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World Bank “could boost lending to developing countries” – Industry roundup: 28 September

World Bank “could boost lending to developing countries by U$190 billion”

A study by the Rockefeller Foundation has indicated that revising the World Bank’s risk management strategy could free up nearly US$190 billion in essential loans for developing countries, without affecting its AAA credit rating.

The Rockefeller Foundation engaged finance analytics firm Risk Control to evaluate and quantify recommendations initially made in 2022 by an independent G20 panel, which had suggested that relaxing the World Bank’s stringent capital adequacy rules could unlock hundreds of billions in extra loans to tackle climate change and promote development.

The report arrives as shareholders of the World Bank, including the US and China, are set to convene from October 9-15 in Marrakech, Morocco. The meeting aims to assess and further the initial reforms already in progress at the institution.

According to the study, the International Bank for Reconstruction and Development (IBRD) could increase its lending by US$162 billion over a period of 10 years or less before prompting a downgrade from global credit rating agencies. Meanwhile, the International Development Association (IDA), which focuses on the world’s poorest countries, could boost its lending by US$21 billion to US$27 billion.

In the fiscal year ending on 30 June 2023, the IBRD committed to new net lending of US$38.6 billion, while the IDA committed US$34.2 billion. 

The study also posited that if rating agencies adjusted their procedures and the allowance for “callable capital,” both IBRD and IDA could potentially extend their lending to nearly US$900 billion.

The report concluded that innovative financial mechanisms, such as hybrid capital, could offer additional funding. Furthermore, securitising 10% of IBRD and IDA’s loan portfolios could create an extra lending capacity of US$29-US$41 billion.

World Bank President Ajay Banga said that the bank had already raised its leverage ratio to secure an extra US$50 billion in loans over a decade. He added that this amount could potentially be doubled with contributions from the international community.

Experts have argued that developing and emerging economies require US$2.4 trillion annually to address global climate issues. Eric Pelofsky, Vice President at the Rockefeller Foundation stated: “We need this because the developing world is pitching off a cliff in terms of debt, available climate finance, development needs. And from a geopolitical standpoint, the Bank, the Fund, the regional development banks are infinitely more transparent than some of the obvious alternatives.

The Biden administration is advocating for the World Bank as a “credible alternative” to China’s overseas lending practices, which are often criticised for lacking transparency and posing risks through collateralised loans.


Italy softens bank windfall tax

Reports suggests that the Italian finance ministry has quietly watered down its proposed windfall tax on banks’ “extra profits” announced last month following an intense round of discussions between rival political factions and the nation’s banks.

According to the draft of a new amendment that will dramatically modify the tax before it goes to the Italian parliament for approval, banks will be able to cut their liability significantly in two new ways.

The development is a major concession to the country’s banking lobby and its political ally, the Forza Italia party that is a junior partner in the current coalition government and also to the European Central Bank (ECB), which sharply criticised the original draft earlier this month.

It also appears to thwart Prime Minister Giorgia Meloni’s hopes to narrow the country’s budget deficit with an opportunistic raid on a sector of the economy that — at least temporarily — is cash-rich.

The banks will now be able to take one of two options: under one, they can escape the tax entirely if they allocate at least 2.5 times the amount that would have originally been paid under the original tax to their core capital reserves. Banks that make a loss can use the previous year’s profits for the reserves, but they are prohibited from passing any increased costs on to consumers. 

Under the second option, banks may pay a modified version of the tax capped at 0.26% of risk-weighted assets, instead of 0.1% of total assets as previously advocated. That also excludes profits generated by interest paid on government bonds, effectively creating a new incentive for Italian banks to hold such debt. 

Rome maintains the tax will raise between €2.5 billion and €2.7 billion, just under the €3 billion predicted before. Unicredit analyst Francesco Maria Di Bella said that the change will likely have little impact on Meloni’s budget planning. 

“Even in its original formulation, the support from this bank tax was only marginal,” said Di Bella. “Of course, it will generate new revenues for the Treasury, but I don’t think the Government has regarded it as a game changer for next year’s deficit.”


China’s Tencent joins CBDC interoperability pilot

China’s fintech giant Tencent, operator of the WeChat and WeChat Pay platforms, will join central bank-led digital yuan (e-CNY) and central bank digital currency (CBDC)interoperability pilots.

WeChatPay and rival Alipay command around 15% of the Chinese payments market., but in recent years, Tencent has moved to align with the People’s Bank of China (PBoC) CBDC adoption drive.

Report state that Tencent will work alongside the PBoC’s Digital Currency Research Institute on the “multilateral CBDC bridge project,” also known as Project mBridge. The project itself is a multinational effort that in addition to the PBoC, involves the Bank for International Settlements (BIS) and the central banks of Hong Kong and the United Arab Emirates (UAE).

In 2022, the prototype mBridge platform conducted “real-value transactions” between 20 commercial banks in four of the group’s territories. Tencent began working with the PBoC on CBDC technology back in 2018.

But observers have commented that WeChat Pay and the PBoC’s coin will likely need to compete with one another in the payment sphere. While WeChat Pay and Alipay are in widespread usage, the digital yuan still only represents a small fraction of the Chinese payments market.

The PBoC has repeatedly insisted that the digital yuan and private-sector alternatives like WeChat Pay will eventually complement one another.

In early 2022, WeChat Pay added an initial raft of electronic payments-CBDC interoperability options to its platform.

In March this year, a PBoC digital yuan update allowed Tencent users to make WeChat Pay payments from the bank’s official app. Tencent updated its own app the following month to allow users to make e-CNY payments from a range of WeChat platforms, including mini-programs, applets, and video accounts.


Fresh US government shutdown looms

Republican US House Speaker Kevin McCarthy has rejected a stopgap funding bill advancing in the Senate, bringing Washington closer to its fourth partial shutdown of the US government in a decade with just four days to go.

That would lead to the furlough of hundreds of thousands of federal workers and the suspension of a wide range of government services, from economic data releases to nutrition benefits, until Congress manages to pass a funding bill that President Joe Biden, a Democrat, would sign into law.

The Senate plan, which advanced on a wide bipartisan margin on Tuesday, would fund the government through to November 17, giving lawmakers more time to agree on funding levels for the full fiscal year beginning October 1.

Senate Democrat Chuck Schumer said the Senate would hold the next procedural vote on its bill on Thursday, unless senators can reach an agreement that would allow them to vote sooner.

McCarthy's House of Representatives was focusing its efforts on trying to agree on more of the 12 separate full-year funding bills, of which they have so far passed one.

“I don't see the support in the House” for the Senate plan, McCarthy said, although the bill has the support of Senate Republicans, including Minority Leader Mitch McConnell.

The House was expected to vote late into the night on amendments to specific funding bills, though even if all four of those bills were to be signed into law by Saturday, on their own they would not be enough to prevent a partial government shutdown.

The prospect of a further government shutdown could hold back growth in the US, commented Susannah Streeter, head of money and markets at financial services group Hargreaves Lansdown. “It would mean delayed pay for millions of Federal workers, including military personnel but also hold-ups for services like passport renewals and even applications for clinical trials,” she added.

“Contractors working for governments are also likely to be significantly disrupted, including companies offering tourism services around national parks, which may be closed. Finding an imminent solution to the budget standoff is looking unlikely, and a long dispute could weigh down on demand in the economy, and could possibly limit the need for a further interest rate hike by the Fed.”


Spain fines ‘Big Four’ consulting firms for overlong working days

The Spanish Labour Ministry is to impose a fine totalling at least €1.4 million on the so-called 'Big Four' consultancies of Deloitte, PwC, EY and KPMG after investigating working practices and conditions at each firm

Authorities were investigating whether employees were actually working longer hours than their records showed. In some cases, employees of the Big Four complained about spending up to 16 hours per day at work.

Spanish media report the investigation was not easy as the consultancies lacked an hourly register, which is a requirement for all companies since the change in Spanish law in 2019.

This alleged lack of accountability made it easy for “marathon working days” to become the norm, according to a former employee at PricewaterhouseCoopers (PwC) consultancy in Madrid.

The ‘Big Four’ offices were raided in November 2022 after the Spanish Ministry of Labour, headed by Minister Yolanda Díaz, opened the investigation ex officio, without any complaint having been lodged.

“Inspectors detected practices that they considered may be outside the scope of labour law, through the press or social media, and acted," sources from the Ministry reported.

The Ministry collected information and documents on how these companies monitored the working hours of their employees and whether overtime was paid or compensated.

Spain's consulting sector has seen major workforce fatigue, according to Raúl de la Torre from Comisiones Obreras, a Spanish trade union.

“A few months ago the employers wanted to include in the [employment] agreement that we had to work up to 12 hours a day from Monday to Saturday, without any additional compensation. We launched a campaign on social media that led to the first strike in the sector,” he said.


JP Morgan’s UK bank to ban cryptocurrency transactions from October

JP Morgan’s Chase UK bank is to impose a ban on cryptocurrency purchases due to an “increase in fraud and scams related to crypto assets”. The ban will come into effect from October 16 and will apply to all debit card and outgoing bank transfers.

A spokesperson for Chase UK said that the bank was “committed to helping keep our customers' money safe and secure.

“We have seen an increase in the number of crypto scams targeting UK consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account.”

Several other UK banks have placed limits on crypto-related transactions, but this move is one of the first outright bans on the asset.

According to data from the UK’s fraud reporting agency Action Fraud, there has been a 40% increase in consumer losses to crypto fraud in the past year, surpassing the £300 million (US$363 million) level for the first time.


South Africa’s Standard Bank selects TCS to modernise operations

South Africa’s Standard Bank Group (SBG) has selected Indian technology services provider Tata Consultancy Services (TCS) to transform its operations. 

The partnership is aimed at modernising SBG’s existing platform and leveraging advanced technology to further streamline its custody and settlement operations. It builds on a 25-year alliance between TCS and SBG.

The tie-up will also support SBG’s goals of migrating all its key business functions running on the cloud by 2026 to enhance operational resilience. Under the alliance, TCS will deploy its TCS BaNCS Global Securities Processing Platform across 15 markets where SBG operates.

TCS claimed that with its platform, SBG will be able to speed up innovation and provide its clients with consistent, dependable, effective and high-performance services. 

The bank will be able to link to the larger financial services ecosystem using TCS BaNCS’ APIs and its technological architecture, it added. 

The platform is already live in seven markets including South Africa. The remaining markets will follow suit by March 2024.


TD Bank offers browser plug-in free to the public

TD Bank, aka Toronto-Dominion has launched an online tool that aims to make life easier for those who struggle with online environments.

The TD Accessibility Adapter tool,  which the bank announced will be made available to the general public for free, is a browser plug-in that enables users to personalise features based on their online needs.

It includes features such as reading guides, adjustable font size, dark mode, a dyslexia-friendly font and monochrome mode. The tool changes what appears on the browser itself without using overlays and can coexist with other assistive technologies, such as stand-alone screen magnification software.

The adapter, which can now be downloaded as a Google Chrome extension, allows those with accessibility needs to avoid the stigma that sometimes comes from disclosing a disability, meaning they can implement the solution from day one, saving companies sick days and enhancing productivity.

While today’s desk jobs almost all involve computers and the internet, an estimated 20% of the population relies on assistive technologies, such as screen readers, closed caption and colour blindness settings, to access the web, according to the website

TD said user preferences for the tool have leaned toward accessibility options, such as voice assistance, closed captioning, auto-captioning and dark mode, when they are available.

The tool was initially developed internally for those working for TD. The bank first piloted it to more than 6,000 retail employees earlier this year and launched it to the rest of TD’s 95,000 workers around the world in June.

Based on the success internally, the bank decided to launch the product to anyone in North America Canada at no cost. The public launch was announced during the Elevate Festival in Toronto, Canada.


InScope-AML and Regula partner on Anti-Money Laundering compliance

InScope-AML, a European developer of Anti-Money Laundering (AML) compliance management solutions, and Regula, a developer of forensic devices and identity verification solutions, announced a technology partnership. Its goal is to enhance know-your-customer (KYC)-service capabilities with comprehensive and trustworthy identity document verification.

According to Regula’s survey, 65% of organisations worldwide use digital document verification as one of their main methods of identity checks and most of the remaining 35% plan to join them in the next year. Responding to this growing demand for reliable and frictionless online ID verification, Regula and InScope-AML are joining forces to offer businesses across Europe and Africa a solution for KYC and AML compliance management.

Being the first step of nearly all KYC procedures, identity document verification is of paramount importance and thus requires robust technology. After market research, InScope-AML chose to incorporate Regula Document Reader SDK into its existing solution. This move allows the company to enhance their proposition and uplevel document identification and verification among all their customers.

As an integral part of the InScope-AML solution, Regula Document Reader SDK automatically reads and authenticates IDs regardless of their type or issuing country. This is possible thanks to Regula’s proprietary database of document templates, which is the largest in the world and contains over 13,000 templates from 247 countries and territories. Apart from reading and validating data, Regula’s solution also cross-checks information from various data fields in the document to spot any possible inconsistencies that may indicate fraud.


HSBC allows customers to pay mortgage using SHIB and XRP

Blockchain payments system FCF Pay has announced that HSBC customers can now pay their mortgage bills and loans with cryptocurrencies through FCF Pay.

The bank’s customers will be able to pay with accepted cryptocurrencies, Shiba Inu (SHIB) and XRP, including other crypto assets such as Bitcoin, Ethereum, Binance Coin, Dogecoin and several others.

“HSBC customers. We are delighted to announce that HSBC users are eligible to pay their mortgage bills and loans with cryptocurrencies through FCF Pay. Some of the accepted cryptocurrencies you can pay with are: Bitcoin, Ethereum, Binance Coin, Ripple, Doge, Shiba Inu, and many more," FCF Pay tweeted.

Earlier this month, FCF announced the debut of its crypto bill services, allowing customers to pay utility bills such as mortgages, auto payments, subscriptions and much more, with cryptocurrencies such as USDT, BTC, ETH and Shiba Inu. Users can also pay their electricity and water bills through the same service.

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