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Industry roundup: 17 February

ESMA aims to bolster MMFs

European regulators are proposing a series of reforms to money market funds (MMFs) in response to the vulnerabilities and liquidity issues experienced by MMFs two years ago, when the first wave of the Covid-19 pandemic hit and sparked financial market turmoil,

The European Securities and Markets Authority (ESMA) has issued an opinion, setting out proposed reforms to the rules for MMFs, designed to enhance the sector’s resilience by addressing liquidity issues and the “threshold effects” for funds that have fixed net asset values.

They include proposals to decouple regulatory requirements from funds’ suspension, gate and redemption fee features; mandate that funds have at least one liquidity management tool available; revise liquidity ratio requirements, including the pool of eligible assets that can be used to satisfy these requirements; and reinforce funds’ ability to temporarily use liquidity buffers in times of stress.

They also aim to bolster the sector’s capacity to better withstand a crisis, including measures to enhance reporting requirements and stress testing, while also clarifying external support requirements, and introducing new disclosure requirements.

The regulator said that the proposed reforms focus on addressing the “significant liquidity difficulties” that arose among money markets, “during the initial outbreak of the Covid-19 pandemic in March 2020.” At that time, funds came under liquidity pressure as assets became harder to sell, while investor redemption demands also spiked.

Commenting on the proposals, ESMA chair, Verena Ross, said that they are designed to, “ensure that [funds] will be able to meet investors’ redemption requests, and that this will continue to be the case also in the future. These reforms will help to improve the overall stability of financial markets, by reducing the risk of liquidity stress.”

ESMA’s proposals were submitted to the European Commission and it intends said to work closely with the Commission on its reforms.


PBoC claims Olympics success for digital yuan

Organisers, participants and visitors at the 2022 Winter Olympics in Beijing could be spending more than £230,000 (US$315,000) daily in China’s new digital yuan, despite the ban imposed by the authorities on tourists due to Covid-19.

Reports cited officials from the People’s Bank of China (PBoC) as the source, who indicated that the e-CNY, China’s central bank digital currency (CBDC), is being used to make CNY2 million or more worth of payments each day.

Reuters quoted PBoC Digital Currency Research Institute director-general Mu Changchun, who provided the data during a webinar hosted by the Atlantic Council. “I have a rough idea that there are several, or a couple of million digital yuan of payments every day, but I don’t have exact numbers yet,” Mu said, adding that there was no breakdown yet of the number of transactions made by Chinese nationals and foreign attendees.

The official still noted that foreign users tend to use hardware wallets more, referring to the e-CNY payment cards, which resemble credit cards but lack the normal chip and magnetic strip. “The software wallets are mainly used by domestic users,” Mu added.

The reported figure would represent a major boost to China’s CBDC rollout, based on total digital yuan transaction volumes of US$13 billion over the period April 2020, when it was launched, to November 2021.

The PBoC has been widely promoting the use of the Chinese CBDC at the Beijing Games, with the state-controlled Bank of China setting up several special ATMs at various central venues so that international guests could convert their foreign banknotes into e-CNY or normal yuan banknotes. However, strict anti- Covid restrictions have sharply reduced the number of foreign visitors to China.

The digital yuan’s increased availability has triggered concerns in the global community over cybersecurity and privacy, with some United States senators reportedly dubbing it a “tremendous security threat to individual users.”

While actively pushing CBDC adoption, China has simultaneously adopted a strict anti-cryptocurrency stance, with the government banning all crypto transactions in September 2021. The website cointelegraph.com reports that up to two million crypto mining devices are stuck in China’s former crypto mining hub, the Sichuan province, after the government halted operations. Miners attempting to move operations to North America have reportedly lost millions of dollars while trying to export crypto mining hardware.
 

Survey links spreadsheets with late payments

Many finance teams continue to be reliant on spreadsheets, despite evidence that they result in overdue invoices, according to the France-based software company Sidetrade, which released the results of its Cash Culture Pulse 2022 survey.

Sidetrade interviewed international firms across the UK, Europe, US, Asia and the Middle East to explore ways to improve efficiencies in the management of unpaid invoices in B2B and the current cash culture trends.

It says that the study focused on measuring the direct impact of the use of accounts receivable software in improving the cash collection results and found that 42% of finance teams still heavily reliant on spreadsheets reported a high ratio of late payments overall (15%). This percentage was almost halved (22%) for finance teams using a cash and credit management software.

The study also focused on how businesses track customer payments and measured the satisfaction and expectations of the teams in charge of this business area. While 87% of finance teams still rely on spreadsheets to manage accounts receivables, either fully or partially, 72% said they were dissatisfied with the process. However, 80% of teams using a dedicated solution to manage this process were satisfied.

Sidetrade said that in the fallout from the Covid-19 pandemic, cash culture has been positioned higher on business leaders’ agendas, as companies look to secure and accelerate cash flow generation and establish a 360° vision on the whole order-to-cash cycle. “This paradigm shift provides seamless collaboration among finance, sales and support functions and ensures that finance has the best technologies available,” it added.

Sidetrade’s CFO, Philippe Gangneux, commented: “It's clear that spreadsheets have an increasing number of limits and complexities. Now intelligent technologies support changing methods of delivering enterprise business capabilities. CFOs have a vested interest in including these intelligent technologies in their new roles and new challenges, or risk missing opportunities to optimise value and drive growth. The modern CFO should now take advantage of AI technology to streamline financial processes, particularly in cash management, and receivables.

“Beyond this, there are a whole host of other ways in which spreadsheets prevent finance leaders from reaching their potential; they limit an organisation's ability to instil a cash culture, they don’t provide any intelligent recommendations, and they cannot promote data centricity and visibility across the business. The crisis we have been through has revealed the importance of securing cash flows, and more and more financial leaders are recognising the benefit of working with a dedicated technology for enhanced order-to-cash performance.”
 

LPA and Globalance partner on ESG reporting

LPA, the Frankfurt-based capital markets technology and advisory firm, announced that it has enhanced its ESG reporting services through a partnership with the sustainability reporting tool Globalance, through which LPA will gain access to investment insight platform Globalance World. 

“Coined the “Google Earth for Investors”, Globalance World gives investors and other stakeholders free access to analyse and assess the future orientation and sustainability of over 6,000 listed companies and selected stock indices related to ESG, climate change and megatrends,” it said in a release. “Globalance World is the first interactive tool of its kind, visualising ESG in a dynamic, transparent and interactive way.”

LPA added that despite the postponement of standardised EU ESG reporting (Sustainable Finance Disclosure Regulation (SFDR) Level 2) to 1 July, 2022, demand for ESG funds is high, especially in the aftermath of last November’s COP26 summit in Glasgow. Firms who distribute corresponding products need to align their ESG fact sheets with the SFDR standard at an early stage.

LPA’s Capmatix Regulations is an all-in-one platform for compliance and regulatory reporting in the investment management industry which helps integrate and verify numerous data structures and automates firms’ reporting processes. The firm said that the integration of Globalance World will offer clients an enriched reporting format and help them extend their market position beyond sustainability compliance. 

“Our banking and asset management clients are increasingly asking for deeper and more meaningful ESG insights, in order to properly market sustainable investments,” added Stefan Lucht, LPA’s founder and managing partner. “Together with Globalance World, we are very much looking forward to demonstrating the capabilities of this new data to our clients.”
 

GCB Bank secures US$117m trade finance facility

GCB Bank, formally known as Ghana Commercial Bank and the largest bank in Ghana, is reported to have raised a US$117 million syndicated trade finance facility from a group of eight lenders.

The facility, disbursed early this month, was oversubscribed by more than double its initial launch amount of US$50 million and London-based alternative trade finance, Africa Trade Finance, is the bookrunner and co-ordinator of the facility. Rima Kalai, an executive director at AFT, said that the pool of lenders is largely composed of banks based in the UK.

In other Africa trade news, the African Continental Free Trade Area (AfCFTA) Secretariat and the African Export-Import Bank (Afreximbank) recently signed an agreement in Cairo on the management of the AfCFTA Adjustment Fund (ADF) that would require funding of US$10 billion over the next five to 10 years.

The base fund is a facility that would support African countries to cope with loss of revenue from import tariffs and the private sector to effectively participate in the new trading environment established under the AfCFTA, which was founded in 2018 with trade commencing at the beginning of 2021.
 

MineHub and Kimura partner on sustainable trade finance venture

MineHub Technologies, the Vancouver, Canada-based digital trade platform and London-based asset management firm Kimura Capital announced that they are forming a joint venture to develop a solution which will enable investors to syndicate their capital in providing trade finance to commodity supply chains.

A release stated that “the Syndication Application will leverage the MineHub blockchain platform and the recently launched MineHub Trade Finance and ESG applications to respectively reduce the credit risk and verify the ESG compliance.

“The Syndication Application will provide investors with exposure to a high yield, relatively low risk, but traditionally difficult to access asset classes. Investors with sustainable or impact investment goals can verify the compliance of the transactions with their ESG criteria certified on the underlying blockchain platform. The syndication of capital will increase the volume and size of the qualifying transactions that can be financed, and as such provide working capital into supply chains, including those that contribute to raising ESG standards.

Arnoud Star Busmann, CEO of MineHub, commented: “This venture is a natural expansion of our partnership with Kimura. We have a shared vision for how blockchain technology will transform commodity trade finance. The real-time transparency and immutability will reduce credit and ESG compliance risk. This in turn will help unlock liquidity pools that are waiting for efficient and transparent channels to deploy capital into commodity supply chains, capital which is increasingly linked to ESG compliance.”

Kimura’s chief investment officer (CIO) Kristofer Tremaine added: “The demand from the investment market to access trade finance via a qualified route is significant. However, recent market events such as Greensill (Capital) have highlighted the requirement for absolute transparency.”
 

Barilla selects Kyriba enterprise liquidity management system

Cloud treasury systems provider Kyriba announced that the Italian multinational food company and world’s largest producer of pasta, Barilla has selected the company’s enterprise liquidity management platform to support its treasury, risk management and supply chain finance operations.

Kyriba said that the integration will centralise Barilla’s multiple supply chain finance programs into a single dynamic discounting solution that better supports its suppliers, shortens the cash conversion cycle and improves liquidity for the company. Barilla also selected Kyriba to increase cash visibility, improve cash forecasting, and digitise FX, interest rate, and commodities risk management.

“We set out to bring more value to the Barilla enterprise and required a provider that would deliver an easy-to-use solution with proven expertise in supply chain finance, and a robust multi-bank connection capable of onboarding suppliers anywhere in the world,” said Giangaddo Prati, group chief financial and information technology officer at The Barilla Group. “Kyriba’s platform completely meets our treasury’s requirements in automation, control, and connectivity with ERPs and banks.”

The project will also see Barilla adopt Kyriba’s digital platform to manage liquidity across the enterprise and to support the group’s global supply chain.

Barilla Group recently marked its 145th anniversary with the debut of a new visual identity, including a new logo and sustainable packaging, as well as a new product launch.

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