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JP Morgan plans to invest US $800 million in Greek-based fintech, Viva Wallet – Industry roundup: 21 December

Bank of Japan surprises global markets by shifting its yield curve control policy

The Bank of Japan (BOJ) surprised markets by raising the upper limit for the 10-year Japanese Government Bond (JGB) yields, enabling it to fluctuate by plus or minus 0.5% rather than from the previous 0.25%. As a result, the yen rose and the Nikkei stock index fell, with the financial market reportedly attempting to determine a fair value.

While most central banks are raising interest rates and stiffening monetary policy to combat inflation, Japan is an unusual case in the global economy, retaining yield curve control and negative interest rates. This strategy has reportedly reduced the value of the yen significantly this year. The bank's adjustment to its yield curve control policy was reportedly anticipated to come towards the end of 2023, making the current change surprising to analysts. The market predicts that this is the BOJ’s first step toward normalization.

Governor Haruhiko Kuroda, BOJ, stated that the cost-push inflation is unsustainable, and that inflation will fall to 2% in 2023. Furthermore, Kuroda attempted to minimize market expectations for further policy changes and reportedly emphasized that today's move is not the first step towards an exit, and that a wider yield band is not required.

Reports indicate that Kuroda is attempting to set the stage for a return to normal policy prior to a leadership change, as his term as governor ends in April 2023. Analysts state that the policy review may not be required in the near term and that monetary policy should remain flexible until a stable 2% inflation target is met. However, with the adjustment made today, his successor can expect to have more flexibility to use monetary policy in the future. Additionally, reports anticipate that the BOJ will keep its policy balance rate at -0.1% for a period of time as well as adopt a cautious approach until the upcoming annual wage negotiation season (Shunto) to be held in April and May 2023. Market participants, however, foresee further tightening.

Binance.US to purchase Voyager assets for US $1 billion

Voyager Digital, which pursued debt restructuring earlier this year, has concluded that the proposal from crypto exchange Binance.US provides the best route for its customers to access their locked funds quickly and seamlessly. Brian Shroder, CEO and President, Binance.US, commented that once the transaction is finalized, users will have immediate access to their digital assets on the Binance.US platform, where they will reportedly continue to receive payments from Voyager.

The court hearing, which is scheduled for 5 January 2023, is expected to allow Voyager Digital to request permission from the bankruptcy court to enter into the asset purchase agreement. Voyager claims that its primary consideration in choosing the Binance.US bid was to maximize the value that would be swiftly returned to customers and other creditors.

Binance.US plans to deposit US $10 million in good faith, in addition to reimbursing Voyager for specific expenses up to a maximum of $15 million. Additionally, the agreement permits Voyager to start returning customer funds right away if the transaction does not close by 18 April 2023, subject to a one-month extension.

Finastra and MA-based Mechanics Cooperative Bank strengthens its alliance to offer cutting-edge payment services

Mechanics Cooperative Bank, a Massachusetts-based financial institution with assets over US $645 million, has selected Finastra’s Payments To Go platform to offer innovative business payments services and improve client services. Furthermore, the bank aims to leverage the power of Finastra’s cloud capabilities by using its resources required to launch real-time payments (RTP) through the Clearing House (TCH) as well as to join the FedNow platform once live. Due to Finastra's participation in the FedNow pilot program, which supports the service's development, testing and adoption, the bank can expect to launch quickly and effectively.

Reports indicate that the bank’s decision to use Payments To Go, which is reportedly built with secure and scalable SaaS capabilities, heralds a wider transformation in the payments sector. Increasingly more financial organizations around the world continue to adopt cloud-based payment processing solutions, enabling banks with the accessibility, flexibility and scale needed to offer improved services and efficiently navigate regulatory requirements.

Visa plans to launch automatic payment for Ethereum accounts via Layer-2 blockchain

Visa has announced that it intends to use the Ethereum blockchain to implement a one-of-a-kind approach to automatic crypto payment. Catherine Gu, Head of Central Bank Digital Currencies and Protocols, Visa, reportedly proposed introducing an auto-pay feature for Ethereum accounts, with Visa aiming to use Account Abstraction (AA).

Reports indicate that Vitalik Buterin, the creator of Ethereum, has reportedly been advocating AA as an Ethereum Improvement Proposal (EIP) since 2015. The Ethereum wallets and smart contracts are essentially embedded into one account, said reports, enabling a user account operating a self-custody wallet to perform smart contract-like operations.

Visa aims to deploy the solution on StarkNet, an Ethereum-based Layer-2 blockchain, in order to generate higher production flows. According to the proposal, Visa was able to facilitate automatic payments for self-custodial wallets using StarkNet's account template.

Libor transition causes much debate for debt investors enduring losses

Multiple investors and market participants have reported major concerns on the transition from Libor to Secured Overnight Financing Rate (SOFR) effective June 2023. In January 2022, US regulators prohibited new loans from using Libor, but extended the deadline for existing contracts until the end of June 2023.

Disputes have begun over the compensation investors should receive when borrowers transition to a new benchmark, adding to the difficulties of the shift from Libor. Analysts are calling SOFR, the replacement for Libor in the US, an “imperfect alternative” to Libor, as the three-month term SOFR has ranged from 8 to 43 basis points below Libor since the beginning of 2022.

Collateralized loan obligations (CLOs), are reportedly more susceptible to the risk of a rate discrepancy between the loans purchased and the bonds sold to investors, creating further negotiations between borrowers and lenders over how to close the US $1 billion annual interest payment gap. Meanwhile, businesses face stiff monetary policy, as the Federal Reserve continues to increase interest rates to control inflationary pressures. As a result, heavily indebted businesses have incurred an increase in borrowing costs, which may affect their cash flow.

Reports indicate that as the deadline to transition from Libor draws near, investors are assessing the economic principles of each deal more intently. Ian Walker, a legal analyst, Covenant Review, commented that if lenders take notice and reject amendments with no or lower spread adjustments, borrowers could potentially renegotiate with better terms.

Furthermore, concerns about potentially amending contracts prior to the phase-out of the benchmark are reportedly growing stronger as the possibility of protracted negotiations over credit spread modification delays the transition from Libor. Data from JPMorgan Chase & Co. states that approximately 80% of the $1.4 trillion US leveraged loan market still needs to transition to SOFR, which may also include a sizable administrative backlog for borrowers, lenders, lawyers and bankers prior to the deadline.

The Covenant Review reported that the overflow of amendments could overwhelm lenders, leaving them without enough time to consider each request and resulting in many of the proposals passing without review.

JP Morgan plans to invest US $800 million in Greek-based fintech, Viva Wallet

JP Morgan, a US investment bank, has purchased a 48.5% stake in Viva Wallet, an Athens-based payments fintech firm established in 2000, with minority shareholders Hedosophia (24%), the Latsis family (13%) and Deca (10%). The transaction is reportedly worth over US $800 million and is expected to be finalized this week.

Viva Wallet, a cloud-based payments platform specializing in small-medium businesses (SMBs) in 23 countries, reportedly offers merchants a variety of services, such as tap to device technology, merchant cash advances, bill payment, expense management, issuance of virtual debit cards, cash disbursement, gift cards and more. Additionally, the fintech joined forces with Klarna in November 2022 to assist retailers in catering to the demands of a new generation of customers seeking more flexible payment options.

London Stock Exchange aims to expand its post-trade offering with the acquisition of Acadia

The London Stock Exchange Group (LSEG) has reportedly agreed to purchase Acadia, a US-based company that offers risk management, collateral and margining services for the uncleared derivatives markets, in order to develop and expand its multi-asset post trade offering for the uncleared derivatives market. Acadia's addition is expected to help bolster the exchange in offering a robust financial sector connectivity system for clients.

Acadia, which was founded in 2009, has reportedly facilitated over US $1 trillion in daily collateral exchanges for over 2,000 firms. LSEG aims to include the company as part of its post trade division following the finalized transaction, pending regulatory approval. Chris Walsh, CEO, Acadia, will report to Daniel Maguire, LSEG’s Group Head of Post Trade.

LSEG has made a number of acquisitions this year, which include TORA, Global Data Consortium and MayStreet. Additionally, Microsoft announced last week that it has purchased a 4% stake in LSEG. The group aims to use Microsoft's cloud service, Azure, for its data and technological connectivity.

LHV UK obtains Annex I financial institution status, allowing loans to SMEs

The Financial Conduct Authority has approved LHV UK's application to register as an Annex I financial institution, which is required to issue loans in the United Kingdom in accordance with the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations of 2017. As a result, LHV UK Ltd., a European-based financial and capital provider and subsidiary of LHV Group, expects to commence issuing small and medium enterprise (SME) loans immediately.

LHV UK's parent company, LHV Group, has reportedly conducted lending to SMEs for fourteen consecutive years. The group recently acquired Bank North's SME lending operations, a Manchester-based regional bank, which includes £17.9 million in loans, sales and support staff, as well as contracts with significant loan brokers. With the approved registration, LHV UK will reportedly be able to issue commercial real estate-backed loans from £500,000.

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