Tag Archives: global banking

International banks team up to create digital currency

Banks announce project to create a new form of digital cashIf you can’t beat them…

Six of the world’s biggest banks have teamed up with UBS to pilot a project to create a new kind of digital cash that is designed to exploit the blockchain technology that already facilitates bitcoin transactions.

Barclays, Credit Suisse, and HSBC are among the major organisations to announce their collaboration with UBS over the ‘utility settlement coin’ (USC), a virtual currency that was originally the brainchild of London start-up Clearmatics. Further discussions with central banks, as well as a review of data privacy and cyber security measures are scheduled but it’s hoped that the USC will speed up settlements and could bring central banks one step closer to the introduction of a formal digital currency.

Head of strategic investment and fintech innovation at UBS, Hyder Jaffrey, said in a statement that discussions would continue over the next 12 months, with the aim of a limited ‘go live’ towards the end of 2018.

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Is the Bitcoin bubble about to burst?

As crypto-currency Bitcoin continues to rise in value, is a bubble forming?Are we on the cusp of a Bitcoin bubble?

What goes up must come down – or must it? Bitcoin’s recent stratospheric rise has helped push the value of crypto-currencies through the $50 billion-mark, triggering concerns over the creation of an unstable asset bubble in what is a largely unregulated market.

The rapid growth in alternative digital currencies — so-called ‘alt-coins’ — as well as in Bitcoin itself is without precedent; the value of Bitcoin alone has risen by more than 50% in a month and is currently worth more than gold. It’s an astonishing trajectory for a virtual, non-fiat currency.

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Central banks explore digital currency

Central banks ponder the introduction of digital currencyNew currency options

Since crypto-currency bitcoin’s successful transition from experimental concept to globally accepted currency with a market value of more than $10 billion, central banks have become interested in investing in exploring the potential of digital currencies for themselves.

Countries including the UK, Russia, Canada, Australia and China are now looking at options for creating their own digital currencies and, while research is at an early stage, there’s a general recognition that the introduction of digital currencies is inevitable.

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Brexit and Trump elevate risks to banking sector

Global events including Brexit and Trump win exert pressure on banking sectorA memorable year

2016 has certainly been a year of surprises. After what seems like decades of ‘business as usual’ in Europe and the US, the steady march of globalisation and the apparently inexorable rise of liberalism, recent political and economic events have turned the old order upside down.

Donald Trump’s US election win coming hot on the heels of the UK’s vote for EU Brexit, coupled with a worrying slowdown in Chinese economic growth and historically low interest rates have not only created uncertainty on the global stage but are also creating significant risks for the global banking sector, according to leading ratings agency Standard & Poor.

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Sterling at risk of losing reserve currency status

Post-Brexit shocks to sterling have rocked the currency’s reserve currency statusPost-Brexit blues

When Britons voted narrowly to exit the European Union in a public referendum earlier this year, they may not have envisaged the ensuing shock to the country’s currency and financial reputation.

But now, with sterling languishing at its lowest value in 40 years and the UK stripped of its Triple-A credit rating, the country is also facing the possible loss of its reserve currency status, should it fail to secure continued access to the European single market.

US ratings agency Standard & Poor has admitted that the British government is risking significant damage to the economy’s growth, with potentially long-term implications for the country’s debt and credit profile. S&P fears that if the UK loses access to the single market, its businesses will suffer incalculable consequences for the foreseeable future.

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Hard Brexit could result in British banking crisis

Head of Germany’s central bank warns that UK could lose its status as the financial centre of EuropeThe Brexit dilemma

More than three months have now passed since the British public voted to leave the European Union but there’s been no clear indication so far of how – or when – the British government intends to effect the political and economic split. In order for the process of Brexit to begin, Article 50 of the Lisbon Treaty must be invoked but because that will set the clock ticking on a strict two-year timetable for negotiations, no-one seems in much of a hurry to push the button.

There’s much that is still unclear – and it’s this uncertainty that’s vexing not only the British public but also the businesses that have a lot riding on whether or not Brexit will allow them to continue to have access to the single market. Britain sells almost half of its exports via the common market, and any change to this process is likely to be expensive.

A ‘soft’ Brexit would minimise the economic impact on the UK but is likely to come at the expense of limiting the number of migrants – an area of concern for many who voted to leave the EU. On the other hand, the ‘hard’ Brexit favoured by some leading Conservative eurosceptics could have disastrous consequences for businesses, most notably for the City of London.

Passporting rights are at stake

The head of Germany’s central bank recently warned that London’s position as a financial centre would come into question if the UK left the single market. In this scenario, it’s likely that banks would automatically be stripped of their ability to conduct business across the EU, which would open the door for other European financial capitals to annexe business from London.

In an interview with the Guardian, Bundesbank president Jens Weidmann pointed out that banks’ passporting arrangements are ‘tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area’ (EEA).

Passporting rights allow firms to use London as a hub for serving clients from across the EU, without having to negotiate licences in separate countries. Because of this, international banks with affiliates in the UK actually account for a large share of international banking activity in London. Bullish Brexiters like Foreign Secretary Boris Johnson have reassured banks that the UK will retain passporting rights even if it leaves the EEA, but Weidmann negative this assumption, saying that business would reconsider relocating their headquarters.

UK-based businesses feeling the pressure

According to a survey of 100 business leaders from large companies by accountancy firm KPMG, more than three-quarters of chief executive officers are considering moving either their headquarters or some part of their operations outside of Britain following the referendum. The CBI and PricewaterhouseCoopers have also reported a deterioration of confidence in the financial services sector in the three months to September.

The surveys suggest Prime Minister Theresa May faces a challenge to retain businesses and jobs when Brexit negotiations finally get underway, and that talk of a hard Brexit is already causing companies to consider – or even accelerate – their own exit strategies.

‘CEOs are reacting to the prevailing uncertainty with contingency planning,’ commented Simon Collins, KPMG’s UK chairman.