Swift to launch new CBDC platform within two years

Global bank messaging network Swift is planning a new platform within the next 24 months to connect the wave of central bank digital currencies (CBDCs) under development to the existing finance system, it told Reuters.

The move, which would be one of the most significant yet for the nascent CBDC ecosystem given Swift's key role in in global banking, is likely to be fine-tuned to when the first major ones are launched.

Around 90% of the world's central banks are now exploring digital versions of their currencies and although keen not to be left behind by bitcoin and other cryptocurrencies, are also grappling with technological complexities.

Swift’s head of innovation, Nick Kerigan, said its latest trial, which took six months and involved a 38-member group of central banks, commercial banks and settlement platforms, had been one of the largest global collaborations on CBDCs and “tokenised” assets to date.

It focused on ensuring different countries’ CBDCs can all be used together even if built on different underlying technologies, or “protocols”, thereby reducing payment system fragmentation risks. It also showed they could be used in highly complex trade or foreign exchange payments and potentially be automated so to both speed up and lower the costs of the processes.

Kerigan said the results, which also showed that banks could use their existing infrastructure, had been widely regarded as a success by those who took part and given Swift a timeline to work to.

“We are looking at a roadmap to productise (launch as a product) in the next 12-24 months,” he confirmed. “It’s moving out of experimental stage towards something that is becoming a reality.”

Although the timeframe could still shift if major economy CBDC launches get delayed, getting out the blocks for when they do would be a major boost for maintaining Swift’s incumbent dominance in the bank-to-bank plumbing network.

Countries such as the Bahamas, Nigeria and Jamaica already launched CBDCs, while China is well advanced with real-life trials of an e-yuan. The European Central Bank has digital euro one underway too, while the Bank for International Settlements (BIS), the global central bank umbrella group, is running multiple cross-border trials.

Swift’s main advantage is that its existing network is already usable in over 200 countries and connects more than 11,500 banks and funds, which use it to send trillions of dollars daily.

 

China makes concessions as it seeks more international investment

China has promised to treat foreign companies the same way as domestic peers in a bid to attract more foreign investment, cooperation and expertise, as Asia’s largest economy moves to upgrade and strengthen its industrial chains.

“China will fully guarantee national treatment for foreign companies, so that more foreign companies can invest in China with confidence and peace of mind,” Vice Commerce Minister Guo Tingting said at the China Development Forum in Beijing but did not give details about how it would guarantee “national treatment”, or the equal treatment of locals and foreigners as per World Trade Organisation (WTO) principles.

For years, Western firms have complained of unequal access in China, a vast consumer market and also global supplier of raw materials and components. Western governments have expressed concern about “economic coercion”, and companies have considered “de-risking” supply chains and operations away from China.

China’s introduction of a broader anti-espionage law, exit bans and raids on consultancies and due diligence firms have further deterred foreign fund inflows. Inbound foreign direct investment (FDI) fell by 8% last year.

China will continue to open up high-level areas of industry and finance and create more market opportunities and will firmly safeguard a multilateral trading system with the WTO at its core, Guo said.

Premier Li Qiang said at the weekend that China will continue efforts to build a first-class business environment and to welcome enterprises from all over the world to invest in the country.

More than 100 overseas executives and investors have attended the annual China Development Forum since the weekend, including companies with deep supply chains in China such as  and Siemens.

China will fully lift restrictions on foreign investment access to its manufacturing sector and deepen in-depth cooperation with firms from all countries, Minister of Industry and Information Technology Jin Zhuanglong said at the forum on Monday.

 

Boeing reshuffle as safety record questioned

Boeing’s chief executive Dave Calhoun will step down at the end of this year following questions over the company’s safety record.

The US multinational also announced that the head of its commercial airlines division will retire immediately while its chairman will not stand for re-election.

The company’s safety and quality control standards have been questioned after an unused door blew out of a Boeing 737 Max in January shortly after take-off, although no-one was injured.

Calhoun took on the chief executive role in early 2020 after the previous boss, Dennis Muilenburg, was ousted in the aftermath of one of the biggest scandals in Boeing's history. Within five months, two brand new 737 Max planes had been lost in almost identical accidents that claimed the lives of 346 passengers and crew. A board member at the time, after being made boss Calhoun promised to strengthen Boeing’s safety culture and rebuild trust.

Commenting on the boardroom reshuffle Susannah Streeter, head of money and markets at financial services firm Hargreaves Lansdown, said: ‘With trust having seeped away in the company’s safety procedures, following five years of catastrophic events including two fatal crashes, Boeing is still likely to go through more turbulence before calmer conditions have a chance of returning.

“Outgoing CEO Calhoun has described the incident when the Alaskan Airlines door plug detached mid-flight as a watershed moment. This series of calamities clearly need to be greeted by an emergency corporate procedure to help mend the company’s reputation. It’s estimated that multiple groundings prompted by faults being discovered have led to more than US$31 billion in losses for the company. Shares are down nearly 25% year to date.

“It’s not surprising that there appears to be some scepticism about the changes, given previous executive merry go-rounds appear to have made no difference and the company has slid into further chaos. David Calhoun was shoved into the CEO seat to sort out the company only in 2020, taking over from Dennis Muilenburg who was fired following the crashes in Indonesia and Ethiopia.

“The company has been left largely rudderless and now the pressure will be on new chair Steve Mollenkopf the former CEO of semi-conductor company Qualcomm to find a new chief executive as soon as possible. Whoever is recruited will have a mountain to climb in terms of enacting culture change in the organisation and restoring the company’s safety credentials.”

 

Bombardier borrows US$750 million via junk-bond offering

Canadian private-jet maker Bombardier is reported to have sold a US$750 million junk bond late last week to help refinance debt due in 2026, raising the size of the offering and getting slightly better terms than it initially expected.

The seven-year bond bond comes with a 7.287% coupon, according to a company insider. The Montreal-based firm had originally sought to borrow $500 million, for which a coupon of as much as 7.5% had been discussed, the anonymous source said.

Bombardier’s debt sale coincided with high-yield spreads — the extra yield investors demand over Treasuries — hovering around their lowest in about two years. The company previously issued debt last November when it raised US$750 million by selling seven-year bonds with a call option after three years at yield of 8.75%.

Bombardier also announced last Friday that it is redeeming about US$200 million of its US$1.7 billion of notes due 2027.

Last week’s transaction “priced well inside of the single B average level, and just shy of B+ levels, thus offering some tightening potential should Bombardier achieve high B ratings as we expect they will this year,” wrote Matt Woodruff, an analyst at CreditSights.

Improving credit quality and growing liability management capacity increases chances that Bombardier could score an upgrade, especially as it chips away at a US$2.8 billion maturity wall coming due in 2026-2027, Bloomberg Intelligence credit analyst Matthew Geudtner wrote in a note.

 

More central banks shift interest rate policy

Following the first interest rate hike since 2007 by Japan this month, other central banks signalled a shift in their rate policies last week.

The biggest upset was delivered by Turkey’s central bank, which on Thursday raised its key interest rate, the one-week repurchase rate, from 45% to 50%, citing the continuing need to counter climbing inflation in the country.

“In February, led by services inflation, the underlying trend of monthly inflation was higher than expected,” the bank’s monetary policy committee (MPC) said in a statement after the decision. It noted that imports of consumption goods and gold slowed, which improved Turkey’s current account balance, but that domestic demand remaining “resilient.”

“Stickiness in services inflation, inflation expectations, geopolitical risks, and food prices keep inflation pressures alive,” the statement said. “The Committee closely monitors the alignment of inflation expectations and pricing behaviour with projections, and the impact of wage increases on inflation.”

Turkish annual consumer price inflation rose to 67% in February, reigniting concerns that the central bank, which had indicated in January that an eight-month-long rate-hiking cycle was over — might have to return to tightening.

The MPC stressed made it that it would not shy away from further hikes, if needed to keep its inflation targets on track. “In response to the deterioration in the inflation outlook, the Committee decided to raise the policy rate. Tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range,” it said.

“Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen.” 

Last week also saw the governing board of the Swiss National Bank (SNB) cut its key policy rate, by 25 basis points to 1.5%, the first cut since the SNB increased the sight deposit remuneration rate to 1.75% last June. To justify this decision, the SNB points to the sharp fall in inflation in Switzerland, which has been below 2% since June 2023 and is therefore in line with the central bank's target. In February, inflation in Switzerland stood at 1.2%.

In addition, the SNB's new conditional forecasts have been sharply revised downwards. At its last meeting in December, it was expecting inflation to average 1.9% in 2024 and 1.6% in 2025 but is now forecasting inflation to average 1.4% in 2024, 1.2% in 2025 and 1.1% in 2026, despite the cut in the key interest rate. For each quarter, the inflation forecasts have been cut by 0.5 to 0.6 points, providing ample justification for the lower rates. The SNB justifies its lower forecasts by lower-than-expected inflation for certain goods and a downward revision of second-round effects.

The rise in the value of the Swiss franc over the past year has helped to limit inflation but is now weighing heavily on the competitiveness of Swiss companies) and the need to support growth also played a role in the decision, according to the SNB.

The Czech Republic's central bank also cut interest rates to support the economy as inflation falls. The bank reduced the rate for the third time in a row, bringing it down to 5.75%. The bank began reducing borrowing costs in last December, marking the first cut since June 2022, and followed this with another half-percentage point cut last month.

 

UK agrees US$100 million trade finance to support Africa food security

Development lender British International Investment (BII) has agreed a US$100-million finance facility with the Eastern and Southern African Trade and Development Bank (TDB) to boost trade finance, farming and food security in the region.

The finance will help fund trade, including importing and exporting goods, on a continent where many debt burdened African economies face currency depreciation and rising debt and inflation compounded by issues such as climate change.

Providing more capital to help bolster trade finance in the region is important as many international lenders have pulled back from offering it, leading to a finance gap of up to US$120 billion annually, African Development Bank research shows.

The financing for TDB means that local companies will be able to buy essential materials such as fertilisers and machinery, helping boost output and cross-border trade, food security, job creation and economic resilience, the lender said.

“This investment underscores the UK government’s commitment to supporting economic and agricultural development across Africa,” said Andrew Mitchell,UK Minister for Development and Africa.

BII, which has investments in over 1,470 businesses in emerging economies across 65 countries and total assets of £8.1 billion (US$10.2 billion) said that between 2022 and 2026 at least 30% of its total new commitments by value will be in climate finance.

The financing facility with TDB is the fourth of its kind to be struck with the lender and would help the bank address supply chain disruptions and forex shortages, said Admassu Tadesse, TDB Group president and MD.

It would also help the group play an important role, “often working counter-cyclically to contribute to the security of supply of essential commodities in high priority sectors such as agriculture and healthcare”, he added.

 

Record 142 natural catastrophes cause US$108 billion insured losses in 2023

A devastating earthquake in Turkey and Syria, severe convective storms (SCS) and large-scale urban floods were the main events driving insured natural catastrophe losses to US$108 billion in 2023, reaffirming the 5–7% annual growth trend in global insured natural catastrophe losses since 1994, reports Swiss Re Institute.

The reinsurer estimates that insured losses could double within the next 10 years as temperatures rise and extreme weather events become more frequent and intense. Therefore, mitigation and adaptation measures are key to reduce natural catastrophe risk.

Global insured losses from natural catastrophes outpaced global economic growth over the past 30 years: From 1994 to 2023, inflation-adjusted insured losses from natural catastrophes averaged 5.9% per year, while global gross domestic product (GDP) grew by 2.7%, meaning that over the period the relative loss burden compared to GDP has doubled.

Jérôme Jean Haegeli, Swiss Re's Group Chief Economist, comments: “Even without a historic storm on the scale of Hurricane Ian, which hit Florida the year before, global natural catastrophe losses in 2023 were severe. This reconfirms the 30-year loss trend that's been driven by the accumulation of assets in regions vulnerable to natural catastrophes.

“In the future, however, we must consider something more: climate-related hazard intensification. Fiercer storms and bigger floods fuelled by a warming planet are due to contribute more to losses. This demonstrates how urgent the need for action is, especially when taking into account structurally higher inflation that has caused post-disaster costs to soar.”

 

Moody’s upbeat as Zambia nears debt restructure

Zambia’s dollar bonds have strengthened in recent days as the country works towards finalising a long-delayed debt restructuring, with Moody’s Investors Service saying a deal would be a catalyst for broader economic reforms.

The price of Zambia’s debt due 2027 gained for a sixth day on Monday to the highest since May 2022, rising 0.1 cents on the dollar to 72.637 cents. Parties to negotiations that started last week expect to conclude a deal for $3 billion of global bonds within days, according to inside sources.

A potential agreement will likely mirror previous terms on coupon adjustments, lower principal amounts and maturity extensions, Moody’s said in a note. Debt and liquidity relief would allow the government the time and space to implement wider economic and fiscal reforms, while reducing investor uncertainty and supporting ongoing funding disbursements under Zambia’s International Monetary Fund (IMF) programme.

The government of President Hakainde Hichilema is looking to draw a line under three years of debt negotiations after it became the first African nation to default during the pandemic era. The central bank previously warned that the prolonged restructuring process was limiting capital inflows, pressuring the foreign exchange market.

The country struck an agreement last year with a group of government lenders, including China and France, to rework US$6.3 billion in loans.

Moody’s cautions that the latest round of bondholder negotiations is taking place in the midst of a severe drought, with far-reaching implications for the economy, energy supply and food security.

“We expect the effects of the drought to weigh on Zambia’s debt carrying capacity, increasing the risk of higher losses for creditors from the current negotiations and following the debt restructuring,” Moody’s said.

 

Paynetics announces strategic acquisition of Novus

Bulgaria-based embedded finance provider Paynetics has announced the strategic acquisition of UK-based neobank Novus.

A release said that the acquisition highlights Paynetics’ commitment to advancing environmental, social, and governance goals (ESG) while improving the financial landscape with its Embedded Finance suite. “Through its approach, Novus has upgraded traditional banking by helping conscious consumers make a difference while seamlessly integrating financial services with event-driven positive impact initiatives,” the release added.

“This corporate model allows users to effortlessly contribute to causes they feel emotionally connected to. In essence, with every transaction, a portion of revenue is automatically directed to an NGO selected by the customer. Through the Novus app, users can further track the carbon footprint their purchases generate and easily offset them via certified Carbon Removal Projects.

“Paynetics aims to further improve such offerings while expanding the ESG ecosystem across Europe, helping clients to push forward ESG initiatives through the corporate Embedded Finance service.”

 

ANZ Group to settle credit cards class action for A$57.5 million

Australia ‘Big Four’ bank ANZ has settled on a class action suit related to credit card interest charged under allegedly unfair contract terms.

Melbourne-based ANZ has agreed to pay A$57.5 million (US$37.7 million) to settle the action related to interest charged on personal credit cards, according to a statement. The case was brought against the Australian lender by law firm Phi Finney McDonald in 2021 which previously alleged «unfair contract terms and unconscionable conduct» in charging interest between July 2010 and January 2019.

“The settlement is without admission of liability and remains subject to court approval,” the bank added.

- Separately, ANZ announced that it has collaborated with smart contracts platform Avalanche and blockchain Chainlink Labs to design an initiative that will fast-track the global movement and settlement of tokenised assets. According to an official blog post, the blockchain project connects Avalanche and Ethereum to settle tokenised assets across the two networks in numerous currencies. 

The initiative will employ the settlement process known as Delivery vs. Payment (DvP). The DvP is a popular type of settlement and risk-management protocol for securities. This system mandates payment before or at the same time as their delivery. Despite being a traditional settlement system, Chainlink and its partners, through the newly launched project will leverage the support of Ethereum and Avalanche to modernise the DvP legacy. 

With the support of the two networks, the partners will modernize the DvP processes allowing assets and payments to be tokenized on the infrastructure. Therefore, enabling atomic and non-intermediated DvP settlement. ANZ will leverage the blockchain interoperability solution of Chainlink and its cross-chain fracture to boost the efficiency of the DvP settlement.