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Industry roundup: 09 March

EU reaches agreement to tighten sanctions on Russia and Belarus

In response to the war in Ukraine, the EU ambassadors agreed on further sanctions against Russia and Belarus. The French government stated that the EU ambassadors of 27 member nations settled on new sanctions against Russian officials and oligarchs and their families for their involvement in Russia's invasion of Ukraine. Additionally, the EU representatives, pending EU national capital adoption, established the agreed upon measures to complete the prior sanctions: exclusion of three Belarusian banks from the SWIFT system, clarification of cryptocurrency issues, and further banning of exports of technologies and goods.

Along with sanctions, the war with Ukraine has led to international criticism stimulating the departure of global companies from Russia. The EU’s previous approved sanctions against Russia targeted officials President Vladimir Putin and highest diplomat Sergei Labrov among others, exclusion of seven Russian banks from the international SWIFT banking system, and banning broadcasting by Sputnik and RT media.

According to the United Nations, at least 474 civilians have been killed and 864 others injured in Ukraine since the beginning of the war on February 24. Filippo Grandi, Commissioner for refugees, stated that over two million people fled Ukraine to adjacent countries.

Moscow responded to the sanctions by issuing a list of states and territories that have taken negative actions against Russia, its businesses and its citizens. According to the law, foreign creditors in these countries can be paid in rubles instead of foreign currencies. In addition, Russian President Vladimir Putin has also ordered the government to make a list of banned or restricted imports.

SEC scrutinizing the growth of cryptocurrency products mirroring deposit bank accounts

Crypto companies around the globe are offering high-yielding products that act like depository bank accounts. With rates in the US such as 17% at Celsius and 14.5% at, these offers can be highly attractive to consumers. However, there is much scrutiny by US regulators, as products like these accounts do not have FDIC or NCUA protection for account holders.

According to reports, BlockFi agreed last month to settle a $100 million settlement with the SEC for not registering its accounts as lending products. They stopped providing accounts to US customers but plan to return to the crypto space after submitting a registration statement with the SEC. Bloomberg reported in January 2022 that the SEC is also investigating Celsius, Gemini and Voyager depository products. CNBC stated that Coinbase suspended its plans for a US cryptocurrency savings account in September 2021 following a critical response from the SEC.

High yields can entice customers to crypto-based accounts, but regulators need to ensure that the general public understands these accounts have higher risk than insured bank accounts, according to reports. Since these accounts do not have deposit protection, interest-bearing products should be treated like any other asset in the broader crypto market.

According to the SEC, a statement outlining the depositors’ risk should include: (1) companies that own assets can fail, (2) deposits can be subject to fraud and hacking, (3) certain cryptos may lose trading potential if their market disappears, and (4) crypto markets can be illiquid and volatile.

Reuters reported that the US President will sign an executive order today, 9 March, requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other issues with cryptocurrencies.

The ever-evolving treasury function transformed by TaaS

The corporate treasurer role and function has evolved rapidly during the last few decades. The role of this finance officer is more diverse, strategic and important to day-to-day operations than at any other time, according to a recent press release.

Treasury-as-a-Service (TaaS) aims to achieve the ultimate goal of modern finance, removing ineffective and repetitive tasks that can be easily performed by someone else familiar with the system and the treasury process. Abdul Naushad, President and CEO, Buckzy Payments Inc., a global cross-border payments network and embedded finance platform enabler for financial institutions and fintechs, commented that TaaS plays a key role in processing international cross-border payments where accurate data and results are critical for treasurers. 

Currency conversions and hedging in FX management can also migrate to real time via TaaS, according to Bob Merali, Director of Treasury and FX Trading, Buckzy Payments Inc. He notes that batch processing typically conceals conversion rates and exposes investors to volatility in the traditional process of cross-currency transactions. However, multinationals operating in multiple currencies will not be able to fully benefit from real-time payments unless (FX) currency conversions and hedging are also processed in real time.

Merali also points out frequent disconnections between cross-currency conversion and the posting process in terms of when payments are made and the exchange rates used. With real-time technology, treasurers should be able to view each conversion time, date, and rate stamp far better than with the traditional treasury methods. Additionally, combining real-time technology with artificial intelligence, treasurers should be able to execute hedges based on user-defined rules.

According to Merali, there are two significant ways companies can support their treasury functions: (1) utilizing powerful and expensive treasury software solutions, or (2) outsourcing with TaaS. Both options meet businesses’ requirements and priorities, which are important components of cross-border payments such as compliance, risk, corporate development, forecasting, analytics and capital strategy.

Rapid real-time payment system embraced by the Bank of London

With the high demands of a faster payment system for the UK economy, the Bank of London, a global clearing agency and transaction technology bank, announced that it is now a Directly Connected Settling Participant (DCSP) of the Faster Payment System, the UK’s 24-hour, 365-day real-time payment system. Additionally, the press release stated the service would enable real-time payments to millions of individuals, businesses and charities across the UK. The Faster Payments System processed 3.4 billion payments in 2021 (a 20% increase from 2020), equivalent to £ 2.6 trillion (a 24% increase from 2020).

The Faster Payments System, which was launched in 2008, is accessed by many other DCSPs, several non-bank payment service providers, and a multitude of users who access the system through sponsored banks such as the Bank of London. According to reports, the Bank of London and Pay.UK (operator of the Faster Payment System), are collaborating to provide access, foster competition and ensure that as many end users as possible have access to full real-time services.

Felipe Hillard, UK Chief Customer Officer, Bank of London, commented that banking and compliance as a service for clients and partners would help drive them to the next wave of financial innovation. Formal participation in the Faster Payment System as a DCSP empowered the bank towards embedding open access, eliminating inefficiencies, and facilitating competition in the market.

Quantum technology advances deeper into the banking infrastructure

CaixaBank, a Spanish multinational financial services company, has partnered with provider D-Wave Systems to calculate hedging of its insurance portfolio using quantum computing. According to the press release, VidaCaixa, the Spanish banking life insurance and annuity division, used D-Wave's Leap quantum cloud service and quantum hybrid solver to develop an application within their investment portfolio selection and allocation, as well as in their portfolio hedging activities. The bank, according to the report, was able to code a quick algorithm to improve their investment hedging using D-Wave’s quantum hybrid solver services.

CaixaBank stated that their bank calculations typically took hours, and this time has now been reduced to minutes while increasing modelling complexity and enabling more dynamic models that are better suited to real-time markets. In addition to VidaCaixa, Caixa Bank is assessing whether to move the application into their normal production environment in other areas of the organization in the coming months. Gonzalo Gortazar, CEO, CaixaBank, commented that investing in quantum computing can help deliver cutting-edge products and services more efficiently and provide superior customer service.

Digital banking for SMEs through BankiFi and Visa fintech partner connect

BankiFi, a UK-based technology company, joins Visa Fintech Partner Connect in Europe, a programme designed to assist Visa customers in delivering the next generation of digital banking solutions. The partner programme would focus on Visa customers who are interested in enhancing digital services for SMEs.

According to the press release, BankiFi provides a set of microservices for enterprise end-to-end financial management, enhancing commercial banking operations. BankiFi’s microservices enables banks to offer SME and trade clients integrated services such as accounting, billing and payments for their business activities.

Banks should be able to free SMEs from time-consuming financial management (from billing and bookkeeping to cash flow forecasting and working capital optimization) and enable them to focus on their business’s profitability and strategy goals. In the midst of intensifying competition and the turmoil of digital challengers, many banks are suffering from a decline in the market share of business banking customers. Nick Reid, Head of Sales, Europe and North America, commented that BankiFi would enable banks to protect and expand their SME market share and keep their digital commercial banking channels relevant.

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