2021.

In addition, Massimo Greco, vice-chair of asset management for JPMorgan Asset Management across Europe, the Middle East and Africa, has been elected vice-president of Efama.

The new board of directors comes after a period of turbulence for Efama, which has spent the past year trying to win back Germany’s fund management association, the BVI, which quit Efama at the start of 2022 over the influence that individual asset managers had at the trade body.

Representing members with more than €31 trillion in assets, Efama brings together the EU's national asset management trade bodies and major fund houses including BlackRock, Amundi, Vanguard and other large EU and non-EU fund groups to lobby on behalf of the industry and share insight.

Under a new structure agreed in April, corporate members no longer have a seat on the Efama board, apart from the roles of president and vice president.


ZERO13 and Zumo partner on carbon credit offering for banks

ZERO13, GMEX Group’s recently launched digital carbon credits aggregation ecosystem and Zumo, the B2B digital assets infrastructure, have announced a collaborative solution targeted at banks and their corporate and institutional clients that want to track the carbon footprint of their digital assets and any aspect of their value chain.

The integrated solution will enable Zumo to leverage GMEX ZERO13’s hub connectivity to digital carbon registries, trade execution venue capability, and its decentralised asset settlement network. It will also provide customers with a flexible and transparent way to account for their carbon footprint through the procurement of tokenised carbon credits, with ease of trading, clearing, and settlement.

Zumo’s position as a Financial Conduct Authority (FCA)-registered UK entity will enable GMEX ZERO13 to onboard new banks, corporates, and other institutions to its trading platform. This will support clients in their efforts to execute environmental, social and governance (ESG) strategies with the help of blockchain technology.

Key to the collaboration will be enabling Zumo’s customers to operate their own and/or access trading platforms and associated liquidity pools for high-quality carbon credit assets and other instruments and to provide end-to-end efficiency through the transaction lifecycle from onboarding (KYC/AML) to settlement.

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