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JP Morgan launches a cross-border liquidity solution in Saudi Arabia - Industry Roundup: 8 August

JP Morgan launches a cross-border liquidity solution in Saudi Arabia

JP Morgan Payments launched a cross-border liquidity solution in Saudi Arabia, connecting clients to liquidity pools in London and other global cities. This follows JP Morgan's domestic sweeping capability product, which was launched in the region in Q4 2021. The new service aims to provide users a route to connect their balances to liquidity mechanisms around the world. The product's major features include maximizing linkages to offshore structures, automating cash consolidation from various accounts into a single account, and optimizing liquidity in Saudi Arabia.

According to Lori Schwartz, Global Head of Liquidity and Account Solutions, JP Morgan Payments, by enhancing liquidity transfer payments, companies can reduce idle balances and use internal cash more efficiently, resulting in improved deficit balances and no overdraft fees.

Bader Alamoudi, Senior Country Officer for Saudi Arabia, JP Morgan, stated that the real-time payments capability and digitisation processes will transform the open banking landscape of the region to both domestic and international transactions. Alamoudi further added that there is a need for comprehensive cash management solutions that support the integration of back-office systems and cutting-edge technologies to cover a regional network with worldwide connectivity. Shahrokh Moinian, EMEA head of payments, JP Morgan, commented that JP Morgan Payments is currently expanding its operations in the rapidly changing EMEA market and will continue to invest in and commercialize their disruptive technology investments.

BlackRock joins forces with Coinbase to expand the crypto market

While the cryptocurrency market is beleaguered by falling prices and government investigations, BlackRock Inc., the world’s largest asset manager, is partnering with Coinbase Global Inc. (up 15% to US $92.61) to facilitate institutional investors with the management and trade of Bitcoin. The collaboration with BlackRock reportedly provides some relief for the largest US crypto-trading platform, whose stock had lost more than two-thirds of its value this year to date.

According to reports, BlackRock clients can expect to use its Aladdin investment-management system to manage their Bitcoin exposure alongside other portfolio assets such as stocks and bonds, as well as to facilitate financing and trading on Coinbase's exchange. The partnership with Coinbase, a US crypto-trading platform, will initially focus on Bitcoin, as stated by BlackRock.

The collapses of the Terra ecosystem and hedge firm Three Arrows Capital have reportedly cast doubt on the crypto market's resiliency and triggered increasing regulatory scrutiny. As a result, Bitcoin has lost approximately half of its value in 2022. The US Securities and Exchange Commission is investigating Coinbase for allegedly enabling Americans to trade digital assets that should have been registered as securities.

According to Owen Lau, Analyst, Oppenheimer & Co., the regulatory risks associated with the cooperation are manageable because it is commencing with Bitcoin, which is said to have a clearer regulatory standing in Washington than other digital assets. BlackRock's Global Head of Strategic Ecosystem Relationships, Joseph Chalom, stated that their institutional clients’ interest in entering the digital asset markets and learning how to effectively manage the operational life cycle of these assets is rapidly growing.

According to the company, institutional investors accounted for approximately three-quarters of the $309 billion in trading volume on Coinbase in the first quarter 2022. Some of Coinbase’s clients include hedge funds, corporate treasury departments, and asset managers.

This collaboration is considered part of BlackRock's larger strategy to expand into digital assets. In March 2022, Larry Fink, CEO, BlackRock, stated that the firm has been researching the importance of digital assets and stablecoins and how they can be used to assist clients. The company announced in April 2022 that it had joined a group of investors in Circle Internet Financial, the issuer of USD Coin, and that it would seek to serve as the stablecoin's primary manager of cash reserves, stated reports.

Clients of both companies can expect to utilize trading, custody services, prime brokerage and reporting capabilities provided by Coinbase.

Growth in same-day ACH propels the ACH Network to 2Q profits

The US National Automated Clearing House Association (Nacha) has reported an increase in Same Day ACH and B2B payments, moving 7.5 billion payments in the second quarter of 2022. The Same Day ACH dollar limit was increased to US $1 million per payment this quarter, following the increase on 18 March, 2022. Additionally, the second quarter reported that there were 185 million Same Day ACH payments totalling $486 billion, representing increases of 24.4 percent and 94.4 percent over the same period in 2021.

ACH operators and financial institutions collaborated with Nacha to enable the $1 million limit. According to Jane Larimer, President and CEO, Nacha, the results demonstrate the benefits of Same Day to ACH Network users.

According to reports, B2B volume increased 12.3 percent in the second quarter, with 1.5 billion payments, continuing a trend that began before the pandemic. Overall, the ACH Network moved 7.5 billion payments, a 3.5 percent increase, totalling $19.6 trillion. Even in the absence of pandemic-related assistance payments, this growth reportedly reflects the addition of more than 250 million payments, according to Larimer.

RBI's liquidity normalization process to continue into 2023

The Reserve Bank of India's (RBI) multi-year process to normalize banking system liquidity is expected to continue into the next fiscal year. Shaktikanta Das, Governor of the Central Bank, further stated that the overall liquidity in the system is increasing, and liquidity normalisation will be a multi-year process following the Monetary Policy Committee's interest rate decision.

One important factor to consider, according to Das, is that some of the targeted long-term repo operations from the pandemic’s first year are expected to mature in 2023, causing the process to continue into the following year.

Reports indicated that the liquidity of the banking system is determined by the supply and demand for central bank money. To manage liquidity, the RBI employs the Liquidity Adjustment Facility (LAF) window. The central bank reportedly lends short-term funds to banks at the repo rate (currently at 5.4%), accepting government securities as collateral, and withdraw funds from banks at the reverse repo rate through this window. The RBI is said to use the LAF framework and a variety of liquidity management tools to manage inflation by increasing and decreasing the money supply.

The RBI has reportedly guaranteed that liquidity will remain in surplus at least through 2022 in efforts to reduce the pandemic-era surplus. Das stated that the central bank's actions had reduced surplus liquidity in the banking system from Rs 6.7 lakh crore in April-May to Rs 3.8 lakh crore in June-July. He attributed this to the variable rate reverse repo operations and the Standing Deposit Facility. However, Das stated that the central bank is expected to guide cash flow processes in response to fluctuating financial conditions.

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