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Industry roundup: 15 July

Major banks partner on Center for Climate-Aligned Finance 

Rocky Mountain Institute (RMI), a global clean energy nonprofit, has announced the launch of the Center for Climate-Aligned Finance in collaboration with Bank of America, Goldman Sachs, JPMorgan Chase, and Wells Fargo. The Center's mission is to serve as an engine room for the financial sector to partner with corporate clients to identify practical solutions through deep partnerships with industry, civil society and policymakers to facilitate a transition in the global economy to net-zero emissions by mid-century.

The financial sector's role in the global sustainability agenda is a critical component as it will help drive climate-aligned solutions with a growing focus on the implementation of the Paris Agreement in real economy sectors. The Center for Climate-Aligned Finance will be independently administered by RMI and will collaborate with the financial sector to develop integrated solutions and decision-useful frameworks in partnership with industry clients in carbon-intensive sectors to drive decarbonisation, as well as develop relevant metrics, tools and means for tracking progress toward the net-zero transition.

While climate alignment of the financial sector, as an approach, holds promise as a durable, holistic framework that will have a tangible impact on the real economy, implementing the idea in practice will be challenging and require collaboration among the financial sector, its corporate clients and policymakers.

The Center will work with financial institutions and corporates to help develop practical and scalable solutions that can help accelerate the transition to a more sustainable energy platform and economy. It will work across industries to shape sectoral climate alignment initiatives for high-emitting industries, based in part on RMI’s experience in helping to develop and launch the Poseidon Principles for the shipping sector. It will also contribute to the development of global solutions, practices and frameworks as finance increasingly plays an important role in decarbonisation of the global economy and driving a just transition.

 

CRIF and SIA form open banking partnership

CRIF and SIA have signed a strategic partnership agreement to offer advanced open banking services and applications in Italy and Europe. The objective of the agreement is to accelerate the innovation process of corporates, banks, and fintechs in the new digital scenario resulting also from the innovations introduced to the market by PSD2, and in particular access to customer current account data - subject to authorisation - and payment orders made by qualified third parties. 

More specifically, the agreement between CRIF and SIA provides for the integration of their respective digital offerings and will cover end-to-end management of the user experience, taking full advantage of the opportunities offered by Open Banking, as well as the possibility to manage customers' personal finances through advanced Personal and Business Finance Management (PFM and BFM) solutions. 

For example, it will be possible to make a purchase, both on traditional and digital channels, through the Payment Initiation Service (PIS), i.e. by starting the payment transaction from the current account chosen by the customer, in addition to other instruments currently used like credit cards and digital wallets. 

The two firms say it will also make it easier for businesses and individuals to take out a loan through a fully digital experience, thanks to a more complete and updated data set that will make access to credit simpler. CRIF and SIA also aim to develop new use cases and collaboration models among financial institutions, corporates and fintechs. 

 

Standard Chartered and USRA join forces on quantum computing

Standard Chartered Bank and Universities Space Research Association (USRA) have signed a collaborative research agreement to partner on quantum computing research and developing quantum computing applications.

In finance, the most promising use cases with real-world applications include quantum machine learning models (generating synthetic data and data anonymisation) and discriminative models (building strong classifiers and predictors) with multiple potential uses such as credit scoring and generating trading signals. As quantum computing technology matures, clients should benefit from higher quality services such as faster execution, better risk management and the development of new financial products.

“Similar to other major technological advancements, quantum computing is set to bring widespread benefits as well as disrupt many existing business processes," said Kahina Van Dyke, global head of Digital Channels and Client Data Analytics at Standard Chartered. "This is why it’s important for companies to future-proof themselves by adopting this new technology from an early stage. The partnership with USRA gives us access to world-class academic researchers and provides us with a unique opportunity to explore a wide range of models and algorithms with the potential to establish quantum advantage for the real-world use cases.”

Standard Chartered and USRA intend to develop this initial collaboration beyond quantum annealing to all unconventional computing systems that could provide an advantage to applications of interest, such as gate-model noisy-intermediate scale quantum (NISQ) processors and coherent ising machines.

 

Frontclear facilitates cross-border repo transaction with State Bank Mongolia and EBRD 

Frontclear has announced it arranged, structured and guaranteed a US$23m cross-border repurchase transaction with State Bank LLC (State Bank) in Mongolia and the European Bank for Reconstruction and Development (EBRD). 

Credit risk, legal and operational risks plus wrong-way risk concerns, has made it very difficult for Mongolian banks to source hard currency liquidity in global capital markets.  The problem is further exacerbated by the ongoing COVID-19 crisis.  The transaction made it possible for State Bank to competitively access funding from foreign banks.

This repurchase transaction is documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customised the swap confirmation to account for legal issues in the Mongolian market. The transaction documentation introduced best practice operational and legal concepts. Frontclear technical assistance programme (FTAP) continues to work with the central bank and the market, to address the structural legal and operational hurdles in the country’s repo and derivative markets.

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