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Industry roundup: 24 June

BNY Mellon launches cross-currency sweeps to automating liquidity management 

BNY Mellon Treasury Services clients are now able to enhance the efficiency of their cash management following the introduction of cross-currency sweeps, the latest addition to the firm's liquidity management product suite.

Cross-currency sweeps are an automated liquidity management tool that enables clients that maintain cash in multiple currency accounts to concentrate cash into their base currency. Such sweeps can be particularly valuable in helping clients limit their exposure to foreign exchange (FX) volatility and negative interest rate-bearing currencies.

Liquidity management tools like cross-currency sweeps automate what was previously a time-consuming and resource intensive process for corporate treasurers and their cash management teams. Clients without access to such solutions are obliged to move cash from non-core currency accounts into their base currency account themselves, requiring manual effort and potentially introducing market risk into the treasury and cash management functions.

Cross-currency sweeps automate the end-to-end process while delivering a host of additional benefits to treasurers. These include reducing internal cash management costs and risks, as well as providing fully transparent, same-day FX settlement that requires no day-to-day interaction from clients.

"The launch of cross-currency sweeps is an example of how we're building technology-driven automated solutions to address the cash and liquidity management needs of our clients," said Greg Malosh, Global Liquidity Product Head for BNY Mellon Treasury Services. "This marks the first in a series of improvements we're implementing over the course of the next year to deliver a full range of sophisticated and intelligent solutions, and we are excited to continue to increase our array of offerings as demand grows for liquidity services."

BNY Mellon is currently piloting cross-currency sweeps with several clients, including fintechs, financial institutions, multinational corporates and fund administrators. Initially, the product will be available for USD, GBP, EUR, CAD and CHF, with the aim to extend the capabilities to include AUD and JPY in the near future.


FCA and the Bank of England encourage market participants to switch to SOFR in US dollar interest rate swap markets from 26 July

Following close engagement with market participants, and to support the US-led 'SOFR First' initiative, the FCA and Bank of England support and encourage liquidity providers in the US dollar linear interest rate swaps market to adopt new trading conventions for interdealer trading based on SOFR instead of LIBOR from 26 July this year. This is to facilitate a shift in market liquidity towards SOFR, bringing benefits for a wide range of users as they move away from LIBOR.

Guidance from US regulators is that banks in the US should cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and no later than the end of 2021. Similar guidance was issued to regulated firms in the UK by the PRA and FCA in a 'Dear CEO' letter in March, and has been reinforced globally by the Financial Stability Board.

In support of this guidance, the Commodity Futures Trading Commission's (CFTC’s) Market Risk Advisory Committee’s Interest Rate Benchmark Reform Subcommittee (MRAC Subcommittee) voted to recommend 26 July for switching interdealer trading conventions for USD linear interest rate swaps from USD LIBOR to SOFR. 

To determine support for, and the feasibility of, a similar approach in the UK to support the US-led initiative, the FCA has engaged with UK market participants in the US dollar interest rate swaps market, including liquidity providers and interdealer brokers (IDBs). An FCA survey of these market participants identified strong support for a change in the interdealer trading convention, which would see SOFR rather than LIBOR become the default price from 26 July 2021.

In line with the MRAC Subcommittee’s recommendation, the FCA and the Bank of England support and encourage all participants in the interdealer US dollar interest rate swaps market to take the steps necessary to prepare for and implement these changes to market conventions on 26 July and shift liquidity away from USD LIBOR to SOFR. 


Finastra and Uni Systems collaborate on treasury, payments and risk solutions 

Finastra has established a partnership with Uni Systems Information Technology (Uni Systems), an information and communications technology (ICT) systems integration company that specialises in information technology landscape transformation in Europe. 

Uni Systems will be bringing Finastra treasury, risk and payments software - Fusion Treasury, Fusion Risk and Fusion Global PAYplus respectively - to local markets with on-the-ground implementation and support services.

The partnership aims to enable customers to benefit from local expertise and high-level professional services alongside Finastra’s technology solutions. It covers selected customers in multiple geographies in Europe, including Greece, Cyprus, Malta, Romania, Bulgaria, Albania, North Macedonia, Serbia, Croatia and Slovenia.

"Uni Systems is an exciting new member of our Fusion Orbit partner program," commented Michael Henssler, general manager, Treasury and Capital Markets and Risk at Finastra. "We are looking forward to reaching wider markets across Europe with this collaboration. Uni Systems’ specialised consultants are now trained and certified in delivering our solutions, both in the cloud and on-premise, and we are confident they will also deliver quality professional services to our customers."


ABN Amro launches €425m fund for sustainable impact companies

ABN Amro has announced its Sustainable Impact Fund (SIF), a fund investing in companies accelerating the transition towards a sustainable and inclusive society. ABN Amro SIF will make private equity investments of €4-30m in companies that have a proven business model and that are ready for the next phase of their growth. The fund will also make venture capital investments ranging from €500,000-4m in companies with a proven concept. 

Three themes have been selected for these investments: the circular economy, the energy transition and social impact. The fund, which is owned and funded by ABN Amro, has its own investment policy and will pursue a combination of social and financial returns.

"Our bank finances countless sustainable initiatives, in the form of loans and credit," said Rutger van Nouhuijs of ABN Amro’s Executive Committee. "However, in some situations, companies need equity investments. Our new fund is able to offer this as a solution. Companies that link sustainable returns to a strong business plan can apply to ABN Amro SIF."

The fund made its first two venture capital investments last month, in Envision and Foodlogica. Envision is a Dutch company that develops software for 'smartglasses'. Combined with an app and AI technology, the glasses translate images and written text into sound to make life more accessible for the visually impaired. Foodlogica solves the challenge of last-mile transport of refrigerated food in densely populated cities with a sustainable fleet that is free of greenhouse gas emissions. Fiberline Composites A/S also recently received private equity funding. This Danish company is developing a specific technology to increase the size of rotor blades for wind turbines. This investment was made by the Energy Transition Fund, which becomes part of ABN Amro SIF.

In terms of geography, the fund will focus on the Netherlands, but also companies from other countries in Northwestern Europe are eligible for investments. The fund reflects ABN Amro’s strategic direction, which includes sustainability and a European focus as its key components.

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