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Industry roundup: 16 December

HSBC sets deadlines for ending coal financing

HSBC, which is Europe’s biggest banker to corporate Asia, has issued its long-awaited policy on financing thermal coal and requires all its clients to have a plan in place to exit the fossil fuel by the end of 2023. It will cut all financing to any company that refuses to engage with the policy.

Under the proposals HSBC will withdraw services for corporate clients that continue to be involved with coal as it seeks to phase out all financing for the coal industry by 2040 globally and by 2030 in the European Union and the OECD countries.

“Eliminating coal-fired power emissions is the most symbolic and important milestone along the road to net zero,” said the bank’s chief sustainability officer, Celine Herweijer.

“Coal-fired power stations contribute roughly a fifth of global carbon emissions output, and the science very clearly tells us they can have no part of a net zero world. No new coal is no longer good enough: our attention has to turn to urgent phase-out of existing coal-fired power.”

The new policy includes targets to cut HSBC’s financing to the thermal coal industry by a quarter by 2025 and by half by 2030, Herweijer added.

However, although the phase-out of current coal-fired generation capacity has become a top priority, HSBC acknowledges that an immediate exit from coal will not always be an option in some regions. “An abrupt shift away from coal would literally turn the lights off for these people. It would endanger their most basic development needs, while disrupting industry and rendering a huge social impact from job losses in coal regions.”

In addition to requiring its corporate clients to submit transition plans, HSBC will check them for clarity, credibility, and pace of progress. If a client fails the test or refuses to provide such information, the bank will suspend services, including funding and advice.

Although HSBC is one of the biggest lenders in Asia, which in turn is the world’s largest consumer of coal, Herweijer says the bank regards this as more of an opportunity than a risk. “Arguably the biggest contribution we can make… is to be at the heart of the energy transition in Asia.”

China links digital yuan to Hong Kong’s Faster Payments System

The central banks of China and Hong Kong are commencing the second phase of an experiment into the viability of the digital yuan (CNY), It will see China will link its central bank digital currency (CBDC) to Hong Kong’s Faster Payments System, the city state’s e-banking system that connects banks to digital wallets and electronic payment platforms.

At a recent event in Hong Kong, Mu Changchun, who heads the Digital Currency Research Institute at the People’s Bank of China (PBoC), provided details on the CBDC trial’s recent progress. 

In the first phase, the PBoC partnered with the Hong Kong Monetary Authority (HKMA) to enable visitors from mainland China to recharge, transfer and spend the digital yuan. During the trial, the two banks worked with select merchants and several Hong Kong banks. Hong Kong residents could also spend the digital yuan in the Luohu District, Shenzhen province.

Thanks to its success the two are now embarking on the second phase, Mu told delegates at the Hong Kong International Financial Center Status and Prospects Seminar.

The highlight from the second phase will be an integration of the digital yuan into the Faster Payments System, which the HKMA launched in 2018. It facilitates faster payments by allowing banks and e-wallet operators to make cross bank/e-wallet payments by keying in the recipient’s mobile phone number or email address. The system operates 24/7 and supports both the Hong Kong dollar and the yuan.

“In the future, when [China] mainland tourists use the digital yuan to shop in Hong Kong, the foreign currency exchange will be completed between two wallets, and local merchants will receive money in Hong Kong dollars, so there will be no currency substitution,” said Mu.

He added that the digital yuan is the key to cross-border trade between China and Hong Kong, and the Covid-19 the pandemic has given the two an excellent opportunity to build the system so that once “the epidemic is over and people can freely travel between the Mainland and Hong Kong, the digital renminbi (RMB) wallet will greatly enhance cross-border payments between the two places.”

Western Union works with Ukraine FIs on cross-border payments

Western Union has announced plans to work with major financial institutions (FIs) in Ukraine and across the Commonwealth of Independent States (CIS) to boost cross-border payments.

The US financial services group has launched international money transfers through Ukraine postal network Nova Poshta, whose non-banking financial institution, NovaPay, has a 40% share of the local money transfer market. 

Customers of Monobank, which launched in July 2017 as Ukraine’s first virtual bank, will be able to use of money transfers with Western Union’s retail network, using Monobank’s app. They can fund international transfers on the Monobank card, while receivers can pick up funds from Western Union’s 600,000nretail locations in more than 200 countries and territories.  Monobank has added more than four million online customers over four years.

Western Union has also rolled out international money transfers in team-ups with Russia’s Sovkombank, which has 11 million customers and 260 locations; Kazakhstan’s Jusan Bank; and through the Tajikistan’s International bank and Rusdhi Orien. 

The company also announced new digital services with major FIs across the region. Customers of Bank Center Credit in Kazakhstan, Kapitalbank in Uzbekistan and Unibank in Azerbaijan can now also send international money transfers through the integration of Western Union’s platform in the banks’ respective mobile apps.

“We are privileged to have already joined forces with top FIs and post offices across the CIS, giving millions of their customers flexibility, convenience and trust in their cross-border money transfers and payments,” said Massimiliano Alvisini, Western Union’s General Manager for CIS, Europe, and Africa.

“We are constantly expanding our network across the region and integrating our global money movement capabilities to enhance the customer experience of major CIS FIs.”

The latest release follows last month’s announcement by Western Union that it was further developing its partnership with Mastercard, by expanding Mastercard Send’s integration into Western Union’s global money movement network, while also uniting Mastercard’s Cross-Border Services delivery with Western Union Business Solutions. 

Western Union said the partnership aims to give US domestic money transfer receivers more options, allowing for payment from a preferred bank card in the US. Funds can be added to a US debit card network and delivered to an account in real-time. 

Investor Cash Management plans expansion

US company Investor Cash Management, a three-year-old financial services technology start-up, plans to build its headquarters in Wilmington, Delaware after securing US$4.3 million in taxpayer grants. 

ICM will invest up to US$15 million in the new facility and plans to hire 395 people. Since its formation in 2018, ICM has been based in Chicago and has 30 employees. The current lease runs until 2023 and the company will look for a new location in Wilmington to build its HQ in the new year, said its CEO and founder Fred Phillips.

The start-up has developed it calls a “transformative technology” that can change securities such as mutual funds or exchange traded funds (ETFs) into digital transaction currencies. It enables users to make investments while maintaining the immediate liquidity provided by a typical bank account.

“The problem that we solve is the most fundamental of economic problems, 'What should I do with my money?'” says Phillips.

ICM’s mobile app and web portal, which are currently being offered to selected wealth management firms and non-profits, can act as a sole bank account with no fees or minimum balances or can be used to allocate money in investments rather than leaving money in low-interest accounts.

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