Bank Industry Insights: February 2024 edition

After emerging a few years ago, sustainable lending products in the fund finance space now encompass everything from large, high profile multi-bank facilities to smaller bilateral facilities. However the fund finance sector still faces a number of unique challenges when implementing green and sustainability-linked lending on transactions, due to the unique characteristics of fund finance transactions as well as macro considerations. In this detailed review , Ashurst's Partners Lorraine Johnston, Robert Andrews and Briony Holcombe ask whether challenging market conditions and rising regulation run the risk of stagnating the rapid development experienced to date for fund finance and ESG. If you want to hear more from our Funds Finance Team, including their take on the key issues affecting the fund finance market at present, take a look at our Funds Finance Outlook .

We’re also seeing exciting new ESG strategies in the digital space. Just this month, Ashurst advised HSBC on the provision of its digital assets platform - HSBC Orion - in connection with the world's first multi-currency digital green bond offering . The issuance of the "digitally native" bonds support green projects that are consistent with the vision to improve the environment, combat climate change and transition to a low carbon economy. This is the HKSAR Government’s second digital bond issuance, and? Ashurst was proud also to have advised on the first HKSAR Government tokenised green bond issuance in February 2023.

Digitalisation trends continued to hit the headlines this month, as Bitcoin recently traded above $50,000 for the first time since 2021. The US Securities and Exchange Commission's decision to reverse a decade-old policy, led to the approval of several spot bitcoin exchange traded funds, providing investors with exposure to the price of Bitcoin through a regulated product. As crypto offerings continue to penetrate the world of traditional finance, issuers are optimistic that mainstream investors will eventually allocate a small percentage of their portfolios to products like Bitcoin, complementing their investments in stocks and bonds.

Finally, having we passed the deadline for comments in respect of the Basel III proposals in January, the proposed requirements continue to be met with fierce opposition from banks. We heard last month how Pablo Hernández de Cos, the Chair of the Basel Committee, supported US proposals to impose more stringent requirements on banks than their UK and EU counterparts. And now Michael Hsu, acting director of the Office of the Comptroller of the Currency, has recently pushed back at banks over criticisms of the proposals , saying that he has seen no evidence that the new rules would make lending to minorities or small business owners more expensive. Rules under Basel III are expected to come into force in January 2025 in the EU and July 2025 in the US and the UK.