BIS warns trade tensions could deepen global financial vulnerabilities

Rising trade tensions and policy uncertainty are clouding the global economic outlook and risk exposing deeper structural weaknesses in both the real economy and the financial system, the Bank for International Settlements (BIS) has warned in its Annual Economic Report 2025. The report outlines a more fragile environment for growth and inflation, citing recent disruptions to trade and tighter financial conditions as key threats. The BIS calls on policymakers to act as stabilising forces, emphasising the need for structural reforms, fiscal prudence, and a continued focus on price stability.

According to the BIS, a shift toward economic fragmentation and protectionism is amplifying the long-term decline in productivity growth seen across many advanced and emerging markets. These pressures come on top of lingering effects from the post-pandemic inflation surge, which the report says could leave a lasting mark on household inflation expectations and complicate monetary policy decisions.

High and rising public debt is another key concern, increasing financial system vulnerability to interest rate shocks and reducing governments’ ability to respond to future downturns. The BIS urges a renewed focus on ensuring debt sustainability to preserve fiscal space.

The report also highlights deeper interconnectedness within global financial markets, driven by the growth of sovereign bond markets and the rising influence of non-bank financial institutions such as investment funds and hedge funds. FX swap markets have played a central role in enabling global investment strategies while managing currency risk, further tightening links across jurisdictions.

To strengthen resilience, the BIS advocates for renewed efforts to boost productivity and reduce structural rigidities, particularly through trade liberalisation and reforms to improve economic agility. It also reiterates that central banks must stay the course on price stability, even amid shifting economic headwinds.

The report underscores that navigating this uncertain environment will require coordinated policy action, long-term discipline and structural change rather than reliance on short-term stimulus or protectionist measures.

“These developments are unfolding in a world already grappling with economic fragmentation, declining productivity, high and rising public debt, and a growing footprint of less regulated nonbank financial institutions,” said Agustín Carstens, General Manager, BIS. “Public policy is crucial as a stabilising force. Policymakers must act decisively on multiple fronts to ensure price stability and promote sustainable economic growth while preserving economic and financial stability.”

 

Australian investors return to managed funds despite global volatility

Australian investors added A$8.6bn to managed funds between January and May 2025, showing cautious resilience in the face of global market uncertainty, according to data from Calastone. The total marks a sharp increase from the A$380m recorded over the same period in 2024. Investor sentiment surged in January following US President Trump’s election victory, but confidence waned in February as central banks pushed back on expectations for rate cuts. This shift triggered profit-taking in equities and lifted bond yields, challenging fund performance across asset classes.

Australian domiciled equity funds bore the brunt of February’s sell-off, recording A$800m in outflows. However, the asset class rebounded with three consecutive months of net inflows from March to May, bringing total equity fund inflows to A$1.25bn year-to-date. This marks a notable turnaround from the A$3.1bn lost during the same period last year. Multi-asset funds also dipped in February, losing A$180m, but have since attracted A$1bn in net inflows year-to-date. That compares with A$1.65bn in outflows over the same period in 2024.

Bond funds showed mixed sentiment in March, with redemptions and subscriptions cancelling each other out to produce flat net flows. This likely reflects investor caution ahead of April’s volatility, which was triggered by the announcement of Liberation Day tariffs.

Unlike their Asian counterparts, who turned bearish in April, Australian investors added A$3.15bn to managed funds that month across all asset classes. This marked the strongest monthly inflow since July 2024, when dovish central bank signals spurred a surge in fixed income allocations. The data suggests that while global conditions remain volatile, Australian investors are willing to re-engage with markets, particularly when valuations adjust and macro signals stabilise.

 

Tideway issues UK’s first corporate Blue Bond

Tideway, the company behind London’s ‘super sewer’, has become the first UK corporate to issue a Blue Bond in sterling, raising £250m to support its work cleaning up the River Thames. Blue Bonds are a subset of Green Bonds, designed to fund projects that benefit marine and freshwater environments. Tideway’s issuance marks a milestone both for the company and the broader UK sustainable finance market, as the project transitions from construction to active environmental delivery.

The Thames Tideway Tunnel has already diverted over seven million cubic metres of sewage from the river, with zero discharges reported since the infrastructure was fully connected in February 2025. Historically, tens of millions of tonnes of untreated sewage would spill into the Thames each year. The new tunnel intercepts this pollution, improving water quality in the tidal Thames and contributing to cleaner marine ecosystems further downstream, including the Thames Estuary and the North Sea.

Tideway has previously issued 18 Green Bonds since the project’s inception. The new Blue Bond label reflects the project’s core environmental impact, aligning more closely with its now-operational status and measurable benefits to aquatic ecosystems.

The £250m raised will provide additional liquidity during the tunnel’s system acceptance period, which is scheduled to complete in 2027. Lloyds Bank acted as global coordinator on the transaction, advising on structuring, documentation and investor communications. The bond is expected to appeal to sustainability-focused investors seeking targeted exposure to water-related impact, as demand grows for labelled instruments that go beyond general environmental credentials.

With the tunnel now operational, Tideway’s transition to Blue Bonds signals a maturing of the UK sustainable bond market, as issuers increasingly link labelled debt to specific environmental outcomes and real-world metrics.

 

ISDA and Ant explore tokenised bank liabilities for FX settlement

The International Swaps and Derivatives Association (ISDA) and Ant International have published a joint report under Singapore’s Project Guardian, outlining how tokenised bank liabilities and shared ledgers can reduce costs and settlement delays in cross-border payments and FX transactions.

The report, developed with support from HSBC, BNY, OCBC and the Global Foreign Exchange Division, proposes a common framework to help banks and financial institutions adopt tokenised payments in transaction banking. It sets out design principles for interoperability, outlines risk mitigation strategies for shared-ledger systems, and highlights real-world use cases already underway.

Produced under the Monetary Authority of Singapore’s Project Guardian initiative, the report aims to address long-standing frictions in international payments. Current challenges include limited settlement windows, time zone mismatches and reliance on multiple platforms, all of which contribute to slower settlement times and higher fees. Globally, businesses spend an estimated US$120bn a year on cross-border transaction costs.

Use cases presented in the report suggest tokenised bank liabilities could reduce settlement times to seconds and enable 24/7 processing. This could cut cross-border transaction costs by up to 12.5% by 2030, saving businesses more than US$50bn.

Ant International contributed a global treasury management use case built on its Whale blockchain platform, demonstrating real-time, multi-currency clearing and FX settlement.

While the technology is advancing quickly, the report stresses the need for a widely accepted industry framework to support broader adoption. ISDA and Ant International, along with other Project Guardian participants, plan to continue developing new use cases and integrations with existing financial infrastructure.

 

Belgium becomes first Eurozone country live with Verification of Payee

Belgium has become the first Eurozone country to go live with Verification of Payee (VoP), months ahead of the EU’s October 2025 compliance deadline under the Instant Payments Regulation. The move positions Belgian banks at the forefront of fraud prevention efforts in Europe’s payment system, enabling real-time name checks to verify whether a payee’s name matches the account number provided. It aims to reduce misdirected payments and combat authorised push payment fraud, which continues to rise across the region.

By adopting an extended version of the VoP framework, Belgian banks are also enhancing user experience and fraud detection. This version offers multilingual notifications (in French, Dutch and German), improved support for special characters, and richer data sets to help banks identify suspicious activity earlier. Compared with basic VoP implementation, this approach is estimated to deliver 30% more effective fraud prevention and higher customer satisfaction.

The Belgian rollout enables mutual VoP checks with the Netherlands, supporting safer cross-border payments and laying the groundwork for broader interoperability across EU markets. The initiative reflects growing momentum behind VoP as the October deadline approaches, with other member states expected to follow.

The implementation was developed in partnership with local industry bodies including CEC and Febelfin, with participation from 17 Belgian banks. SurePay, the vendor supporting the rollout, currently processes more than 200 million VoP checks each month across Europe, a figure expected to double as batch verification is introduced.

 

US earnings under pressure as tariffs begin to bite

Second-quarter earnings reports are expected to reveal early signs of how President Trump’s tariff policy is affecting US companies, according to analysts at Goldman Sachs Research. While Goldman economists assume firms will pass on 70% of tariff costs to consumers via higher prices, surveys so far show limited inflation, which suggests companies may be absorbing more of the cost than expected. This could weigh on profit margins, especially for firms most exposed to new tariffs.

“Companies have so far only announced modest price increases this year, although increases have been larger among firms most exposed to tariffs,” David Kostin, chief US equity strategist in Goldman Sachs Research, wrote in a recent report.

Consensus estimates indicate corporate margins have already begun to contract. On a sequential basis, margins are expected to fall by 50 basis points from 12.1% to 11.6%, reflecting the pressure on company profitability as they grapple with higher input costs and pricing constraints.

“We expect the S&P 500 in aggregate will beat the low bar set for the second quarter,” Kostin added. Sales growth is projected to remain solid, supporting earnings despite narrowing margins.

For the full year, Goldman Sachs Research forecasts S&P 500 earnings-per-share to rise 7% to US$262. The outlook factors in a modest drag on growth and a temporary inflation bump due to tariffs, but this is expected to be balanced by gains in sectors such as information technology, communication services and healthcare. Over the next 12 months, Goldman forecasts the S&P 500 will deliver a total return of 3.5%, reaching a level of 6,500.

 

ECB advances DLT settlement plans with dual-track strategy

The European Central Bank (ECB) has approved a two-track plan to enable the settlement of distributed ledger technology (DLT) transactions in central bank money, marking a major step toward integrating tokenised assets into the financial system.

The first track, known as Pontes, will offer a Eurosystem DLT-based settlement solution by linking DLT platforms with existing TARGET Services. A pilot is scheduled to launch by the end of Q3 2026, incorporating lessons from the ECB’s 2024 exploratory work. During the pilot phase, the Eurosystem will also assess potential enhancements aligned with operational, legal and technical standards.

Alongside Pontes, a second track called Appia will focus on developing a long-term DLT settlement framework that supports a more integrated and innovative financial ecosystem in Europe. The ECB said it will continue engaging with both public and private sector stakeholders as part of this effort.

Both initiatives aim to support innovation while maintaining the safety and efficiency of market infrastructure. Dedicated contact groups will be established for Pontes and Appia to ensure market involvement, with a call for expressions of interest for the Pontes group expected soon.

The dual-track strategy builds on the ECB’s 2024 DLT trials, which involved 64 participants and over 50 experiments. A report on the outcomes of those trials was also published.

 

US farmer sentiment falls as trade outlook dims

Farmer sentiment in the US declined sharply in June, according to the Purdue University/CME Group Ag Economy Barometer, as concerns about future agricultural exports weighed on producers’ outlook. The overall barometer dropped 12 points from May to 146, ending a two-month streak of improvement. The decline was driven by a sharp fall in the Index of Future Expectations, which dropped 18 points to 146. In contrast, the Current Conditions Index dipped only slightly, down 2 points to 144. Despite the June declines, all three indices remain above year-ago levels.

Weaker confidence in trade prospects appears to be a key factor. The percentage of farmers expecting agricultural exports to rise over the next five years fell to 41% in June from 52% in May. Meanwhile, those anticipating a decline rose to 16%. Only 31% of respondents strongly agreed that free trade benefits agriculture, down from 49% in late 2020.

The Farm Financial Performance Index fell 5 points to 104, indicating a slightly weaker outlook, though still above the baseline of 100. Livestock income, particularly from beef, remains a source of support. In contrast, the Farm Capital Investment Index rose 5 points to 60, with 24% of producers saying it's a good time to invest. However, this has not translated into a stronger outlook for machinery sales, with 54% planning to cut back compared to last year.

Short-term farmland value expectations also softened slightly. The index dropped 4 points to 120, driven by fewer respondents expecting price increases.

“Overall, we see weakened agricultural producer sentiment coupled with their weakened expectations for the future,” said Michael Langemeier, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. “Reduced optimism about the future of US agriculture’s export prospects stands out as a major cause of the shift in sentiment. Although farmers remain concerned that US tariff policies will reduce their income, fewer producers in May and June said they expect a negative or very negative impact on their income than they did in March and April.”

 

Nissan seeks to delay supplier payments to boost short-term cash - Reuters

Nissan Motor is asking some of its suppliers in the UK and EU to accept delayed payments as part of an effort to shore up short-term liquidity, according to internal correspondence cited in a report by Reuters.

The requests are part of a broader push to strengthen free cash flow during what the company has described as its most challenging financial quarter. The move follows a similar effort at the close of its previous financial year and is reportedly intended to give the carmaker more flexibility at the end of the April–June period.

Nissan reported a ¥700bn net loss for the fiscal year ending in March and expects negative free cash flow of around ¥550bn for its automotive business in the current quarter. As part of its turnaround plan, the company has announced a 15% global workforce reduction and the closure of seven plants, targeting ¥500bn in cost cuts over the next two years.

According to Reuters, some suppliers have been offered the option of delayed payment in exchange for a higher payout, or immediate payment via a financial intermediary such as HSBC. The emails reviewed by the news outlet suggest a cash flow improvement target of €150m linked to the deferral strategy.

Nissan told Reuters that some suppliers were offered more flexible payment terms but emphasised that participation was voluntary and designed to support its free cash flow position.

Nissan held ¥2.2trn in cash and equivalents at the end of March but faces significant bond redemptions this financial year. The carmaker’s credit rating remains below investment grade, and any further downgrades could complicate future financing.

 

Nacha backs US plan to phase out federal cheque payments

Nacha has formally backed a US executive order that would eliminate paper cheque payments for all federal disbursements by the end of September 2025, citing potential savings and fraud reduction.

In its comments on Executive Order 14247, Nacha said the move aligns with its long-standing goals to modernise the US payments system and reduce reliance on cheques. The federal government issued around 36 million paper cheques in 2024. Nacha estimates that switching these to ACH (Automated Clearing House) payments could have saved more than US$68m that year alone.

While the Treasury Department already processes over 1.8 billion electronic payments annually, including Social Security, tax refunds, and Medicare, cheques continue to be used in a minority of cases. Nacha argues the remaining usage is due more to policy inertia than technical barriers.

It urged the government to minimise hardship exceptions, arguing that consumers and businesses already have access to bank accounts, prepaid cards and digital payment tools. Nacha also called for stronger fraud controls and faster settlement times to match private sector standards.

 

Tide selects Atlar to strengthen global treasury operations

SME banking platform Tide has partnered with treasury infrastructure provider Atlar to streamline payments, cash management and bank connectivity across its global operations.

The move comes as Tide scales its business across the UK, India and Germany, managing growing complexity across multiple banks, currencies and legal entities. With over one million members and more than 2,000 employees worldwide, Tide is seeking to centralise control while maintaining agility.

Atlar’s platform provides Tide with real-time visibility across more than fifteen financial partners, integrating directly with its SAP S/4HANA system to automate data flows between ERP and banking infrastructure. The rollout supports automated payments, cash forecasting and centralised treasury management.

“As a global business operating at scale, we needed a modern and flexible treasury platform that could integrate seamlessly with our systems and banking partners. With Atlar, we’ve found a solution that gives us the visibility and control we need to support our continued growth,” said Piero Ardito, group treasurer at Tide.

The partnership reflects a broader shift toward API-first treasury systems among digital-first financial services firms looking to scale efficiently while preserving oversight.

 

BBVA expands global supply chain finance through Olea partnership

BBVA Corporate & Investment Banking has partnered with trade finance platform Olea to strengthen and globalise its supply chain finance (SCF) capabilities. The alliance enables BBVA to extend its SCF offering beyond Europe, the US and Latin America, targeting major trade corridors and emerging markets.

The agreement combines BBVA’s international reach with Olea’s digital infrastructure to deliver integrated, transaction-specific financing solutions. The platform supports real-time data exchange, multi-currency coverage, and risk-adjusted pricing by streamlining execution while maintaining control and compliance standards.

A key feature of the partnership is broader credit access for mid-sized suppliers operating across borders. Olea’s technology consolidates financing, risk assessment and onboarding, allowing BBVA to offer scalable solutions across more than 70 trade corridors. This is especially relevant in markets where supplier financing remains limited or inconsistent.

Operational integration between BBVA and Olea includes joint commercial teams and a shared focus on speed, flexibility and transparency. The collaboration aims to reduce financing turnaround times from weeks to days, while improving visibility across supply chains.

 

Mastercard and Octet Türkiye target B2B payments across MENA

Mastercard has partnered with Octet Türkiye to introduce a corporate payment solution designed to support digital transactions and improve financial flexibility for businesses in the Middle East and North Africa (MENA). The new platform is intended to simplify B2B payments by allowing companies to use corporate credit cards for purchases, while enabling suppliers to receive invoice payments immediately. It draws on Octet Türkiye’s experience in trade facilitation and aims to help companies shift away from cash, aligning with broader regional efforts to digitise financial services.

According to Mastercard, the offering is designed to help businesses manage liquidity more effectively, including through the option of paying in instalments. The companies also suggest that it could enable better control over working capital by extending payment terms without the need for traditional short-term loans.

The move comes as digital B2B payments are forecast to nearly double in the Middle East and Africa by 2028, according to data from Statista. Mastercard and Octet Türkiye say the collaboration is focused on building secure, efficient tools that reflect the evolving financial needs of firms across the region.