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Industry roundup: 5 April

US Treasury halts Russian government dollar debt payments

In the latest of its escalating programme of financial sanctions the United States has prevented the Russian government from paying holders of its sovereign debt more than US$600 million from reserves held at US banks

After Russia invaded Ukraine on 24 February, an initial package of sanctions included the freezing of foreign currency reserves held by the Russian central bank at US financial institutions. However,  the Treasury Department had been allowing the Russian government to use the funds to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis.

On 4 April, as the largest of the payments came due, including a US$552.4 million principal payment on a maturing bond, the US government decided to cut off Moscow’s access to the frozen funds, a US Treasury spokesperson told Reuters. A US$84 million coupon payment was also due the same day on a 2042 sovereign dollar bond.

The move aims to force Moscow to make the difficult decision of whether it would use dollars that it has access to for payments on its debt or for other purposes, including supporting its war effort, the spokesperson said. Russia faces a historic default if it chooses to not do so.

“Beginning today, the US Treasury will not permit any dollar debt payments to be made from Russian government accounts at US financial institutions,” the spokesperson added. “Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default.”

A Bloomberg report notes that to date, a carve-out in US policies has allowed overseas and US investors so far to receive payments on Russian foreign-currency debt, even as restrictions complicate the process. The exemption is set to expire on 25 May.

“It seems to me that it is a U-turn of what the US government allowed on 17 March, when Russia paid a US$117 million coupon,” commented Carl Wong, head of fixed income at Avenue Asset Management Ltd. in Hong Kong, which owns no Russian dollar debt.

EU “raises €6 billion from new 20-year green bond”

The European Union is raising €6 billion (US$6.58bn) from the sale of a new, 20-year green bond reports Reuters, which references memos from two lead managers.

The green bond will fund member states’ environmentally friendly projects that are part of the bloc’s coronavirus recovery fund.

The bond, due 4 February 2043, is guided to pay a spread of around 11 basis points over the mid-swap level, the memos said.

The offering the EU’s second green bond following a debut issue last October, in what was the bloc’s first step to potentially becoming the world’s biggest issuer of green bonds. That offering, a 15-year green bond, raised €12 billion and received more than €135 billion of demand, the European Commission said, making it the largest launch and the highest level of demand for a green bond sale to date.

For its latest sale the EU hired Bank of America, Citi, Credit Agricole, Danske Bank and JPMorgan, said Reuters.

PBoC reports jump in China’s renminbi cross-border payments

The business volume of cross-border payments in Chinese renminbi (RMB) grew strongly in 2021, according to a report from the People’s Bank of China (PBoC).

The PBoC’s data shows that last year, over 3.34 million transactions were handled through China's RMB cross-border payment system, representing a 51.55% rise year-on-year.

The total value of these transactions stood at yuan (CNY) 79.60 trillion (about US$12.53 trn), a 75.83% increase from a year earlier.

On average, some 13,400 transactions were processed daily in 2021, with an amount of CNY318.4 billion, the report stated. 

The PBoC also recently held a symposium on its trials of the digital yuan (e-CNY) and announced plans to expand the scope of its central bank digital currency  (CBDC) pilot to include more regions within China.

At the weekend, the PBoC confirmed that Tianjin, Chongqing, Guangzhou, Fuzhou, Xiamen and six cities in the coastal eastern Zhejiang province will be added to the existing 10 major “pilot” cities to test the use e-CNY, it said. Zhejiang is preparing to host the 2022 Asian Games, aka the XIX Asiad, a multi-sport event to be held in Hangzhou from 10 to 25 September.

UK government plans cryptocurrency NFT

UK Chancellor of the Exchequer, Rishi Sunak has ordered the Royal Mint, producer of Britain’s coinage for over 1,000 years, to create its own non-fungible tokens (NFTs) as part of the government’s attempts to demonstrate that Britain is open to cryptocurrency businesses.

Sunak said that the Mint, which also sells commemorative coins to mark special events, would sell the tokens as an “emblem of the forward-looking approach the UK is determined to take”.

However, his announcement drew ridicule from several commentators: Simon French, an economist at Panmure Gordon, dismissed it as a late April Fool’s Day joke, independent economist Julian Jessop asked: “What on earth is the point of this?” and Mauricio Magaldi, of financial services consultancy 11:FS said: “The news that the Treasury will be launching NFTs later this year seems to be nothing more than a strategic PR play”.

The Mint’s own announcement described the move as a “natural progression” and added: “The Royal Mint is one of the world’s leading providers of premium collectables, making this a natural progression for us. By creating NFTs we plan to help customers own digital collectables in a secure and trusted way, while engaging a new audience with The Royal Mint.”

The Treasury announced several other measures that it said would demonstrate the UK is open to cryptocurrencies and blockchain technology, amid criticism that firms have been leaving in response to Britain’s strict regulatory regime. Mr Sunak said: “It’s my ambition to make the UK a global hub for crypto asset technology, and the measures we’ve outlined will help to ensure firms can invest, innovate and scale up in this country.”

The UK government has said that it intends to legislate to bring stablecoins – digital assets usually pegged to a fiat currency such as the pound or the dollar – into its regulatory regime, requiring issuers and services providers offering such products in the UK to follow rules set by UK authorities.

Santander adds instant payments into Brazil from Europe

Santander Bank has launched an international payments service for Spain’s small and medium-sized enterprises (SMEs) and corporate clients that enables them to make immediate international payments to recipients in Brazil, in Brazilian Real (BRL), through the One Trade solution.

The Spanish bank says it is the first in Europe to launch a custom-built payments solution that allows customers to make transfers into Brazil in local currencies and in real time. The new service is provided through Santander’s PagoNxt business unit and is designed to shorten the payment times between transfers from several days to just minutes, while also removing the need of FX documentation and third parties.

SMEs and corporate clients in Spain can also use the One Trade solution to make instant payments in BRL to recipients from Brazil through online banking. The service will be extended to customers in markets outside Spain over the months ahead.

Figures for 2021 show that around 5,000 Spanish SMEs processed payments to companies in Brazil, counting for over €4 billion spent; a 14% increase from 2020. Santander’s new solution aims to facilitate cross-border payments and integrate digital banks into the ecosystem, including the ones that don’t currently support international payments.

Fernando Lardiés, general manager of PagoNxt Trade, and global head of One Trade, told Finextra that the current user experience for currency transfers to Brazil is an opaque and complex process, which often leaves customers waiting for several days for payment.

PagoNxt Trade aims to become a platform through which to provide services to Santander entities and clients via their normal online banking with single sign-on, and to extend these into regions where Santander is not present as a commercial bank. “Our ambition is to become the provider of the services for banks, but with significant service enhancements such as this one.”

Bolero and TradeLens partner on electronic bills of lading

Cloud-based trade finance digitisation group Bolero International has announced a collaboration with the blockchain-based global trade platform TradeLens to provide a digital service for importers and exporters using electronic bills of lading (eBLs) in trade finance transactions.

Bolero’s trade finance digitisation platform, Galileo, connects corporate clients with trade partners and banks and allows corporates to manage their Letters of Credit (LCs), guarantees, Standby LCs, ePresentations under LCs, open account and documentary bills for collection (DCs), and electronic bills of lading in a single solution.

TradeLens’ eBL platform for containerised goods providers simplifies the issuance, transfer, and surrender of original shipping document in structure format allowing for the digitisation and automation of supply chain and financial processes and is an eBL solution accepted by industries including ocean carriers, banks, and regulators. 

TradeLens eBL will be integrated into Bolero’s Galileo platform, connecting the two platforms’ respective networks of banks, corporates, and supply chain participants, to provide “a streamlined and seamless experience for users of Galileo who wish to leverage TradeLens eBL’s carrier network.”

The partners comment that the Covid-19 pandemic has emphasised the critical value and fragility of global supply chains, especially how relatively minor disruptions can have enormous knock-on impacts to interconnected global economies across raw materials, commodities and complex elaborately transformed manufactures (ETM) such as semiconductors.

This has underpinned demand for various digital solutions, including the use of eBLs which are a key shipping document facilitating the transfer goods titles. Corporates have been forced to use multiple solutions to address the complexity and diversity of the challenges in global trade, resulting in an inconsistent approach and disjointed customer experience. 

“Bolero has a vision to connect the physical and financial flows to digitise trade finance,” said Bolero CEO, Andrew Raymond. “For this to happen, we need to be able to provide a common view of the data and documentation that is shared between all parties in the supply-chain process. Our investments in the Galileo platform make this possible”

“Our strategy with TradeLens is to provide access to the TradeLens Electronic Bill of Lading from within the Bolero Galileo application. This will leverage the Bolero bank network to more easily connect corporates and banks involved in financing goods in transit. Our goal is to become an aggregator of various electronic documents in Trade to provide a single point of access to our clients and giving both banks and corporates the ability to easily access and exchange these documents as part of their Trade transaction flows.” 

TradeLens and GTD Solution CEO, Michael White added: “The approach of integrating solutions where customers need them is common in the digital realm, which means users of technology gain access to best-in-class services without additional or multiple integrations. This collaboration is a practical example of connectivity for global trade and platforms and enables local communities in emerging and developed markets to participate in financial and trade opportunities.”.

Australian Securities and Investments Commission sues Macquarie

The Australian Securities and Investments Commission is suing Macquarie Bank for what it alleges are serious cash management account lapses.

ASIC claims that the bank failed to monitor and prevent A$2.9 million of withdrawals by convicted former financial adviser Ross Hopkins. Hemwas sentenced in May 2021 to a maximum period of six years for misappropriating about $2.9 million from his clients without their knowledge over a three-year period from October 2016.

In civil proceedings ASIC claims that Macquarie’s monitoring of the transactions was limited and while there was a ‘fee authority’ provision which allowed the adviser to deduct a fee, the transactions did not pass through the fraud monitoring system or undergo checks to ensure the transactions were for fees. The alleged lapses took place between 1 May 2016 and 15 January 2020.

ASIC’s deputy chairman, Sarah Court, said that although Hopkins had been “dealt with appropriately in the court”, the regulator had investigated how he was able to perpetuate the fraud. “When we had a look at Macquarie’s systems and compliance checks and what we say is there were significant failures to detect and prevent these frauds from occurring,” she commented.

Macquarie should have detected a “range of red flags” and although the bank was on notice that Mr Hopkins was a potentially problematic individual, it took no action to prevent the frauds from occurring. The regulator also alleges that Macquarie made false or misleading representations in promoting its cash management accounts as having features that limit third-party access, in particular where fee authority had been granted.

Macquarie had said it would check that any transaction made under the ‘fee authority’ was actually for fees, but did not do so, ASIC said.

In a statement, Macquarie responded that it had co-operated with the matter and that the 13 clients that suffered losses had been fully reimbursed. “Macquarie treats the security of its clients’ accounts with the utmost seriousness and has continued to introduce new controls and processes to respond to the evolving external fraud environment,” the bank said.

Citi adds sustainable trade and working capital loans solution

Citi has announced the launch of its Sustainable Trade and Working Capital Loans (Sustainable T&WC Loans) solution in Europe, the Middle East and Africa (EMEA), Latin America (LATAM) and Asia Pacific (APAC) regions.

The launch follows the rollout of Citi’s Sustainable Supply Chain Finance offering as “the next step of the journey to expand Citi’s sustainable Trade and Working Capital Solutions as a key part of Citi’s broader commitment to advancing its Environmental, Social and Governance (ESG) agenda.”

Citi said that T&WC Loans assist clients in managing their working capital needs, by financing their international trade finance activities and general day-to-day commercial activities, helping to improve liquidity. The Sustainable T&WC Loans solution can also support clients with their sustainability goals, where the proceeds of the loan are used for an environmental or social purpose. Should certain sustainability criteria be met, the solution can provide clients a framework for incentivised pricing.

Peadar Mac Canna, Head of EMEA Trade and Working Capital business at Citi said the bank is closely working with our clients to support their supply chains and ecosystem transition to a sustainable, low-carbon business model that balances the environmental, social and economic needs of society.

“Companies around the world are increasingly looking at how to incorporate sustainable practices across their businesses,” said Davida Heller, Head of Sustainability Strategy, Citi. “We are supporting our clients at every step of their journey with our products and services, and this extended working capital loan offering represents yet another tool in our toolbox to help our clients achieve their sustainability goals.”

Citi added that the Sustainable T&WC Loans product will initially launch in 80 countries across the EMEA, LATAM and APAC regions, and will be further rolled out across North America during 2022.

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