The Bank of England stepped up efforts to beat back the worst inflation since the 1980s by boosting interest rates half a percentage point to the highest level in 15 years. The move surprised investors who had priced in a 40% chance of a hike of that magnitude. BOE policymakers also reiterated earlier guidance pointing to even higher rates, similar to the message Federal Reserve Chair Jerome Powell conveyed to US lawmakers this week. Central bankers in Norway joined the BOE in accelerating their rate increases, while Switzerland dialed back its pace of hiking. Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy: WorldIn addition to the UK, Norway raised its benchmark rate a half point to 3.75%, while central banks in Indonesia, the Philippines, Mexico and Brazil left borrowing costs unchanged. The Swiss National Bank delivered its smallest hike since policy tightening began a year ago, while saying more action is likely. The creeping rot inside commercial real estate is like a dark seam running through the global economy. Even as stock markets rally and investors are hopeful that the fastest interest-rate increases in a generation will ebb, the trouble in property is set to play out for years. EuropeUK core inflation, which excludes food and energy, accelerated unexpectedly to a 31-year high of 7.1% in May, helping explain the BOE’s decision to raise interest rates a half percentage point. Separate data showed government debt now exceeds the size of the UK economy for the first time since 1961, imperiling Prime Minister Rishi Sunak’s promise to restore health to the public finances and cut inflation.
Economic momentum in the euro area almost came to a halt in June, signaling an end to the revival the bloc demonstrated since its winter downturn. A purchasing managers index compiled by S&P Global fell to a five-month low. Germany’s rollout of ultra-cheap public transport last summer is set to reverberate through its upcoming inflation readings, causing a headache for the European Central Bank.
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The Development Bank of Singapore (DBS), a Singaporean multinational banking and financial services corporation, has been given approval by the International Financial Services Centre Authority (IFSCA) to set up an international banking unit (IBU) at GIFT City. GIFT City officials believe more financial companies from Singapore will enter GIFT City after the arrival of SGX Nifty.
DBS will offer financial services like trade finance, external credit borrowing (ECB), treasury operations and derivatives at its GIFT City IBU. According to sources, the IBU will make DBS bank's offering on foreign currency loans and trade finance business competitive. Surecomp, a leading provider of global trade finance solutions, has announced that PT. Bank BTPN Tbk (BTPN), one of the leading privately-owned banks in Indonesia and part of the SMBC Group, has gone live with its DOKA solution. This solution is aimed at streamlining BTPN’s back-office trade finance processing automation, replacing the bank’s previous trade finance application. According to a recent report by the International Chamber of Commerce, Asia is the world’s largest region for trade finance, with a total of $1.98 trillion in trade finance issued in 2020. Indonesia is one of the key players in this region, with trade finance playing a crucial role in the country’s economic growth. The DOKA solution, which is hosted in Jakarta, has been fully deployed and supported by Surecomp’s local teams in Asia.
With seamless integration with the bank’s other trade-related systems for limits and position management, sanction screening, SWIFT connection, collateral management, and core banking, BTPN can now deliver a more efficient customer service supported by expedited internal processing of its growing trade finance transactions in the form of Letters of Credit (LCs), documentary collections, and trade loans. The World Trade Organisation (WTO) estimates that 80–90% of world trade relies on trade finance. It is a mechanism that not only ensures security between importers and exporters but can also extend a line of credit to companies desperately needing cashflow to get their operations moving. Pandemic disruptions, political upheaval and currency fluctuations have made companies more nervous to trade internationally. “With every crisis, trust among the participants goes down and that’s when you reconsider the risk that is involved in open account transactions,” says Enno-Burghard Weitzel, senior vice president of Strategy, Digitalisation and Business Development at Surecomp. “The more insecure these financial flows to physical supply chains are, the more you want to secure them with a guarantee” from trusted financial intermediaries. Unfortunately, trade finance has not always been a straightforward solution due to an excessively manual process, and a lack of access to smaller corporates who might not have the know-how to get the best deals. However, this is a narrative that Surecomp wants to change. “For the last 35 years we have provided trade finance solutions to a very small group of multinational corporations (MNCs). Now we are providing solutions to a far broader space even SMEs can now make use of our solutions,” says Weitzel. SEOUL: South Korea formally restored Japan to its list of countries it gives preferential treatment in trade on Monday, three years after the neighbors downgraded each other's trade status amid a diplomatic row fueled by historical grievances. In announcing the move through a government gazette, South Korea's Ministry of Trade, Industry and Energy also said Seoul will further restrict technology and industrial exports to Russia and its ally Belarus to support the US-led pressure campaign against Moscow over the war in Ukraine. After years of friction, Seoul and Tokyo are working to repair relations as they tighten their three-way security cooperation with Washington to counter the threat posed by North Korea. Pyongyang has used the distractions caused by the war to accelerate the testing of nuclear-capable missiles. South Korean officials expect Tokyo to restore Seoul as a favored trade partner too but expect that step to take more time based on the procedures to revise Japan's export regulations. In September 2019, South Korea dropped Japan from its "white list" of countries receiving fast-track approvals in trade, reacting to a similar move by Tokyo. Japan had also tightened export controls on key chemicals South Korean companies use to make semiconductors and displays, prompting South Korea to file a complaint with the World Trade Organization.
Trade is the engine of the global economy, but trade financing is complex and traditionally reliant on paper. One pain point for many financial institutions has been the lack of a network to support collaborative workflows within the trade ecosystem, and a lack of interoperability between solutions. Surecomp today (March 16) announced that it is partnering with Contour, one of the global digital trade finance networks, as part of a collaborative vision to drive the digital transformation of trade finance across financial institutions. Surecomp has over 35 years of expertise in digitising trade finance processes and its integration with Contour’s decentralised network of banks and corporates will provide users with a fully integrated end-to-end trade service solution. Through the collaboration with Surecomp’s trade finance platform RIVO, Contour’s member banks will be able to access digital Letter of Credit workflows directly on Surecomp’s back-office applications, providing straight-through automated processing, reducing costs, improving operational efficiency and optimising profitability. The new collaboration between the two businesses addresses several issues within the trade finance space by streamlining and simplifying trade finance processing, leading to new business opportunities, improved trade productivity and ultimately, a sustainable future for global trade. Both companies are recognised as industry leaders in this year’s Global Finance awards winning ‘Best Trade Finance Software Provider’ and ‘Best DLT Platform for Trade Finance’ respectively. Follow: Ngulminthang Lhanghal“This partnership encapsulates Surecomp’s value in driving collaboration rather than competition, by bringing the ecosystem together to facilitate trade and boost economies,” says Enno-Burghard Weitzel, Surecomp’s SVP of strategy, digitisation and business development.
“Financial institutions using the Contour network will now be able to automatically process trade finance applications on the back-end providing a seamless, straight-through process for heightened efficiency and customer support.” Carl Wegner, CEO of Contour, said: “Surecomp shares our vision in ensuring that the trade finance ecosystem is open to everyone, from large financial institutions and MNCs to local banks and MSMEs. Our integration with Surecomp will take us a step further into the future. Originally Posted: https://www.theglobaltreasurer.com/2023/03/16/interoperability-between-digital-trade-finance-solutions-on-the-rise/ Higher interest rates are forcing commodity traders to rethink some deals and push up prices, in the latest example of how a period of rapid central-bank hiking is reshaping global business. The companies that buy, sell and transport the world’s natural resources are particularly vulnerable to rising rates, because they rely on banking lines to finance their trades – from shipping a cargo of wheat or oil to holding inventories of aluminium. As rates rise, the additional costs of a weeks-long journey or extended storage in a warehouse or tanker are making certain trades far less attractive. The financing cost can dictate whether deals are made or not, and some companies are seeking to pass on the expense to their customers, or getting out of some trades completely. “It is totally reshaping the supply chain, we have clients coming to us and saying they have to reconsider their business models because of interest rates,” Pierre Galtié, head of commodity trade finance at Banque de Commerce et de Placements, said in an interview. “Players were able to buy a big cargo and put it on storage for a month or more with bearable cost. Now it is a bit different, the carry cost is much higher and not an option,” he said. The pressure on commodity traders is an example of how the end of the era of cheap money is changing the business world. But unlike in sectors like technology and crypto, the business cycle for commodities traders has moved in the opposite direction, cushioning the blow, so that they are making record profits even as interest rates rise. The industry earned an estimated $115 billion in 2022 even accounting for costs like freight and finance, according to consultancy Oliver Wyman, an increase of nearly two-thirds from a year earlier. Interest rates are only one element of costs that go into a typical commodities deal – even just moving products from one port to another means chartering vessels and taking out insurance for the trip. Then there’s the cost of hedging derivatives to lock in the cargo’s price, and collateral in the form of margin to enable those positions. However, the industry is particularly exposed to rising rates because trading houses rely on bank credit for the huge amounts of money needed to buy, transport and store big volumes of commodities. Follow: Ngulminthang LhanghalThe sums accruing interest add up quickly: for example, at current prices a typical LR1 tanker shipment of fuel oil could cost around $46 million, and a mid-size oil trader is likely to have several in transit at any one time. Trading giant Trafigura Group had total credit lines of $73 billion at the end of its last financial year, with a network of about 140 banks around the world.
One area where interest rates are a central factor is when traders purchase and hold commodities. For example, storing metal in warehouses for an opportune moment to sell has been a feature of the aluminium market since interest rates were set to near-zero levels after the 2008 financial crisis. As rates have risen, futures prices have traded at a growing premium – or “contango” — over cash rates to reflect the higher cost of carry. But even the widest contango since 2008 is only just enough to compensate for more expensive financing, said Duncan Hobbs head of research at metal trader Concord Resources Ltd. “The spread has to move out to compensate, and if that doesn’t happen you can imagine some people will walk away from that space,” he said. In other cases, increased costs of finance for traders are being reflected in higher prices charted to the end customer. Costs of small-volume oil contracts to buyers based in the Caribbean have “gone up very significantly this year,” says Michael Winstone, director of crude and fuel oil at trading house Novum Energy Trading Corp. “It depends on the exact logistics but I think with the finance costs in addition to higher shipping rates, some of our diesel and fuel oil sale contracts have gone up between six to ten dollars a barrel,” he said. The ability to keep profits steady by raising prices and maintaining margins can sometimes be a question of scale, and mid-sized players are under more pressure, BCP’s Galtié said. Still, even the biggest players are having to weigh the added costs. “Right now liquidity is limited and capital’s expensive. So what it means is that if you’re going to want to operate in the market, you need higher margins to cover your operating base,” Christopher Bake, a member of the executive committee at the world’s biggest independent oil trader, Vitol Group, said at on a panel during International Energy Week. “It does become more difficult.” Originally Posted: https://economictimes.indiatimes.com/small-biz/trade/exports/insights/rising-rates-are-reshaping-once-lucrative-commodity-trades/articleshow/98793651.cms DiMuto and Aleta Planet have partnered to support digital B2B payments and trade finance. The collaboration brings together DiMuto’s global trade solutions platform and Aleta Planet’s B2B cross-border payment solutions to make payments in and out of China more efficient and transparent, the companies said in a Tuesday (Jan. 17) press release. “Our customers now enjoy greater flexibility and visibility with the addition of this payment gateway option to our Payment Management module,” DiMuto founder and CEO Gary Loh said in the release. “Strengthening our ability to track trade payments will greatly open up opportunities for financing of trades on our platform.” PYMNTS research has found that only 23% of small businesses are happy with their cross-border payment solutions. As a result, companies around the world are turning to multicurrency tools, targeted strategies and future-fit accounts payable (AP) and accounts receivable (AR) solutions to help accelerate and streamline their international growth, according to “International B2B Payments: A Guide for Entrepreneurs and Digital Businesses,” a PYMNTS and Payoneer collaboration. Solutions like those offered by DiMuto address the “black hole” that plagues cross-border payments, Loh told PYMNTS in an interview posted in August 2022.
“You could have a bank sending the money from Singapore to China,” Loh said at the time. “On one side, the bank account shows that the funds were transferred, but on the other side, the bank says it hasn’t received it.” By allowing financiers to gain visibility on payments made and received by borrowers, as well as other trade documents, the new collaboration will also reduce the risk of financing and enable agricultural small to medium-sized businesses (SMBs) access financing at competitive rates, according to the release. Together with the payment solutions developed by the new partnership, DiMuto will work with Aleta Planet’s parent company, Asia Capital Pioneers Group, to accelerate its trade financing services. “Asia Capital Pioneers Group’s partnership with DiMuto reflects our commitment to creating a digitalized trade finance ecosystem, where physical agricultural assets can now be tracked throughout the supply chain, to give greater assurance that these transactions meet the criteria set out in our sustainability financing frameworks,” Asia Capital Pioneers Group Chairman Ryan Gwee said in the release. Follow: Ngulminthang Lhanghal Originally Posted: https://www.pymnts.com/smbs/2023/tradeling-mastercard-team-to-increase-small-business-access-to-finance/ Wema Bank has gone live on Kachasi Trade Finance Software to enable the achievement of full automation of trade finance operations. Trade finance is a phrase used to describe different strategies that are employed to make international trade easier. The market share is expected to increase by $12.20 billion from 2021 to 2026, and the market’s growth momentum will accelerate at a CAGR of 4.38 percent. Kachasi, owned by Union Systems, is the first indigenous trade finance software application built to automate the entire lifecycle of international and domestic trade finance operations, and it is the result of over 20 years of experience implementing and customising various international trade finance software applications for banks across Africa. Wema Bank’s journey with the software began in March 2022. As a first of its kind, Kachasi Trade Finance Software comes with intuitive design and functionalities. “We are pleased to be joining the league of banks around the world that re using technology to transform trde finance operations,” Tajudeen Bakare, divisional Head of Operations and General Service, Wema Bank. “This project will significantly reduce turnaround time improve operational efficiency, and unlock new revenue streas for the bank. It will also improve the bank’s ability to respond quickly to regulatory policies and updates.” Union Systems says the bank going live on its software is a major milestone which highlights the organisations’ competence and commitment to delivering value. “Our enterprise project delivery methodology, superior domain expertise, and the Wema Bank team’s matching determination, dedication, and support resulted in the project being completed in a record time of four months,” Seun Adeleye, divisional head, Client Service, Union Systems Limited. “This has been a model implementation, demonstrating what can be accomplished through effective collaboration between African financial institutions and competent indigenous technology vendors.” Follow: Ngulminthang Lhanghal Originally Posted: https://businessday.ng/technology/article/wema-bank-taps-kachasi-trade-finance-to-improve-efficiency-via-automation/ The African Development Bank Group is supporting the trade finance efforts of Bank One Limited. The Group will provide a $40 million trade finance package that is meant to help Bank One of Mauritius increase its capacity to provide trade finance to small to medium-sized businesses (SMBs), local corporates and other key sectors in Mauritius and across Africa, the African Development Bank said in a Thursday (Dec. 22) press release. The package includes a $25 million risk participation agreement and a $15 million transaction guarantee, the release said. “Given the cross-sectoral nature of trade, the proposed facility, while leveraging Bank One’s footprint, is expected to enhance the African Development Bank’s efforts to integrate Africa and improve the quality of life for the African people,” African Development Bank Head of Trade Finance Lamin Drammeh said in the release. Africa has an annual “trade finance gap” of $81 billion because SMBs and other domestic firms have greater difficulty accessing trade finance than do multinationals and large local corporates, according to the press release. The African Development Bank aims to reduce that gap by deploying the new transaction guarantee and risk participation agreement with Bank One, which is a leading Mauritian and regional banking for with reach that extends across the continent and globally, the release said.
“This approval affirms the Bank’s support for financial integration as a cornerstone for the development of the private sector across the continent,” African Development Bank Deputy Director General for Southern Africa Kennedy Mbekeani said in the release. This announcement comes about two months after Nigerian startup Breeze partnered with United Kingdom-based supply chain finance company Finverity to accelerate its mission of providing SMBs in Africa with access to trade finance. Like the African Development Bank, these companies said that most of the trade financing from African banks goes to larger corporations, even though most of the regional trade participants are SMBs. “This partnership provides us with the necessary fuel and support as we strengthen our presence in Nigeria,” Breeze CEO Chimenem Nnwoka said at the time. “Our partnership with Finverity enables us to provide modular supply chain finance products that are tailored to the specific needs of our customers.” |