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Sanctions sink trade finance bank ATB – Industry roundup: 28 April

Trade finance bank ATB succumbs to Russia sanctions

Sanctions imposed on Russia following the invasion of Ukraine have been cited as the reason for the demise of Amsterdam Trade Bank (ATB), which has filed for bankruptcy.

The bank, set up in 1994 to finance trade between European countries and former Soviet states, is a subsidiary of Russia’s largest commercial bank, Alfa Bank and was a provider of shipping, commodities and trade finance.

ATB issued a statement confirming that it filed for bankruptcy on 22 April and the Amsterdam District Court has appointed two bankruptcy trustees after UK and US sanctions “caused operational difficulties”.

“The majority of ATB’s counterparties, including correspond[ent] banks and infrastructure providers, find it difficult to continue supporting ATB,” the statement added.

Global Trade Review, which reported on the bank’s demise, quoted court-appointed trustees Toni van Hees and Job van Hooff, who told GTR: “UK and US suppliers threatened to terminate their services or already suspended their services. Also, correspondent banks bounced payments made by or to ATB.” The bank had outstanding loans of €570 million at the time of the bankruptcy, according to the trustees. It held €1.2 billion in assets as of 2020.

ATB was one of six Alfa Bank subsidiaries directly sanctioned on 7 April by the US Treasury “for being owned or controlled by, or for having acted or purported to act for or on behalf of” Alfa Bank. While the EU has not acted similarly against either Alfa or ATB, the sanctions from the US and UK still severely limited their ability to operate due to the importance of both countries as correspondent banking hubs.

At the end of 2020, Alfa Bank owned 75.4% of ATB, with a further 6.5% stake held by Alfa Bank’s parent company, ABH Holdings, according to the annual report for the year. Alfa Bank was sanctioned by the US on 24 February after Russian troops entered Ukraine.

ATB had begun a transition away from commodities and shipping finance under chief executive Oren Bass, founder of US online lender Pave, who joined the bank in 2020. Last October it rebranded as FIBR, becoming a digital-only lender to small and medium enterprises (SMEs) across the EU and UK and stated: “Over time, our exposures to trade, commodity and shipping finance will be reduced as we focus more on financing European SMEs.”

It is unconfirmed whether if the bank was accepting new commodities, shipping or trade business in the period immediately prior to the bankruptcy. At the end of 2020, around 40% of ATB’s loans went to the shipping sector and 17.7% to trading companies, with the remainder of the debt was to sectors including energy, finance and agriculture.

The bank had more than 23,000 private account holders, most of whom reside in the Netherlands but with another 6,000 in Germany, according to a 22 April statement from De Nederlandsche Bank. The Dutch central bank also said that it had activated the deposit guarantee scheme that insures personal accounts up to €100,000 and up to €25,000 for customers receiving investment services from the bank. It puts ATB’s deposit guarantee scheme at approximately €700 million.

Trio partner on cross-border payments pilot

EBA CLEARING, SWIFT and The Clearing House (TCH) have announced plans to launch a pilot service for immediate cross-border (IXB) payments with the support of banks from both sides of the Atlantic.

The pilot service is scheduled to begin by the end of this year with several participants joining the service in a phased approach. It is being designed with the contribution of 24 financial institutions, including those that are preparing to join the pilot. They include ABN AMRO Bank; Allied Irish Banks; Bank of America; Bank of New York Mellon; BBVA Group; BNP Paribas; Crédit Agricole; Deutsche Bank; ERSTE Group Bank; Helaba; HSBC; ING; Intesa Sanpaolo Bank; KBC; J.P. Morgan; PNC Bank; Societe Generale; Toronto Dominion UniCredit S.p.A and UniCredit Bank (HypoVereinsbank).

A release announcing the initiative stated: “The development of this pilot marks another important step in the IXB initiative launched by the three private-sector, member-owned companies to improve cross-border payments by utilising the fastest domestic payment options. It follows a proof of concept completed in October 2021, with the contribution of seven financial institutions. The proof of concept demonstrated the ability to synchronise settlement in one instant payment system with settlement in the other and to convert real-time messages between both systems.

“Since October 2021, the group of supporting financial institutions has continued to grow and has formed an IXB Sounding Board to provide input on the development of this cross-border payment service leveraging existing real-time infrastructure, technology and standards. Based on state-of-the-art building blocks, such as ISO 20022 message standards, SWIFT Go and the instant payment systems of EBA CLEARING and TCH, the service initially will support instant payments in the US dollar and euro currency corridor. It is developed with a view to being extended to other currency channels and payment systems.

“It is envisaged that the IXB pilot service will be followed by a full service offering in 2023. The key features of the service will be aligned with the focus areas related to speed, access, cost and transparency, as outlined by the Committee on Payments and Market Infrastructures (CPMI) and Financial Stability Board (FSB) for enhancing cross-border payments.

“By providing a model that can be replicated across other currency corridors and payment systems, the IXB initiative is expected to provide even greater opportunities for financial institutions and their customers around the globe.”

Central African Republic legalises Bitcoin

The Central African Republic (CAR) has become the second country in the world to legalise Bitcoin, following the lead of El Salvador last September.

The proposed bill to grant the cryptocurrency legal status in the CAR was signed into law after getting a unanimous go-ahead from the country’s National Assembly. Bitcoin will now be a legally accepted payment method, alongside the regional currency, the Central African CFA franc (XAF).

While El Salvador’s economy depends on the US dollar, CAR’s regional currency is backed by France, which means that the country lacks an independent monetary policy and does not control the supply of money within its borders.

Currently the Central African CFA franc XAF has an average annual inflation rate of 4.8%, although over the past five years that figure has ranged between -3% and 12%.

In a research note at the start of this year, crypto investment firm Fidelity predicted that more governments and even a central bank could buy Bitcoin in 2022. According to its report, if enough countries jump on the bandwagon, others were likely to follow suit — if only to prevent themselves from being at a competitive disadvantage.

“If Bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers,” the report stated. “Therefore, even if other countries do not believe in the investment thesis or the adoption of Bitcoin, they will be forced to acquire some as a form of insurance.”

Among several possible contenders, El Salvador’s neighbour Panama is tipped as a candidate for next making Bitcoin legal tender. However, a recent survey in El Salvador suggests that Bitcoin has gained only modest traction in the country, and most of its people are still using dollars seven months after the cryptocurrency was made legal tender in the country.

The lack of enthusiasm is despite the government's campaign for crypto adoption, led by its young President and Bitcoin enthusiast Nayib Bukele, the experiment has yielded little, and the nation's digital wallet – aka “Chivo Wallet” – has not yet been widely used. 

Instant payments “accelerate Brazil’s financial inclusion”

Latin America payments platform EBANX reports that new payment types are unlocking the potential of the region’s market for online merchants as the open banking movement matures – even though about half of its population still have no bank account.

EBANX says that methods such as Pix instant payments and digital wallets have assisted a major shift to digital commerce for Latin Americans with nearly 50% more e-commerce users last year compared to pre-pandemic years (68% at the end of 2021 against 45% before Covid-19). This means that more than 150 million people bought online for the first time in 2020 and 2021.

“Instant payments and digital wallets are the fastest-growing means of creating broader financial inclusion and access to more goods and services purchased online in Latin America, which is one of the world's fastest-growing e-commerce markets,” said Paula Bellizia, president of Global Payments at EBANX.

“They’re connecting more businesses with consumers, many of whom are first-time digital shoppers who desire more variety and instant gratification. And the rise of this new ‘instant economy’ is a vital way for merchants to unlock the huge potential of the LatAm market and grow their slice of an increasingly lucrative pie.”

EBANX reports that Latin America’s digital commerce market is projected to grow 31% per year until 2025, an acceleration comparable to only that of Asian markets. It adds that the open banking movement is driving “a new online shopping experience”, with Brazil leading the charge in open banking regulation across the region and countries such as Mexico and Colombia preparing its implementation for late 2022.

Open banking will enable users to choose between products and services from multiple banks and fintechs in a single environment. “Companies will have to invest even more in customer experience and satisfaction, which is exactly what the regulators want,” says Wagner Ruiz, EBANK’s Chief Risk Officer and co-founder. “If you want to keep your customers, you'll need to provide a good service.”

As the region’s e-commerce ecosystem matures, new types of instant payments such as Pix are ushering in a new era of closer relationships with end consumers, who expect a friendlier shopping experience, greater flexibility, and faster confirmation and delivery.

“Pix democratises access to e-commerce and brings more people to the table,” says Erika Daguani, vice-president of product at EBANX. “People who didn’t have a credit card, for example, or small entrepreneurs who had no way to accept them, can now receive payments quickly via Pix.”

Online shopping using digital wallets is another of the most quickly adopted payment methods in LatAm, growing to 11.5% of the region’s total digital market in 2021. “Digital wallets are easy to use, mobile-friendly, don’t require the shopper to have a bank account, and let them make immediate purchases with instant notification with just a touch of a button,” adds Daguani.

Alibaba joins Low Carbon Patent Pledge

China’s e-commerce giant Alibaba has joined the Low Carbon Patent Pledge (LCPP) to accelerate the adoption of green technology.

The LCPP is an independent platform that encourages organisations to share patents for low carbon technologies. It was launched on Earth Day 2021 by Hewlett Packard Enterprise (HPE), Microsoft, and Meta with its mission to promote low carbon technologies and foster collaborative innovation.

Alibaba has made nine key patents for green data centre technology available for free to external parties. Its Alibaba Cloud subsidiary aims to have its global data centres running entirely on clean energy by 2030, starting with upgrades to five of its hyper-scale data centres in China.

The nine patents offered are parts of Alibaba’s green data centre technologies including the unique "soaking server" cooling system Alibaba Cloud has deployed for its data centres since 2015. This non-mechanical cooling measure leads to energy savings of over 70% compared to traditional mechanical cooling, says the company.

Joining the coalition of various pledgors from the international society, the initiative marks the first time that Alibaba Group has pledged to offer critical intellectual property broadly available on sustainability, which “reinforces its long-standing commitment to achieving a low-carbon and sustainable future for the society through forging broader cooperation.”

Dr. Chen Long, VP of Alibaba Group and chair of Alibaba’s sustainability steering committee said, “We believe technology innovation is a key driver in transitioning to the low-carbon circular economy of the future. As a pioneer and global technology leader, we are committed to taking broader social responsibility to use technology to level the playing field and empower the wider social groups, creating long-term value.

Shanyuan Gao, general manager of Alibaba Cloud Infrastructure’s internet data centre division, said: “Eco-friendly data centres are critical to Alibaba’s sustainable operations. We employ cutting-edge green technologies in its hyper-scale facilities, of which liquid cooling and renewable electricity storage make a considerable difference in reducing carbon emissions.

“For instance, in our Hangzhou data centre, server clusters are submerged in specialised liquid coolant, which quickly chills the IT hardware.”

Alibaba Cloud’s Zhangbei data centre employs the same method, which contributed to it earning a Green Power Consumption Certificate from the Beijing Electric Power Exchange Centre in 2021, recognizing the facility as the first in China to use heat-pump technology.

“As Alibaba Cloud builds a secure and resilient global infrastructure network, it believes that the advanced technology housed within the data centres will become the new standard with liquid cooling being promoted throughout China and in more countries in the future,” the company added.

E-commerce hub Hangzhou starts mass Covid-19 testing

The Chinese city of Hangzhou, the country’s e-commerce hub and home to tech giant Alibaba Group, will start mass testing for Covid-19.

The testing drive will cover most of Hangzhou’s downtown area, with 10,000 free test sites to be set up, the municipal government said in a statement. It urged residents to get tested every 48 hours.

In addition to Alibaba, the city has a small but notable network of tech companies, including games maker NetEase and video-surveillance product company Hangzhou Hikvision Digital Technology.

‘’Just as soaring commodity costs were topping worry lists among many companies, fresh supply chain issues are looming with yet another Chinese commercial hub facing hugely disruptive lockdowns,” commented Susannah Streeter, senior investment and markets analyst at UK financial services company Hargreaves Lansdown.

“More than 12 million citizens in the e-commerce centre of Hangzhou are set to undergo testing, a move which was a precursor to the hugely disruptive Shanghai shutdown and Beijing has also reported an increase in cases, with some residential areas sealed off. The worry is that China is committed to its zero covid policy for the long haul and that is set to mean ongoing disruption for trade.”

In addition to e-commerce firms, Hangzhou is also the base of carmaker Zhejiang Geely Holding Group and Nongfu Spring, the bottled drinks company

While outbreaks of the virus in Shanghai and Beijing show signs of stabilising, the port cities of Qingdao and Qinhuangdao have also announced partial lockdowns, moves that could further worsen global supply chain disruption as local governments take swift measures to limit Covid-19 flareups.

Nordea AM launches climate engagement fund

Nordea Asset Management (NAM) has announced an extension to its suite of climate-focused solutions with the launch of the Nordea 1 - Global Climate Engagement Fund.

“NAM has been a longstanding proponent of climate and environment investing since the launch of its renowned Nordea 1 - Global Climate and Environment Fund – now Europe’s largest Article 9 vehicle – back in 2008,” the company stated.

The new fund is managed by Alexandra Christiansen and Robert Madsen, members of NAM’s Sustainable Thematic team, which is headed up by Thomas Sørensen and Henning Padberg, the managers of the Global Climate and Environment Fund. The Sustainable Thematic team is a sub-group of NAM’s Fundamental Equity boutique, which has 27 portfolio managers and analysts. It is further supported by NAM’s 25-strong Responsible Investment team, which includes dedicated impact and engagement specialists.

The Nordea 1 - Global Climate Engagement Fund, an Article 8 vehicle, “leverages the experience, investment approach and risk management framework of the Global Climate and Environment strategy, but instead of focusing on leaders in climate solutions, it targets companies in the earlier stages of transitioning towards sustainable business models,” said the company. “By pushing these companies to catch up to climate leaders, this approach unlocks under-appreciated value and contributes to the reduction of real-world emissions.”

Christiansen added: “Over the past few years we have witnessed a meaningful flight of capital out of areas of the market deemed ‘not green enough’ and potentially at risk in the transition to a net zero emissions world.

“Yet we believe many businesses that are carbon intensive today will still be relevant in the future green economy – or even critical to enabling the energy transition. Our goal is to generate alpha by de-risking the fundamentals of these companies through engagement on decarbonisation targets, strategy, and capital commitments.”

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