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Most central banks now developing a digital currency – Industry roundup: 24 April

WEF says 98% of central banks are ready to launch digital currency

More than 98% of the world’s central banks are now “researching, experimenting, piloting or deploying” central bank digital currencies (CBDCs), according to the World Economic Forum (WEF).

The WEF, a Geneva, Switzerland-based international organisation focused on public-private cooperation, predicts in a new report that there could be 24 live CBDCs by 2030.

The organisation suggests that wholesale CBDCs (wCBDCs), which are restricted to large transactions between financial institutions, could address banking industry challenges related to interbank payments and securities transactions.

“Central bank money (CeBM) is crucial for interbank payments and securities transactions because it is virtually free of credit and liquidity risk, enables institutions to reach settlement finality and promotes financial stability. CeBM is ideal for systemically important transactions despite the emergence of alternative payment instruments,” states the report.

“Wholesale central bank digital currency (wCBDC) is a form of CeBM that could unlock new economic models and integration points that are not possible today. wCBDCs promise to preserve the role of CeBM as a credit risk-free payment instrument by providing a foundational layer for digital payments in the next generation of financial markets.”

The WEF says wCBDCs are poised to improve cross-border transactions. The organisation acknowledges, however, that the legal and regulatory elements needed to make widespread wCBDC use possible “have an unknown timeframe.”


Hong Kong launches one-stop platform to help small businesses

The Hong Kong Monetary Authority (HKMA) has launched a one-stop SME information platform on its website as part of its ongoing efforts to help small and medium-sized enterprises affected by changes in consumer and tourist spending patterns.

The platform provides information on SME lending services offered by 11 major banks including HSBC, Standard Chartered, Bank of China (Hong Kong), SME service hotlines and loan products such as trade financing and unsecured overdrafts.

“We hope that the platform can make it easier for SMEs to shop around so that they can compare and choose among loan products offered by different banks and increase their bargaining power,” said Eddie Yue Wai-man, CEO of HKMA.

Hong Kong has an estimated 340,000 SMEs, accounting for 98% of the city’s businesses and employing 45% of the private-sector workforce, according to the government, which defines an SME as a non-manufacturing firm with fewer than 50 employees or a manufacturing firm with fewer than 100 employees.

The platform is the latest in a series of measures announced last month by the HKMA together with the Banking Sector SME Lending Coordination Mechanism.

The mechanism, established by the HKMA and 11 participating banks in 2019, rolled out several rounds of relief measures during the Covid-19 pandemic. The lenders granted a combined HK$1.2 trillion (US$153.8 billion) worth of payment holidays and other forms of relief to alleviate the cash-flow pressure of 19,000 SMEs, Yue said.

The measures announced last month marked another step in helping SMEs navigate challenging market conditions as many Hongkongers travel to mainland China to dine and shop, leaving local shops and restaurants with fewer customers.

Hongkongers made more than 1.5 million outbound trips during the first three days of the Easter holiday, nearly five times the number of arrivals in the same period, government data showed. They shop for roast chicken, soap and other bargains at US warehouse store in mainland China.

“This change has brought varying degrees of challenges and opportunities to SMEs in Hong Kong. Some retailers and restaurants have benefited while others have seen a decline in business,” Yue said. “In this complex and ever-changing economic environment, some SMEs may be facing greater operating pressure.”

Retail sector lawmaker Peter Shiu Ka-fai said the HKMA’s measures are vital and will help SMEs cope with these challenges.“Many SMEs, including restaurants and retailers, are struggling as the post-Covid recovery is worse than expected in Hong Kong,” he said. “The HKMA’s new platform will help SMEs know about the funding support they can get.”

Since last month, the 11 banks in the SME lending coordination mechanism have each introduced fee waivers and other concessions, with nine offering unsecured loan products to improve their cash flow, Yue said.

The HKMA will work closely with the banking and commercial sectors to introduce the remaining measures that were announced last month but have not yet been implemented. These include banks giving customers a transition period of at least six months for credit limit adjustments.

Other measures include giving preapproved payment holidays to support customers facing difficulties and making it easy for SMEs to switch banks for lending.


Commerzbank fined €1.45 million for AML failings

Germany’s financial authority has imposed a €1.45 million (US$1.54 million) fine on Commerzbank due to the bank's inadequate efforts to prevent money laundering.

Commerzbank and its online subsidiary Comdirect Bank, which the bank fully acquired in 2020, had violated their supervisory duties, the Federal Financial Supervisory Authority (Bafin) announced.

As a result of insufficient supervision, employees violated money laundering obligations by not updating customer data in a timely manner or sufficiently and by taking insufficient internal security measures, the authority wrote.

In addition, the enhanced due diligence obligations were inadequately applied in three cases due to the breach of supervisory duties, Bafin said.

According to a Commerzbank spokeswoman, the necessary adaptation of processes and updating of data was already fully completed in 2022.

The issue stems from the integration of the online subsidiary Comdirect Bank into the group. In the process, requirements for checking the legitimacy of new customers as well as processes and checks for updating customer data at Comdirect were reviewed, she said.

The bank was in constant close contact with the responsible supervisory authority," said the spokeswoman. Commerzbank naturally complied with the requirements of Bafin, she added.

According to the information provided, the fine has been legally binding since 28 March.


Standard Chartered introduces open banking marketplace

Standard Chartered has announced the launch of its new Open Banking Marketplace, a one-stop platform that enables both existing and prospective clients to discover, identify, and test application programming interfaces (APIs) that best meets their business objectives in a sandbox environment.

With the objective of streamlining business-to-bank collaboration, corporates keen to partner with the bank in their digital transformation can benefit from a shorter discovery and implementation process, by allowing their developers to start coding and plugging into the Bank’s open banking ecosystem to simulate the experience almost immediately.

Standard Chartered said that In embracing the future of banking, it has been focused on enhancing its open banking capabilities through the sharing and use of APIs. The Open Banking Marketplace builds on an earlier iteration of the bank’s aXess platform that was launched in 2019 – which was part of a broader initiative targeted at the developer community to boost its open banking capabilities – and offers a richer user experience with the aim of accelerating open banking adoption by making it easier for corporates to tap into the applications required.

Besides the ability to access a growing suite of more than 100 ready-built API products from cash and FX to trade and securities, users of the platform can also enjoy other unique features such as:

  • Browse and filter solutions tailored to their industry across 33 markets globally, including manufacturing, fintech, technology, e-commerce and more;
  • Create a project space and conduct testing with their team in an upgraded simulator environment which allows them to write and test production-ready code; and
  • Explore new developer guides such as API technology documents and tutorials on the Bank’s security protocols and authentication.

The Open Banking Marketplace also features past use cases and client stories specific to each API product, offering insights on replicable solutions and tangible outcomes that illustrate how Standard Chartered’s open banking solutions can provide value-add to businesses – especially useful for stakeholders beyond those in the developer community.

“Open banking has been a transformative force over the last decade, with APIs playing an important role in enabling corporates to build future-proof propositions that meet the needs of the evolving digital economy,” said Mark Willis, Standard Chartered’s Global Head of API & Open Banking Ecosystems, Digital Channels & Data Analytics.

“What is needed to further its adoption is a shift in focus towards a better user experience – one that is less technically focused and offers simple, plug-and-play solutions.”


Citigroup sells maple bonds in first major deal for nine years

Citigroup is selling a large debt offering in the Canadian-dollar bond market for the first time in nearly a decade as US banks seek to diversify funding after reporting earnings.

The bank is marketing US$1 billion of fixed-to-floating rate notes that mature in four years and can be called after three, according to reports citing insiders. The deal is expected to yield 1.07 percentage point above Canadian benchmarks, after initial discussions in the 1.07-1.10 percentage point range, said the unidentified individuals. The initial offer included a floating-rate tranche, which was dropped.

The planned deal marks Citigroup’s first large public offering in Canada since 2015, according to Bloomberg. That US$600 million deal has a 4.09 per cent coupon and will mature next year. The bank sold loonie-denominated debt in small pieces in 2021 and 2023, Bloomberg-compiled data show.

The deal comes after the bank reported better-than-expected earnings this month. It would be the second maple bond offering from a large US bank in recent days, following Wells Fargo & Co.’s US$1.25 billion deal that drew orders twice its size.

The two deals have emerged at a time when many Canadian companies, including banks, are going overseas to sell debt, often for better pricing, creating a slowdown in supply and investors keen to deploy cash.


Carbon removal registry Isometric launches

Carbon removal registry Isometric officially launched this week, issuing its first credits to the Stripe-led fund dubbed Frontier. The number of tons Isometric has verified so far is small compared to traditional carbon offset registries, but it could mark a step toward fixing an industry recently mired in controversy.

Isometric’s first verified removals come from Vaulted Deep, a company that uses a slurry injection technology to sequester carbon-filled organic waste deep underground. Several other companies, including Equatic and Charm Industrial, have also made agreements with Isometric and are currently undergoing the verification process, according to Isometric founder and Chief Executive Officer Eamon Jubbawy.

The Isometric Registry platform says that it is set to change the game in carbon dioxide removal efforts by introducing carbon credits ”that are the most stringent in terms of scientific standards and represent the highest quality in CO2 removal seen on the market so far.

”This registry marks a turning point in the quest for sustainable solutions to combat climate change, offering a reliable and transparent way to monitor and reduce carbon emissions.”

Isometric says that there are three reasons why the carbon removal credits offered on their registry are considered the highest quality available.

Firstly, the carbon credits are backed by scientific research and have been verified against the Isometric Standard, ensuring that each credit represents the removal and safe storage of one metric ton of CO2 from the atmosphere.

Their second key feature is transparency, as the credits on this platform come with a detailed life cycle assessment that is available to the public. This level of clarity is crucial in building trust and credibility in the carbon offset market, ensuring that buyers know exactly what they are investing in.

Lastly, the Isometric Registry operates on a flat-fee basis with regard to the cost of verification and issuance. This means that the buyer of credits covers these costs at a fixed rate, eliminating any guesswork and making it easier for companies and individuals to participate in carbon offsetting initiatives.


Hungary seeks “soft landing” as rates cut again

Hungary has further slowed the pace of cuts to what is the European Union’s highest key interest rate, with policymakers seeking to anchor the volatile forint (HUF) in a riskier economic environment.

The National Bank of Hungary reduced the benchmark interest rate by 50 basis points (bps) to 7.75% on Tuesday, matching most forecasts in a Bloomberg survey. The unanimous decision compared with a 75 bp reduction in March and a full percentage point cut in February.

“A careful and patient approach” is warranted at a time of greater investor risk aversion, Deputy Governor Barnabas Virag said at a press briefing.

The central bank is looking for a “soft landing” after a more aggressive phase of its monetary-easing cycle that saw the key rate drop from a high of 18% a year ago, Monetary Council member Gyula Pleschinger recently told Bloomberg. Risks include a bloated budget, an expected delay in rate cuts by the Federal Reserve, as well as the weakening of the forint, he said.

Central bankers target a terminal rate of between 6.5% to 7% by June, in line with a strategy to maintain an adequate premium over inflation to anchor the forint. Traders see less room for cuts, with forward rate agreements pricing only about 70 bps in further reductions over the next three months.

While the central bank may have room for two more monthly 50 bp cuts until it reaches a terminal rate of about 6.75% in June, policymakers are in “no rush” to get there, Virag said.

The forint has weakened 2.6% against euro so far this year, underperforming regional peers such as the Czech koruna, Romanian leu and the Polish zloty.

Policymakers are monitoring the forint’s swings more closely due to its pass-through effect on inflation. The central bank expects price growth to pick up during the course of the year, after slowing to within the tolerance band around their 3% medium-term target in the first quarter.


China considers updates to anti-money laundering law

Chinese lawmakers have begun considering a draft revision to the Anti-Money Laundering (AML) Law according to rreport, with rules specifying AML obligations for specific non-financial institutions.

The draft was submitted to an on-going session of the Standing Committee of the National People's Congress, the national legislature, for review.

Comprising 62 articles in seven chapters, the new draft strengthened the supervision and management of anti-money laundering and improved provisions on anti-money laundering obligations.

The draft clarified the range of non-financial institutions involved and their anti-money laundering supervision obligations.

It also stipulated the obligations for financial institutions, requiring them to establish and improve the internal control mechanism for anti-money laundering, carry out customer due diligence and keep customer identity information materials and transaction records.


C8 Technologies plans systemic FX hedge platform

London-based fintech C8 Technologies is to launch a foreign exchange (FX) hedging platform which employs systemic trading models to help businesses manage their currency exposures.

Named C8 Hedge, the new platform provides guidance to corporate treasurers and investment professionals for managing their foreign exchange exposures across a range of currencies, using online tools.

The platform employs machine learning and statistical models to help predict future FX movements, enabling users to develop hedging solutions which align with their specific needs.

According to C8, through its active approach, C8 Hedge allows users to benefit from currency movements, increasing returns when compared to those offered by passive FX hedging.

The platform has the ability to adapting the shifting market conditions to access opportunities and mitigate risk, offering a hedging solution to protect portfolios against adverse currency movements.

“Applying our systematic trading models to FX hedging through an intuitive platform that anyone can use allows corporates and funds avoid the complexities they would otherwise face when they buy an asset or sell products overseas” said Mattias Eriksson, chief executive at C8.

“FX presents intricate risks that require a tailored approach, which is why we have designed the platform to allow users to easily craft customised FX hedging solutions that meet their exact requirements every time they need to handle foreign currency exposure”.

C8 Hedge users are also able to: calculate optimal FX hedge ratios for all their currency exposure including both assets and liabilities; add risk weights for each currency exposure; calculate optimal FX ratios for each currency within a portfolio risk limit.


Yubi partners with MODIFI on international trade finance

India’s Yubi, which describes itself as ”the world’s only technology company powering the end-to-end debt lifecycle,” has announced a strategic partnership with MODIFI, one of Europe’s fastest-growing business-to-business (B2B) fintech companies.

According to a release: ”This collaboration marks Yubi Group’s entry into cross-border trade financing, reinforcing its commitment to democratizing access to capital and fostering inclusive economic growth. By leveraging technology and innovation, Yubi Group and MODIFI aim to reshape the landscape of cross-border trade finance, empowering Indian SMEs and mid-sized corporates to compete and thrive globally.”

“At Yubi, we are committed to simplifying access to credit for SMEs,” said Yubi Group Founder and CEO Gaurav Kumar. “This partnership with Modifi addresses several key challenges faced by Indian companies venturing into international trade. Many lack awareness of financing solutions, struggle to navigate complex regulations and grapple with data in unstructured formats. By combining Yubi’s extensive network and industry knowledge with MODIFI’s innovative solutions, we can empower Indian businesses, offering them much-needed liquidity and risk mitigation.” he added.

The partnership ”will provide Indian exporters and importers with robust, unsecured funding for global transactions, a vital step in mitigating the perennial need for collateral. This innovative funding model will bestow the essential financial muscle to fortify their commercial engagements, transcending boundaries and providing substantial financing, representing up to 80% of the invoice valuation. Furthermore, they will benefit from unprecedented real-time insights into the creditworthiness of global trading partners, empowering them to navigate international market risks with acumen and seize burgeoning global opportunities.”

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