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Industry roundup: 3 July

FSB cautions firms on Libor transition deadline

The Financial Stability Board (FSB) has discussed the impact of COVID-19 on global benchmark transition. The FSB’s Official Sector Steering Group (OSSG) is monitoring the developments closely and recognises that some aspects of firms’ transition plans are likely to be temporarily disrupted or delayed, while others can continue. 

The FSB maintains its view that financial and non-financial sector firms across all jurisdictions should continue their efforts in making wider use of risk-free rates in order to reduce reliance on IBORs where appropriate and in particular to remove remaining dependencies on LIBOR by the end of 2021.

LIBOR transition remains an essential task that will strengthen the global financial system. COVID-19 has highlighted that the underlying markets LIBOR seeks to measure are no longer sufficiently active. Moreover, these markets are not the main markets that banks rely upon for funding. The increase in the most widely used LIBOR rates in March put upward pressure on the financing cost of those paying LIBOR-based rates. For those borrowers, this offset in large part the reductions in interest rates in those jurisdictions where central banks have lowered policy rates.

Relevant national working groups are co-ordinating changes to intermediate milestones in their benchmark transition programmes, where appropriate, to ensure global coordination. Financial and other firms should continue to ensure that their transition programmes enable them to transition to LIBOR alternatives before end-2021.

LIBOR transition is a G20 priority, and the G20 in its February 2020 communique asked the FSB to identify remaining challenges to benchmark transition by July 2020 and to explore ways to address them. The FSB will publish a report on these issues later this month. FSB members, in collaboration with other standard-setting bodies and international institutions, will continue to monitor developments.

 

Halcyon Agri secures sustainability-linked loan from Deutsche Bank

Deutsche Bank’s Corporate Bank has announced that it has provided a US$25m sustainability-linked loan facility with a three-year tenor, and an accordion feature to upsize the facility to US$75m, to Corrie MacColl, a subsidiary of Halcyon Agri Corporation (Halcyon), to finance the company’s capex investments for its rubber plantations in Cameroon and Malaysia.

The proceeds of the loan will be used for the maintenance of Halcyon’s rubber plantations while promoting its Cameroon Outgrower Programme, which aims to provide additional food security and boost the income of 13,000 local smallholder farmers. The Borrower group will be required to comply with the mutually agreed sustainability framework developed by Environmental Resources Management Singapore (ERM), throughout the life of the loan. Compliance will be assessed and/or verified by ERM appointed by Deutsche Bank, Singapore Branch as consultant on the Framework.

ERM will be responsible for reviewing the key performance indicators of the loan, which will complement and enhance the borrowers’ existing sustainability strategy and objectives, and is another step for Halcyon to drive ESG standards. ERM has also set the sustainability performance targets embedded in the Framework of the financing facility. While ESG conditions attached to loan rates are not unusual in corporate lending facilities, it is the comprehensive nature of the KPIs that will set a new standard for the rubber industry, making this commercial loan unique.

 

SCT Inst transaction limit increased to €100,000 

The maximum amount per Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) transaction has been dramatically increased, from €15,000 up to €100,000. Payment end-users can use the SCT Inst scheme in higher-value business-to-business and business-to-consumer transactions.

This new transaction limit means additional freedom for payment end-users to pay and be paid in an instant, for example, for a large delivery or high-value service provided, make immediate payments to companies, public administrations and individuals or quickly correct a late payment.

 

ING Germany and Amazon join forces on SME lending

ING says it is the first bank in Germany to cooperate with Amazon in offering loans to eligible sellers - mainly small and medium sized enterprises (SMEs) - through Amazon’s seller portal.

The cooperation with Amazon opens up a new digital sales channel for ING in Germany. Amazon acts as a broker and presents loan proposals on the lending page of its selling portal to eligible business who sell their goods via the platform. Sellers are directed to ING’s website where they can submit a credit application to ING. ING in Germany will provide these sellers with loans of between €10,000-750,000 with a repayment period of up to three years. 

In addition, SMEs now can gain better access to liquidity to help them grow. For Amazon, it means their established sellers can use this fresh capital to buy inventory to meet sales demand, fund their operations and reach more customers. 

 

Bank of America agrees 10-year solar electricity agreement to power facilities

Bank of America has announced its first 10-year structured renewable energy agreement for solar power in Texas. In partnership with Reliant, an NRG Energy company, the deal will contribute to Bank of America’s commitment to purchase 100% of electricity from renewable sources and builds on the company’s carbon-neutral efforts. The project will provide electricity through the Electric Reliability Council of Texas (ERCOT) region to 345 facilities, which include office sites, financial centers and ATMs. Bank of America will receive both electricity and Green-e®-certified renewable energy certificates (RECs).

The agreement will supply 160,000 megawatt-hours (MWh) of electricity to Bank of America’s Texas operations annually. The project will be located in west central Texas and is expected to be operational in mid-2022. In the interim, the bank’s Texas facilities will receive electricity and Green-e-certified RECs from other renewable energy projects contracted by NRG.

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