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Industry roundup: 7 April

Bloomberg confirms BSBY short-term credit sensitive index adheres to IOSCO principles

Bloomberg has announced that an independent assurance review of the Bloomberg Short-Term Bank Yield Index (BSBY) confirmed that the short-term credit sensitive index adheres to the International Organization of Securities Commissions’ (IOSCO) Principles for Financial Benchmarks. The review was conducted by a global, independent accounting firm and the final report is expected to be available shortly.

“Alignment with the IOSCO Principles is an important milestone, and recognises BSBY adheres to industry best practices,” said Steve Berkley, CEO of Bloomberg Index Services Limited (BISL) at Bloomberg. “An increasing number of financial institutions and corporations are looking to BSBY for their loan products as they transition away from LIBOR, and we will continue to support their needs as they work to ensure compliance with regulatory timelines.”

BSBY includes a term structure and systemic credit-sensitive spread, which may be used to support the market’s transition from IBOR benchmarks to risk-free rates. BSBY is available as a standalone rate, and can also be used to supplement Term SOFR. Bloomberg began publishing BSBY on an indicative basis in October 2020.

BSBY will be calculated daily and published at 8 AM ET, using the prior day’s transaction data, on a T+1 basis. The index can be accessed via the Bloomberg Terminal, and will be posted publicly on Bloomberg.com on a delayed basis. The index is available for five tenors: overnight (BSBYON), 1-month (BSBY1M), 3-months (BSBY3M), 6-months (BSBY6M) and 12-months (BSBY12M). 

While initially offered in the US, BSBY will soon be available for licensing in additional jurisdictions, including the UK and the EU.

 

E-commerce drives additional US$900bn in online spending 

According to Mastercard’s latest Recovery Insights report, an additional US$900bn was spent online in retail around the world in 2020. This means that in 2020, e-commerce made up roughly US$1 out of every US$5 spent on retail, up from about US$1 out of every US$7 spent in 2019.

For retailers, restaurants and other businesses large and small, being able to sell online provided a much-needed lifeline as in-person consumer spending was disrupted. Roughly 20-30% of the Covid-related shift to digital globally is expected to be permanent, according to the Mastercard Recovery Insights report: Commerce E-volution. The report draws on anonymised and aggregated sales activity in the Mastercard network and proprietary analysis by the Mastercard Economics Institute. The analysis dives into what this means by country and by sector, for goods and services, and within countries and across borders.

“While consumers were stuck at home, their dollars traveled far and wide thanks to e-commerce,” said Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute. “This has significant implications, with the countries and companies that have prioritised digital continuing to reap the benefits. Our analysis shows that even the smallest businesses see gains when they shift to digital.”

The report found that economies that were more digital before the crisis - such as the UK and US - saw larger gains in the domestic shift to digital that look more permanent than the countries that had a smaller share of e-commerce before the crisis, such as Argentina and Mexico. Asia Pacific, North America, and Europe were the strongest regions in driving e-commerce adoption. Meanwhile international e-commerce rose 25-30% during the pandemic.

The pandemic also saw the shift to electronic payments accelerate in the US, with more consumers moving from cash to touch-free payments in-store. According to the Mastercard analysis of payment forms at brick-and-mortar retail stores and restaurants, non-cash payments jumped by an additional 2.5 percentage points beyond the ongoing trend. This led to an acceleration of the shift from cash to electronic payments by a full year.

 

Traydstream and Standard Bank roll out automated trade document checking solution 

From April 2021, all Standard Bank South Africa trade transactions within a set threshold will rely on the Traydstream platform to augment human intelligence to complete all the necessary UCP 600 and ISBP trade rule checks as well as cross-document and compliance verifications to identify discrepancies.

The Traydstream platform harnesses advanced machine learning technologies to extract and interpret data from trade document sets and has over three hundred thousand trade rule permutations to provide the most comprehensive automated document scrutiny in the industry. This accuracy and efficiency is specifically underpinned by its proprietary technology to understand all the complex, unstructured clauses in letter of credit (LC) transactions.

"Leveraging the benefits of automation continues to be a key focus for our operations and we are very pleased with the progress that has been made in such a short time," said Kevin Holmes, head of Trade & Product Management for Standard Bank Group. "Our document examination represents a key point in our trade automation journey as we are happy with the platform results and will no longer be doing any parallel running."

 

Bank of Japan begins CBDC experiments

The Bank of Japan has been undertaking preparations to begin experiments on Central Bank Digital Currency (CBDC) early in the 2021 fiscal year, in order to test the technical feasibility of the core functions and features required for CBDC. As necessary preparations are now complete, the proof of concept (PoC) Phase 1 has begun.

In PoC Phase 1, the bank plans to develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption. 

The Bank of Japan noted in a statement that this phase will be carried out for a duration of one year, through to March 2022.

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