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Industry roundup: 1 December

CLS and Finastra collaborate on netting services 

Market infrastructure CLS and fintech Finastra have agreed to enter into a collaboration to provide Finastra customers with access to CLSNet, CLS’s bilateral payment netting calculation service. The move addresses increased demand from the buy-side for a centralised infrastructure to manage post-trade processes.

Through a single integration between CLS and Finastra’s Fusion Confirmation Matching Service (CMS), the 800+ corporates and buy-side institutions that are Finastra customers will be able to access CLSNet without the need for additional development. Users will be able to view trades that are expected to settle, confirm trade details with each relevant counterparty as well as make net settlement payment calculations on a per currency basis, thereby removing manual reconciliation netting processes.

A large number of market participants currently manage the bilateral settlement process via email. The collaboration between CLS and Finastra is a step in addressing the operational risk associated with these manual processes, in particular between banks and their buy-side clients.

The impact of limited payment netting is exacerbated by the high settlement costs associated with emerging market currencies, despite their rising relevance for FX market participants. As a bilateral payment netting calculation service for FX trades not settling in CLSSettlement, CLSNet allows FX participants to net payment amounts directly with counterparties before settling through the correspondent banking system. By using standardisation and enabling a greater percentage of FX transactions to settle on a net basis, the service aims to optimise intraday liquidity, while delivering greater operational efficiency and increased risk mitigation for non-CLS-settled currencies. For CLSNet participants, the collaboration with Finastra will create a greater network effect by enabling a wider group of market participants to benefit from the standardisation and automation of post-trade netting processes.


Mastercard, TSYS and Extend launch mobile virtual card solution for commercial clients

Mastercard, TSYS and Extend, have introduced a mobile virtual card solution that enables virtual corporate cards to be loaded into a mobile wallet for fast and secure contactless payments. 

The mobile virtual card solution addresses the growing demand for digital, contactless commercial payments, something that has been amplified by the changing nature of work and business expenses during the pandemic, and the rise of the work-from-home economy. Previously, one of the main barriers to wider adoption of virtual cards has been the inability to load them into a mobile wallet for use at physical point-of-sale terminals. This solution lets employees or contractors load their virtual corporate card into their mobile wallet to initiate contactless payments with their mobile device.

The solution uses Mastercard Digital Enablement Services (MDES) to tokenise virtual card numbers (VCNs) for secure mobile payments. MDES turns card numbers into tokens that become useless to fraudsters and eliminates the frustration of manually updating card numbers.

Businesses can use this solution to issue a single or multi-use virtual card to employees, enabling them to fund and manage authorised purchases. TSYS generates the virtual card number, which is accessed in the Extend app and then seamlessly loaded into a mobile wallet.


IASB consults on possible new accounting requirements for M&A within a group

The International Accounting Standards Board has launched a public consultation on possible new accounting requirements for mergers and acquisitions involving companies within the same group - business combinations under common control. 

IFRS 3 Business Combinations set out reporting requirements for mergers and acquisitions - referred to as business combinations in IFRS Standards. However, that Standard does not specify how to report transactions that involve transfers of businesses between companies within the same group. Such transactions are common in many countries around the world. As a result of this gap in IFRS Standards, companies report similar business combinations in different ways. In some cases, they provide fair-value information about the acquired company and in other cases, they provide book-value information. Moreover, book-value information is provided in various ways and is often insufficient. This diversity in practice makes it difficult for investors to understand the effects of such transactions on companies that undertake them and to compare companies that undertake similar transactions.

The discussion paper 'Business Combinations under Common Control' sets out the IASB's preliminary views on how to fill this gap in IFRS Standards. It says its aim is to reduce diversity in practice and to improve transparency and comparability in reporting these transactions.

The IASB's view is that companies should provide similar information about similar business combinations when the benefits of that information to investors outweigh the costs of providing it. Specifically, the Board is suggesting that fair-value information should be provided when a business combination under common control affects shareholders outside the group. That suggestion is consistent with the existing requirements in IFRS 3 for mergers and acquisitions between unrelated companies. In all other cases, the Board is suggesting that book-value information should be provided using a single approach to be specified in IFRS Standards.

The Discussion Paper seeks feedback on the Board’s preliminary views on when and how each approach should be applied, and the deadline for comments is 1 September 2021.

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