Last Week In Review: A Financial Roundup
Monday
Get ready for 3pc interest rates, says KPMG
KPMG economists predict the Bank of England will cut interest rates to 3% as inflation drops below 2%. The UK entered a ‘technical’ recession last year, and Chief Economist Yael Selfin has warned that failure to lower rates could harm the economy.?
Bank of England Governor Andrew Bailey hints at forthcoming rate cuts. KPMG forecasts a slow economic recovery, projecting 3% growth this year and 0.9% next year due to factors such as dwindling immigration, subdued investment, and stagnant productivity.
Meanwhile, the job market shows signs of improvement, with job opportunities increasing slightly, indicating growing confidence among companies.?
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Tuesday?
SWIFT planning launch of new central bank digital currency platform in 12-24 months
The global bank messaging network SWIFT plans to launch a new platform within the next one to two years to integrate central bank digital currencies (CBDCs) with the existing financial system.?
This move is crucial, as 90% of central banks are exploring digital currencies in an attempt to keep pace with evolving technology and cryptocurrencies like bitcoin; however, they continue to face technological challenges.
SWIFT recently trialled 38 banks and commercial entities in one of the largest global CBCDs and "tokenized" asset collaborations to date. The 6-month trial demonstrated the feasibility of using CBDCs for complex transactions and the potential for process automation, enhancing speed, and reducing costs.?
The new platform aims to address interoperability challenges among different CBDC protocols. Despite potential delays, SWIFT aims to launch the product in the next 12–24 months.?
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Wednesday?
BoE to investigate impact of private equity risks on small UK companies
The Bank of England is investigating risks in the private equity sector due to concerns about financing for smaller and riskier companies amid a decline in investor risk sentiment.?
The Financial Policy Committee (FPC) noted that higher interest rates have strained private equity funds, leading to asset devaluation and increased debt default rates. This has impacted acquisitions by private equity-backed firms, with a 10% drop observed in 2023.?
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The FPC plans to publish a comprehensive assessment in June. Previous warnings from the BoE highlight difficulties in assessing risks in private credit markets due to data challenges and geopolitical uncertainties. Concerns extend to potential spillover effects on other UK institutions.?
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Thursday?
European investment banks fit to vie for bigger share of business in 2024
European investment banks are poised to increase their market share in 2024, having strengthened their positions in key markets over recent years.?
While bulge-bracket US firms are expected to maintain their global dominance, European banks have restructured and repositioned their investment bank divisions, enhancing their competitiveness.?
Factors such as higher interest rates and stricter capital rules in the US present opportunities for European banks to expand their market presence. They aim to grow in investment banking divisions (IBD), particularly in advisory, debt capital markets (DCM), and equity capital markets (ECM) businesses.?
Despite challenges, including intense competition and economic uncertainties, European banks are expected to capitalise on their strengths and strategic initiatives to drive growth and improve investor returns.
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Friday?
UK to cut stock settlement times from 2027
A recent report has recommended that Britain’s stock markets should reduce the time to settle share trades to one business day by the end of 2027 to stay competitive, a move supported by the UK government.?
The recommendation follows global trends, with the US, Canada, and Mexico shifting to settlement within one day (T+1). The pressure is mounting on Britain to follow suit, with the EU already committed to the transition. The switch to T+1 is deemed essential for efficiency and international competitiveness.
While the move requires significant investment, it does offer cost savings and risk reduction. European asset managers face challenges under the new regime, highlighting the need for a coordinated approach. The UK plans to align with EU timelines if feasible but will proceed independently if necessary.
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