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Industry roundup: 17 November

Effective ways to manage climate-related financial risks: Basel Committee consults on principles

The Bank of International Settlements’ (BIS) Basel process continues to provide a forum for monetary and financial stability cooperation among central banks and other financial authorities. This collaboration committee involves regular high-level meetings of senior monetary and financial officials and the support from BIS with international groups in pursuit of financial stability.

The Basel Committee on Banking Supervision (BCBS) established a high-level Task Force on Climate-related Financial Risks in 2020 to address climate-related financial risks with the banking sector.

Earlier this year, the Basel Committee on Banking Supervision published a series of analytical reports on the management and supervision of climate-related financial risks. Now, the Committee released a public consultation on these principles. The approach includes assessing and considering disclosure, supervisory and regulatory measures related to climate-related financial risks.

This consultative document includes 18 high-level principles striving to achieve a balance between establishing a common reference point for globally active banks and supervisors, while remaining flexible enough to accommodate changes in this area. Below is a snapshot of topics covered in the document:

 

Principles 1-12 pertain to effective management of climate-related financial risks:

  • Corporate governance
  • Internal control framework
  • Cash and liquidity adequacy
  • Risk management process
  • Management monitoring and reporting
  • Comprehensive management of credit risk
  • Comprehensive management of market, liquidity, operational and other risks
  • Scenario analysis

 

Principles 13-18 provide guidance for the supervision of climate-related financial risks:

  • Prudential regulatory and supervisory requirements for banks
  • Responsibilities, powers and functions of supervisors

The committee plans to monitor and manage the implementation process within member jurisdictions to ensure an understanding of expectations and integrate these principles in an expeditious manner.

According to the press release, the committee invites commentaries on the principles. Submittals are due by 16 February 2022.

For more details on the consultative document, please click here: principles for the effective management and supervision of climate-related financial risks

 

SaaS payment management for optimization of financial performance

Mesh Payments, a payment and spend management company for corporations, launched an “industry-first” suite of SaaS payment management capabilities. The number of subscriptions today is staggering, with many organizations using over 100 services. Duplicate subscriptions, outdated subscriptions, and paying for too many licenses are a few of the challenges these subscriptions present. According to Mesh, finance managers will benefit from managing their spending and optimizing SaaS services in real-time.

“Mesh payments will optimize SaaS spend quickly and easily, with the tools to gain insight into which subscriptions are working for or against the business,” said Oded Zehavi, co-founder and CEO, Mesh Payments. The SaaS Payment Management solution eliminates these challenges by enabling businesses to track all SaaS expenditures in one single location.

The SaaS payment management solution offers finance managers the following capabilities to assist in strategic decision making:

  • Connection to all SaaS platforms.
  • Artificial Intelligence (AI) driven subscription optimization.
  • Full control and visibility of SaaS payments.
  • Integration of accounting systems and intuitive workflows.

For more information on SaaS Payment Management, please visit: https://www.meshpayments.com/saas-payment-management/

 

Net financing changes in UK

Throughout the pandemic, UK businesses have raised finance from banks, financial markets, and government programs. Most have now begun to pay back their loans.

UK companies have raised approximately £ 77 billion in net additional loans from UK banks and global financial markets since March 2020, significantly higher than recent averages. This funding and broader government support helped companies survive the pandemic.

The mixture of government funding and support has also improved the overall liquidity positions of UK companies. In general, corporate cash balances have increased by around £180 billion (more than a third) since March 2020. This improvement in cash on hand probably partly explains the low demand for loans from businesses in 2021 compared to 2020.

Year to date 2021, the net repayment of bank loans by large enterprises is very small, and the net issuance of capital markets has remained basically unchanged. At the same time, compared with the monthly positive net borrowing of 3.6 billion pounds in 2020, the net borrowing of small and medium-sized enterprises (SMEs) will be significantly reduced to about negative 500 million pounds per month in 2021.

In total, since March 2021, the net financing raised each month has been mainly negative (Figure A). This means that, in general, the funds repaid by companies have begun to exceed the funds raised.

As stated in Bank of England’s press release, although the net financing raised by companies during the pandemic has increased significantly, especially for small and medium-sized enterprises, this has only resulted in a modest increase in the total amount of corporate debt. However, this modest increase in debt may increase the number and scale of vulnerable companies. Overall, the Financial Policy Committee believes that due to the COVID-19 pandemic, UK corporate debt vulnerabilities have generally increased slightly.

Figure A: In total, the company's repayment of funds has begun to exceed the funds raised.

 

Net finance raised by UK private non-financial corporations per month

Sources: Bank of England and Bank calculations

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