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India announces end of the 2,000 rupee banknote – Industry roundup: 23 May

India to withdraw the INR2,000 banknote

The Reserve Bank of India (RBI) said that it will be withdrawing the 2,000-rupee (INR) banknote – equivalent to about US$24 or £20 – from circulation later this year.

In a release announcing its decision, the RBI described the notes as a temporary measure. The INR2,000 notes were issued following the demonetisation of the INR500 and INR 1,000 notes, which were suddenly withdrawn from circulation in November 2016.

When INR2,000 notes were introduced they were intended to quickly replenish the Indian economy's currency in circulation after demonetisation. However, the central bank has frequently said that it wants to reduce high value notes in circulation and had stopped printing new INR2,000 notes within three years.

The RBI says that the notes are now nearing the end of their expected lifespans. It adds that it will withdraw its highest value note from circulation at the end of September, as it is not widely used. Economists claim that the move could boost bank deposits.

Reports suggest that the September 30 deadline has sparked a shopping frenzy as stores selling gold, diamonds and luxury brands are swamped by consumers seeking to get rid of their stashes of INR2,000 notes before they cease to become legal tender.

“Earlier, INR2,000 notes used to make up 1 to 2% per cent of our daily sales. The rest was credit or debit cards. Now this has jumped to 80% per cent,” one manager told the Hindustan Times newspaper.

The total value of INR2,000 notes in circulation is estimated at INR3.62 trillion ($44.27 billion), or about 10.8% of the currency in circulation in India.

“This withdrawal will not create any big disruption, as the notes of smaller quantity are available in sufficient quantity,” said Rupa Rege Nitsure, group chief economist at L&T Finance Holdings. “Also in the past six or seven years, the scope of digital transactions and e-commerce has expanded significantly.”


Bank of Israel hikes interest rates for 10th time to 4.75%

The Bank of Israel, which like its US and European peers has been hiking interest rates steeply, has raised its benchmark interest rate for a 10th consecutive time, lifting borrowing costs by 25 basis points (bps) to 4.75% as it struggles to limit inflation growth in recent months.

The central bank’s move came after Israel’s consumer price index (CPI), an inflation measure that tracks the average cost of household goods, rose in April at almost double the rate than was forecast. The April CPI increased by 0.8% above analysts’ expectations of 0.4% to 0.5%, taking annual inflation over the past 12 months to 5%, according to data released by the Central Bureau of Statistics on May 15. The April CPI monthly reading was the highest since July 2022.

“Economic activity in Israel is at a high level, and is accompanied by a tight labour market, although there is some moderation in a number of indicators. Inflation is broad and remains high,” the Bank of Israel said in a statement on reasons for the latest rate hike. “The tighter monetary policy and moderation of activity abroad are expected to lead to a slowing in the pace of inflation alongside some slowdown of economic activity in Israel.”

Over the past year, the Bank of Israel has steadily hiked its benchmark interest rate from a record low of 0.1% in a bid to rein in inflation. Despite the steps, inflation has been hovering above 5% in annual terms for more than six months, far above the government’s target range of 1% to 3%.

“Inflation in Israel is ‘sticky’ and high, and it is notable that the level by which inflation has been reined in is low compared to what has occurred in other developed countries,” Bank Leumi economists wrote in a research report, adding that at least one further rate hike could follow later this year.

Bank of Israel governor Amir Yaron said the central bank remains committed to do everything to bring down inflation back into the government’s target range.


Book claim of state-sponsored Libor rigging in 2008

Banks were pressured to manipulate the Libor and Euribor benchmark interest rates at the height of the global financial crisis in October 2008 through a co-ordinated drive by national central banks and governments, reports UK daily The Times.

The paper is publishing excerpts from Rigged, a forthcoming book by Andy Verity, the BBC’s economics correspondent, which shows evidence of central banks pressuring commercial banks into publishing rates that were artificially low to calm panic in financial markets.

The Bank of England (BoE), the Banque de France, the European Central Bank (ECB), Banca d'Italia, Banco de Espana and the Federal Reserve Bank of New York allegedly intervened on a large scale in the setting of the two rates.

Verity claims that investigating agencies, including the FBI in the US and the UK’s financial regulator, were told in November 2010 of an international drive to get Libor – the London Inter-bank Offered Rate – and Euribor rates down, regardless of the real cost of borrowing cash.

Jurors in nine criminal trials for the far smaller-scale interest rate “rigging” of Libor in London and New York between 2015 and 2019 were never shown this evidence of manipulation by governments and central banks, the book claims.

Lord Tyrie, who as former member of parliament Andrew Tyrie chaired the UK Treasury Committee of MPs when it enquired into Libor in 2012, told the BBC that “the evidence that Mr Verity has unearthed strongly suggests that the committee's inquiry into the Libor scandal was not told the whole truth.

“The public rely on Parliament to get to the truth. This case illustrates why Parliament should bolster its information-gathering powers with more effective sanctions against those who provide less than the full picture. Parliament appears to have been misled and, if that's the case, should not let it rest.”

Nineteen traders were convicted of Libor rigging and nine jailed because of court rulings that outlawed any influence on Libor apart from the interest rates on offer on the money markets at which a bank could borrow and lend cash.


US companies resort to bond market as debt ceiling deadline looms

US companies are rushing to borrow money in the bond market, bringing forward deals in case the country’s debt ceiling stand-off is not resolved before the end of the month and causes turmoil over the summer, reports the Financial Times.

Citing data from Dealogic, the paper reports that highly rated companies have issued bonds worth US$112 billion so far this month, against US$46 billion in May 2022 and more than triple the amount sold in April. Excluding 2020, when ultra-low interest rates sparked a US$196 billion borrowing boom, May corporate issuance this year is the highest since 2016.

Bankers who handle corporate bond deals say borrowers are making the most of a relatively buoyant market environment to tap investors now before any possible volatility erupts from the US government running out of cash at the start of June, which could have cascading implications for global asset prices.

“It’s fair to say that there’s been some acceleration” in issuance, Richard Zogheb, head of global debt capital markets at Citi, told the FT.

He added that “the acceleration has been folks who were planning to access the market in the relatively near- to medium-term”, in June or July, and instead said “‘we’ll just go now . . . we might as well avoid this whole issue’”.

A total of 56 companies priced investment-grade US bond deals in May, Dealogic data shows, with more than two-thirds of the proceeds earmarked primarily for acquisition financing — the highest proportion since December 2021. Pharma group Pfizer last week launched a jumbo-sized US$31 billion bond sale, implemented to help fund its US$43 billion purchase of cancer drug specialist Seagen announced in March.


US finance job titles “enjoy 20% pay boost when ESG added”

US-based bankers and money managers whose job titles include ‘ESG’ (environmental, social and governance) or ‘sustainability’ earn on average around 20% higher base salaries than colleagues of the same seniority without those labels, according to analysis of salary data carried out for Reuters.

The news agency commissioned New York-based data startup Revelio Labs to scrape online professional profiles for people with finance roles in commercial and investment banking and asset management and split them into those with ESG or sustainability in their job titles and those without.

They then applied their salary model which is trained on publicly available data from three sources: roughly two million H-1B documents, in which US companies declare the salaries they pay to their non-US employees, around 25 million job postings that included salaries, and about one million self-reported salaries.

Reuters notes that more than US$30 trillion in capital has been committed to ESG-related investments as the world steps up efforts to curb greenhouse gas emissions and companies face pressure on issues such as workplace diversity and social justice

This has sparked competition to attract bankers and asset managers for these roles, leading to higher base salaries than for equivalent professionals in non-ESG related functions, Revelio Labs’ analysis conducted for Reuters confirms.

“Salaries of ESG and non-ESG personnel started to diverge in 2020, in line with the spike in hiring in ESG roles due to the increasing focus on ESG and sustainable investing in the finance sector,” said Loujaina Abdelwahed, an economist for Revelio Labs.

The strong demand for professional talent comes amid a political backlash against ESG in parts of the Western world, especially in the US, where it has culminated in some US states legislation to remove environmental and social considerations from business.

Since 2019, the rate of base salary growth for ESG roles has been about 38 percentage points higher than non-ESG personnel, Abdelwahed said.

ESG-tagged roles overtook non-ESG on a six-month moving average basis in June 2020 and in August 2021 surged to peak around US$109,846, at least US$20,000 higher than non-ESG.

The analysis does not take into account the discretionary bonuses often awarded to bankers and asset managers for their performance, as this data is not available from the public sources consulted by Revelio Labs.

The gap dipped in the second half of 2021 but has since increased again: in April 2023 average ESG salaries were $110,348 versus $90,283.


Australia Post raises A$100 million from first sustainability bond

Australia Post has priced its first-ever sustainability bond at A$100 million (US$66.3 million), focused on both environmental and social projects. The six-year bond was priced at the start of last week and was oversubscribed with orders from Australian and Asian investors.

Issued under an Australian Medium-Term Note (AMTN) programme, the funds raised will be used to assist Australia Post in delivering on its 2025 Sustainability Roadmap and community strategy. The mail company’s range of initiatives to deliver a sustainable future includes: targeting net zero carbon emissions by 2050; reducing scope 1, 2 and 3 emissions by 15% by 2025 from a 2019 baseline; sourcing 100% renewable electricity by 2025; 100% fully sustainable packaging range aligned to the 2025 National Packaging Targets by 2025; decreasing waste to landfill by 20% by 2025; commitments across Australia Post’s Reconciliation Action Plan (RAP), Accessibility and Inclusion Plan and through its safety agenda; and spending A$100 million with social enterprise and Indigenous suppliers by 2025.

Supported by National Australia Bank (NAB) and Westpac as joint lead managers and joint sustainability coordinators, this issuance follows the establishment of Australia Post’s sustainable finance framework. The sustainability bond is aligned to the International Capital Market Association’s (ICMA) green bond principles, social bond principles and sustainability bond guidelines. According to the post, Australia Post is the first Commonwealth Government Business Enterprise to target net zero emissions by 2050, with further commitments laid out in its 2025 Sustainability Roadmap, including working to meet the United Nations Sustainability Development Goals.

Rodney Boys, chief financial officer at Australia Post Group, said: “The landmark transaction further demonstrates Australia Post’s long-term commitment to decarbonisation and renewable energy and highlights how community service and social purpose is at the centre of what Australia Post does.

“As one of the oldest and most established businesses in Australia, we’re immensely proud that our inaugural sustainability bond is one of the first combined green and social sustainability bonds issued by an Australian corporate in recent years. Delivered under Australia Post’s newly established Sustainable Finance Framework, this demonstrates our commitment to create a more sustainable network and support community organisations across Australia.”


Singapore’s OCBC Bank sets decarbonisation target for ship finance

Singapore’s OCBC Bank, Southeast Asia’s second-largest lender, has announced its latest decarbonisation goals, under which it will stop financing upstream oil and gas projects that received approval for development after 2021. This is in addition to the bank's target to reduce absolute emissions in the oil and gas sector by 35% by 2030 and 95% by 2050.

The bank aims to achieve a target metric or “alignment delta” at or below zero by 2030 for shipping and says that targets are an internationally recognised, science-based pathway. OCBC will apply them to the six sectors it finances that are the most greenhouse emissions intensive — power, oil and gas, steel, shipping, aviation and real estate, as part of its goal to hit net zero in its financed emissions by 2050.

Alignment delta is based on emission intensity or the emissions per unit of output. The targets are expressed in percentage terms to measure how far above or below the reference pathway the emission intensity is.

OCBC said the 2030 targets had been set as interim checkpoints for the bank to ensure that it is poised to hit its 2050 goal, The targets will be reviewed at least once every five years as more client data becomes available, it added.

The bank has committed more than S$25 million (US$18.6 million) in decarbonisation efforts across its key markets, to install energy-efficient technology and up the share of renewables in its energy mix. It also claims to have achieved carbon neutrality for operational emissions in 2022.

OCBC joins several other Asian financial institutions that have set environmental targets for financing activities. These include fellow Singaporean banks DBS and United Overseas Bank, which in November 2022 also committed to stop financing upstream projects.

OCBC also joined the Net Zero Banking Alliance (NZBA) in October 2022. The NZBA also includes US-based banks such as JP Morgan Chase and Bank of America. A key principle of the NZBA is that the targets set out by signatory banks must be in line with the stipulations of the United Nations’ (UN) Paris climate agreement.


Sweden’s Brite Payments launches instant payments network

Swedish fintech Brite Payments is launching a network to power instant payments and payouts across Europe.

The company said that Brite Instant Payments Network (IPN) aims to help close the gaps in Europe's “fragmented” real-time payments landscape, leveraging open banking to give merchants and businesses what it describes as an “out-of-the-box” payments and payouts solution.

According to Brite,“the full potential of open banking payments is yet to be realised”. Making use of open banking-first approach, it has built a network that enables anytime instant payments processing while also addressing the limits of SEPA Instant transfers.

“Brite IPN is the ‘engine’ that enables us to process payments instantly and equip businesses with a true out-of-the-box solution,” said Brite Payments founder and CEO Lena Hackelöer. While open banking had “enormous untapped potential”, businesses needed solutions that deliver “real and immediate value”.

“We have been building our next-generation proprietary network since Brite was founded in 2019, and I am excited to announce Brite IPN as a significant step forward in our mission to support merchants and businesses with a faster, more convenient, and secure open banking payments solution,” she added.

The IPN will also enable payouts in markets and currencies outside of the eurozone, enabling merchants to fund or request settlement in their choice of currency. The launch of the new network follows a year of growth for Brite, which saw revenues and transactions volume more than double on its platform last year and nearly doubled its workforce.


India’s Cashfree Payments links with Tazapay to help exporters

India-based payment platform Cashfree Payments has partnered with Tazapay, a Singapore-based cross-border payments company, to facilitate cross-border payments to Indian exporters.

A release said the partnership with Cashfree Payments will enable Tazapay to settle all cross-border payments directly to Indian exporters’ local bank accounts in rupees (INR) in one business day. The partnership aims to create new opportunities for Indian sellers to expand their reach and tap into more global buyers. It also aims to accelerate Indian export growth and aid Indian businesses looking to grow their customer base in international markets.

The move will eliminate hassles for many Indian exporters, who previously faced challenges with e-FIRS generation requiring two or more weeks, alongside numerous bank follow-ups. Cashfree Payments now provides e-FIRS to all Tazapay merchants, complete with remitter and buyer details, for all their transactions – within one business day.

Cashfree Payments has focused on building solutions for global companies and international payment aggregators, who need to pay Indian business entities or individuals from anywhere in the world. The India-based company also provides solutions to enable Indian exporters to collect payments in over 30 currencies from more than 100 countries. It also offers an option enabling payers to pay using their local rails like Automated Clearing House (ACH in US), Single Euro Payments Area (SEPA in EU), Electronic funds transfer (EFT in Canada) and Faster Payments Service (FPS in UK).

Reeju Datta, co-founder of  Cashfree Payments, said: “India is the biggest market for inward remittances globally, covering merchandise and services exports. However, traditional wire transfers have been the go-to payment method for Indian businesses. These methods have caused payment delays, affecting exporters’ operations and cash flow management.

“Our partnership with Tazapay now eliminates payment hassles, empowering Indian exporters to expand their business across boders smoothly.”


BNY Mellon expands short-term investment platform

BNY Mellon has announced the expansion of its short-term investment platform, LiquidityDirect, to incorporate access to mutual funds, enhanced focused investing options, interest-bearing demand deposit accounts and sponsored cleared repo sweep capabilities to help companies maximize liquidity, manage risks and improve performance.

The enhancements “provide corporate treasurers and other finance executives with a comprehensive platform for leveraging more than 100 investment vehicles. The expansion also unlocks additional value via integration with SAP’s Treasury Management workstation, creating efficiencies for self-directed cash management, payments and investments.” It also builds on LiquidityDirect’s existing platform integration with other major treasury workstations and cash management systems, including Indus Valley Partners, G Treasury and Hazeltree.

Adam Vos, CEO of BNY Mellon Markets & Execution Services, said: “Throughout market cycles, the global demand for liquidity remains paramount for all market participants. A critical component to meeting clients’ needs is providing integrated access from a single source to an array of liquidity solutions. We have built—and now significantly enhanced—our LiquidityDirect platform to offer clients exactly these types of innovative solutions, to meet their dynamic investment and risk criteria as they execute on their liquidity strategy.”

LiquidityDirect also provides access to the Black Opportunity for Learning and Development (BOLD) Share Class on Dreyfus Government Cash Management, offered exclusively through BNY Mellon, so clients can easily make a direct social impact.

Since launching, assets in the BOLD Share Class have grown nearly eightfold, now totalling an estimated US$4.8 billion. In addition, 10% of the BOLD shares’ net revenue will be donated to Howard University’s Graduation Retention Access to Continued Excellence grant annually.

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