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Industry roundup: 15 March

Citi broadens exit from Russia

Citi is expanding its withdrawal from Russia, as the country’s war on Ukraine continues to drive an exodus of Western companies. In a blog post, Citi announced the decision to widen its exit beyond the long-planned sale of its Russian retail bank.

The departure will now cover “other lines of business” in Russia, where Citi provides a range of corporate banking services. The bank said it is “moving with urgency to complete our assessment of our operations in Russia”:

“In April 2021, we announced our intent to exit our consumer business in the country. We have now decided to expand the scope of that exit process to include other lines of business and continue to reduce our remaining operations and exposure.

“Due to the nature of banking and financial services operations, this decision will take time to execute.”

Fellow US banks Goldman Sachs and JPMorgan announced last week they were pulling out of Russia and Germany’s Deutsche Bank and Commerzbank have joined the exodus from Russia in recent days.

Citi said it will no longer solicit any new business or clients and is helping companies that are withdrawing from Russia.

“We are providing assistance to multi-national corporations, many of whom are undergoing the complex task of unwinding their operations.

“We will continue to manage our existing regulatory commitments and our obligations to depositors, as well as support all of our employees during this very difficult time.”

Citi's website reveals that it had about 500,000 retail clients and 3,000 corporate clients in Russia, where it provided services that included cash management, trade finance, investment banking, corporate finance, lending, FX and hedging services.

In separate news from the bank, Citi announced that it is teaming with the fintech IntraFi to create a new service that will let Citi’s corporate and institutional clients sweep any excess cash they have into US branches of foreign banks. The service, dubbed Yankee Sweep, is designed to help corporate clients manage their money better and obtain higher yields on deposits, Citi said when announcing the partnership Monday

“For treasury organisations, key aspects of effective liquidity management include managing risk, counterparty exposure, daily liquidity, and optimising yield,” it stated in the release. “In order to achieve these objectives, organisations would need to manage cash across multiple banks and/or money market funds. With Citi’s new solution, institutional clients now have access to a more streamlined experience to help them diversify their counterparty risk and maximise yields with the additional safety and security provided by a deposit solution.”

Michael Berkowitz, North America Head of Liquidity Management at Citi’s Treasury and Trade Solutions added: “Citi is pleased to be the first bank in the US to launch this solution in partnership with IntraFi, one of the most innovative companies in the finTech liquidity management space. The new capabilities will help our clients balance competing demands for returns, risk management, and daily liquidity while simplifying the process to diversify their counter-party exposure.”

Citi’s Treasury and Trade Solutions group holds more than US$670 billion of customer deposits from large corporations, financial institutions, public sector entities and middle-market clients. It has cash concentration services that let clients automate the movement of money around the world and across their subsidiaries.

Soaring nickel prices impact on supply chains

The recent surge in commodity prices has seriously impacted on the global market for nickel and related upstream and downstream industries, said the China Nonferrous Metals Industry Association (CMRA), following an unprecedented spike in global nickel futures at the London Metal Exchange (LME) last week.

Nickel is a key raw material for the production of stainless steel and new energy batteries, with the latter being an important item in countries embracing green development, especially China, where new energy vehicles have become a pillar industry for low-carbon transformation.

In the two days 7 and 8 March the LME nickel futures rose by 174%, which triggered an announcement that all nickel trading on Tuesday 8th would be cancelled and not resumed before Friday. According to reports, the price spike was likely to have been triggered by China’s giant Tsingshan Holding Group, which holds a large number of short bets on the LME.

The LME defended the temporary suspension and cancellation, saying the market had become disorderly with prices not reflecting the physical market. The CMRA agreed, commenting: “Current nickel prices have seriously deviated from the fundamentals, losing the guidance significance to the spot market,” adding that soaring prices cause serious harm to the global supply chain. The association said it would monitor the situation closely and urged industry participants to maintain market order, preventing irrational price spikes in nonferrous products

The nickel price fluctuation came as Western sanctions against Russia widened, including the exclusion of Russian banks from the SWIFT international payments system. As Russia's nickel ore accounts for 11% of the global supply, and its pure nickel accounts for 20%, the impact is not surprising, analysts said.

The Shanghai Futures Exchange suspended trading in some nickel contracts for a day starting from the evening trading session on Wednesday 9 March, in response to speculation after the global price fluctuations.

Many international traders are also monitoring the situation. Analysts report that upstream companies are less willing to take new orders, while downstream industry participants are looking at contingency measures to cope with the potential supply shortage and price rise.

An announcement posted by Tesla China’s official website on 10 March stated that prices of the car manufacturer’s Model 3 high-performance version and the Model Y long-range and high-performance version had increased. The rise was about yuan (CNY) 10,000 (US$1,570), according to media reports. The current domestic Model Y high-performance versions use ternary lithium batteries, which contain nickel-cobalt and other precious metals.

However, the CMRA is hopeful that longer-term the expansion of the cooperation and investment with Indonesian nickel partners could help ease the supply chain problems and price pressures. In 2021, Indonesia became the world’s largest nickel producer, which according to the industry association was the result of a combination of Chinese technology and capital with Indonesian resources.

China has invested in several projects in Indonesia via companies such as Tsingshan, Zhejiang Huayou Cobalt and GEM Co Ltd, with products ranging from nickel sulphate and mixed hydroxide precipitate to nickel matte and stainless steel.


Santander and Agrotoken develop grain-backed tokens

Santander has taken a step into the crypto industry by offering loans backed by agricultural commodity tokens. The Spanish bank has partnered with Agrotoken, an Argentinian start-up that developed a group of grain-backed tokens that enable producers to transact with their commodities.

Argentinian producers have already validated the software product in a pilot exercise. Santander reports that the product is innovative in linking financial products with agricultural tokens, including blockchain services to facilitate transactions.

“This is the first global experience in backing loans with tokens based on agrocommodities such as soya beans, corn and wheat,” said Eduardo Novillo Astrada, CEO and co-founder of Agrotoken. “Together with Santander, we are creating a number of financial products to provide farmers with a service where they can easily access a new system of credits backed by the sale of their grains.”

Fernando Bautista, head of Agribusiness at Santander Argentina added: “At Santander Argentina, we are leveraging technology and innovation to generate new business solutions thatmake life easier for farmers and expand their opportunities. This is the first time that a financial services platform has used blockchain and cryptoassets technology to expand the agricultural credit market and unlock the farmer’s business potential.”

Santander says that the product represents several milestones, as it is the first time that a global financial services platform connects tokens based on agricultural products to financial products. It is also a new experience using blockchain technology to generate new businesses and make the process more efficient. Furthermore, it is the first collateral generated from cryptoassets based on agricultural products.

Each token represents one tonne of grain sold and delivered by the farmer to a wholesaler. In addition, these tonnes of grain are also validated through a Proof of Grain Reserve (PoGR) certificate, a system that is always transparent, secure, decentralised and auditable through a modern security infrastructure.

Once the farmers have their digital assets, the agrotokens can be used to carry out various transactions, reflecting the three price indices set in aggregate with the Matba Rofex group, which reflect in real time the value of the grains.

Since January 2021, several transactions have been carried out that demonstrate the usability of cryptoassets in exchange for different types of supplies, trucks, machinery and farms.

Santander adds that is focusing on technology to provide more and better services, as evidenced by its plan to invest US$225 million in this sector and in Argentina, as Ana Botín, its group executive chairman, announced last November when she visited the country.

Jamaica offers user incentive as it launches CBDC

The Jamaican government has said that the first 100,000 citizens to use the country’s new central bank digital currency (CBDC) – known as Jamaica Digital Exchange (Jam-Dex) – due to be launched at the start of April, will receive a free J$2,500 (US$16) payment to encourage widespread adoption. 

Jamaican prime minister Andrew Holness announced the incentive in a Facebook post on 10 March to a mixed reception. While some Facebook users praised Holness for “embracing a digital future” others expressed concern about the motivations of the Jamaican government, accusing Holness of trying to “bribe” citizens into the federal banking system.

Bank of Jamaica (BOJ) unveiled Jam-Dex on 17 February with the tagline “No cash, no problem” and the government’s finance minister, Dr Nigel Clarke has said that the aim is to encourage citizens to use CBDC as an option when conducting transactions. The Jamaica Observer reports that one in six of the Jamaican population is currently unbanked and the initiative will encourage low and middle-income consumers to join the national banking system.

The initiative forms part of the government’s digital transformation of Jamaica’s economy. Dr Clarke said that any individual with an existing bank account can automatically be eligible for a Jam-Dex digital wallet. “If you don’t have a bank account, all that is required to set up a Jam-Dex-enabled wallet are simplified Know Your Customer information: name, address, date of birth, tax registration number (TRN), and a valid government-issued photo ID such as a driver’s licence, passport, or voter identification card. Of course, once the national identification system (NIDS) is fully implemented, this will be accepted.”

The finance minister added that the government hopes more merchants such as corner shops, vendors, and bars will accept Jam-Dex and make its use more widespread to achieve success. The government is also looking to incentivise businesses to set up electronic wallets and to conduct payments in Jam-Dex. The government and central bank will also push for the BOJ to be the sole issuer.

Eastern Caribbean Central Bank DCash service resumes

The Eastern Caribbean Central Bank (ECCB) says full functionality of the DCash digital payments platform was restored on 9 March, following a power outage on 14 January that interrupted the service for nearly two months. DCash is the digital version of the Eastern Caribbean (EC) dollar.

“As part of the restoration, the platform now benefits from several upgrades including an enhanced certificate management process and an updated version of the software which provides the foundation for the DCash system,” the ECCB announced on its website. “Extensive testing and assurance exercises were conducted prior to restoration of the platform to ensure full functionality of the service in accordance with quality assurance specifications.”

However, the lengthy disruption to DCash has caused some analysts to question the reliability of central bank digital currencies (CBDCs). DCash involves the secure minting of a digital version of the East Caribbean dollar as legal tender. The ECCB, as the monetary authority of the Eastern Caribbean Currency Union (ECCU), has the sole authority to mint, issue, and redeem DCash.

 Seven of the eight ECCB member countries are currently enrolled in the DCash pilot, with Anguilla set to join soon. Further promised developments in the pipeline include the introduction of an e-commerce function, which will enable businesses to accept DCash via their websites, and the rollout of government to consumer payments. The free DCash app is available for download in the Google Play Store and the Apple App Store.

Nigeria’s central bank promotes cash collection centres

The Central Bank of Nigeria (CBN) has released a series of guidelines for the registration and operation of Bank Neutral Cash Hubs (BNCHs) across the country, including minimum limits of naira (₦) 500,000 (US$1,200) for individuals and ₦ 1 million for corporates in transactions with a BNCH.

“The CBN, in collaboration with the Banker’s Committee, initiated the Nigerian Cash Management System, which seeks to reduce cost and improve operational efficiency in the country’s cash management value chain,” the bank announced.

“One initiative towards the stated goal is the introduction of BNCHs [which] are cash collection centres to be established by registered processing companies or Deposit Money Banks (DMBs) based on business needs. They will be located in areas with high volumes of commercial activities and cash transactions.”

The central bank added that the hubs would provide platforms for customers to make cash deposits and receive value irrespective of the bank with which their accounts are domiciled. “This guideline aims to provide minimum standards and requirements for BNCH registration and operations for effective supervision.

“The key objective is to reduce the risks and costs borne by banks, merchants and huge cash handlers in the course of cash management activities. It will also deepen financial inclusion and leverage on shared services to enhance cash management efficiency.”

However, the activities that BNCHs are not permitted to carry out include investing lending and any transactions involving foreign currency.

According to local press reports, the CBN, experts and industry players in Nigeria have expressed worry over the rising cost and risks of cash handling. “This led to a potpourri of policies aimed at advancing the cause of cashless transactions, with the current and former central bankers admitting the system must find a way to reduce the cost and risk.
“There have been challenges accessing cash at automated teller machines (ATMs), with the situation degenerating into a crisis point during the recent Yuletide. Inside sources have hinted that the banks were becoming increasingly worried about risks posed to cash in transit (CIT).” 
The situation reached a point where “banks were shying away from the responsibility of cash management, owing to the rising risk, thus under-servicing cash points, including ATM and creating hurdles around the across-the-counter withdrawal.

“In remote communities and even within the metropolis, ATMs are deactivated at night as deliberate protective measures for the banks.”  

Treasure Financial develops Treasure Cash

Treasure Financial, the San Francisco-based B2B fintech company launched in 2016, announced the launch of a new product called Treasure Cash, an allocation within its Treasure Reserve account, which it says enables businesses to earn 15 times more on their idle cash with 10 times higher Federal Deposit Insurance Corporation (FDIC) insurance, zero market risk and daily liquidity.

In its release Treasure, which focuses on cash management solutions for small and medium-sized businesses (SMBs) with annual revenue of US$5 million to US$100 million in revenue, commented: “When it comes to managing idle cash, businesses previously had limited tools at their disposal, but Treasure is rapidly filling that void.

“The Fintech company has built a full suite of products to help C-suites not only better track their finances in real-time but also access tools to help them generate revenue from their business capital. Treasure Cash provides businesses in the US the ability to meaningfully monetize their idle cash with the safety of 10x higher FDIC insurance.”

“We’re excited to add this new allocation to Treasure Reserve which is our idle cash management offering,” says Sam Strasser, Treasure CEO. “With Treasure Cash businesses can generate revenue from their idle cash like big corporations do. This ultra-safe offering which doesn’t bear any market risk, complements Treasure’s High Yield allocation generating up to 100x more.”

The release states that US businesses are frustrated with the lack of services and expensive fees they pay with their banks. According to Bankrate, banks receive a minuscule yield, on average.03%, from their business bank accounts.

With the Treasure platform customers can easily sign up online, add information about their business and typically have their Treasure Reserve account open by the next business day. From there they have the ability to deploy their idle cash into different options such as Treasure Cash or Treasure High Yield to maximise the revenue they can make out of their idle cash. All these services are provided with a seamless digital experience.

“It is about time businesses have access to the same type of tools that big corporations deploy on a daily basis to optimize their finances with their treasury department,” says Ben Verschuere, Treasure’s Co-Founder. “Our mission is to turn business’ finances into revenue opportunities and our Treasure Reserve does exactly that.”

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