Finance

Balancing climate finance and financial stability is a scorching dilemma | East Asia Forum

Published

2 years ago

July 9, 2023

Balancing climate finance and financial stability is a scorching dilemma | East Asia Forum

Author: Editorial Board, ANU

Asia has been sweltering through one of its most intense heat waves in memory. In April, Vietnam and Laos saw their hottest temperatures on record, and in India hundreds have died in extreme heat conditions. Elsewhere, there are ominous signs. The North Sea is five degrees hotter than normal and the Baltic Sea eight degrees hotter. A heat dome over Texas and Mexico has baked the region for weeks. Climate change, in other words, is most definitely here. The need for urgent action worldwide has never been more obvious.

And yet even as the atmosphere races ahead of the climate models, and the need for urgent action intensifies, ambition and implementation lag behind. The United Nations Environment Programme’s 2022 climate report was ominously titled ‘The closing window’. It argued forcefully that the world is letting the chance to meet the Paris Agreement goal of only 1.5 degrees of warming slip through its hand.

The science is unequivocal: action must be ramped up dramatically. Easier said than done, comes the reply from diplomats and policymakers. The fundamental problem is the same as it has been since the climate change emergency was first identified: cutting domestic carbon emissions benefits the entire world, but the costs are borne solely by the country who cuts them. Without a worldwide carbon price, many countries are likely to shirk.

In recognition of this fact, there has always been an acknowledgment that developing countries will require assistance to meet emissions reductions targets, in the form of climate finance from developed countries. The sums are considerable. Nicholas Stern and Amar Bhattacharya estimate that US$1 trillion of climate finance will be required annually by 2030, more than three times current levels.

At the same time, the macroeconomic environment for massive spending on the scale required is darkening. Interest rates are rising, inflation remains stubbornly high and the legacy of COVID-19 borrowing weighs heavily on the balance sheets of governments around the world. Corralling the necessary money from donor countries to finance ambitious action in developing countries will be difficult.

But if getting the money from donors is a challenge, there is also a major — and underappreciated — problem for recipient countries, one that has been illustrated and underlined by recent developments in the global economy.

An open door for foreign investment swings both ways. The rise in interest rates in the West has seen capital flow from developing countries back into developed ones, where the rate of return is now more respectable. This has put pressure on exchange rates and exacerbated the debt problems of many developing countries that cannot borrow in their own currency.

The need for financial stability is acutely felt by policymakers and central bankers in the developing world, particularly in Asia, where memories of the Asian Financial Crisis are still strong a quarter of a century later. Given that the massive amounts of money required for climate change action cannot realistically be met by domestic savings in most developing countries, taking effective action means importing capital, and hence increasing currency account deficits.

As M Chatib Basri and Adam Triggs argue in this week’s lead article, the tension between prudent macroeconomic policy on the one hand and financing effective climate action on the other has the potential to derail efforts to avoid catastrophic global warming. ‘If developing countries are to import the foreign savings needed to fight climate change’, they point out, ‘the rich world and the institutions it controls will need to work with them to reduce financial instability’.

There are a number of steps that can be taken, as Basri and Triggs note: international and regional financial institutions need to be reformed so that countries can more effectively make use of the financial security that they can offer; institutions themselves need to ensure that their own resources are more effectively marshalled to guarantee stability in the face of massive flows of climate finance; and rich countries can continue to make new arrangements like bilateral currency swap lines to ensure that the financial safety net is sufficient to facilitate a huge ramp-up in international capital flows to address climate change.

It may not seem immediately obvious that a pressing concern in fighting climate change is addressing the global financial architecture. But the institutions and rules that make up that architecture will be called upon to support a truly unprecedented flow of money from rich to poor countries. It is a pressing task for policymakers to ensure that they are fit for the task.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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Finance

US consumer finance watchdog fines payments firm Block over Cash App operations

Published

7 hours ago

January 17, 2025

Press Room

US consumer finance watchdog fines payments firm Block over Cash App operations

Block said the issues raised by the regulator were “historical” and did not “reflect the Cash App experience today” [File]
| Photo Credit: REUTERS

The Consumer Financial Protection Bureau (CFPB) on Thursday ordered payments firm Block to pay a penalty citing fraud and weak security protocols on its mobile payment service Cash App.

The regulator said Block, which is led by tech entrepreneur Jack Dorsey, directed Cash App users who experienced fraud-related losses to contact their banks for transaction reversals.

However, when the banks approached Block regarding these claims, Block denied that any fraud had occurred.

Cash App is one of the largest peer-to-peer payment platforms in the U.S. and allows consumers to send and receive electronic money transfers, accept direct deposits and use a prepaid card to make purchases.

“When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused,” said CFPB Director Rohit Chopra.

In response, Block said the issues raised by the regulator were “historical” and did not “reflect the Cash App experience today.”

“While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us and focusing on what’s best for our customers and our business,” the company said.

The move is one of the final regulatory actions under the Biden administration as Washington awaits the inauguration of President-elect Donald Trump. Billionaire Elon Musk, who is slated to co-head a new government agency to slash government spending, has called for the elimination of the CFPB.

The CFPB’s order includes up to $120 million in redress to consumers and a $55 million penalty to be paid into the CFPB’s victim relief fund.

The regulator also alleged that Block deployed a range of tactics to suppress Cash App users from seeking help in order to reduce its own costs.

Block’s gross profit rose 19% to $2.25 billion in the third quarter ended Sept 30, with Cash App accounting for $1.31 billion of the total income.

On Wednesday, the company also agreed to pay $80 million to a group of 48 state financial regulators after the agencies determined the company had insufficient policies for policing Cash App.

Published – January 17, 2025 09:14 am IST

Finance

Logan Ridge Finance Corporation Schedules Fourth Quarter and Full Year 2024 Earnings Release and Conference Call

Published

15 hours ago

January 16, 2025

Press Room

Logan Ridge Finance Corporation

Call Scheduled for 11:30 am ET on Friday, March 14, 2025

NEW YORK, Jan. 16, 2025 (GLOBE NEWSWIRE) — Logan Ridge Finance Corporation (Nasdaq: LRFC) (“LRFC,” “Logan Ridge” or the “Company”) to release its financial results for the fourth quarter and full year ended December 31, 2024, on Thursday, March 13, 2025, after market close. The Company will host a conference call on Friday, March 14, 2025, at 11:30 a.m. ET to discuss these results.

By Phone: To access the call, please dial (646) 968-2525 approximately 10 minutes prior to the start of the conference call and use the conference ID 1779602.

A replay of this conference call will be available shortly after the live call through March 21, 2025.

By Webcast: A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis at https://edge.media-server.com/mmc/p/h9fj5e3y. The online archive of the webcast will be available on the Company’s website shortly after the call at www.loganridgefinance.com in the Investor Resources section under Events and Presentations.

About Logan Ridge Finance Corporation

Logan Ridge Finance Corporation (Nasdaq: LRFC) is a publicly traded, externally managed investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. Logan Ridge invests primarily in first lien loans and, to a lesser extent, second lien loans and equity securities issued by lower middle market companies. Logan Ridge Finance Corporation is externally managed by Mount Logan Management, LLC, a wholly owned subsidiary of Mount Logan Capital Inc. Both Mount Logan Management, LLC and Mount Logan Capital Inc. are affiliates of BC Partners Advisors L.P.

Logan Ridge’s filings with the Securities and Exchange Commission (the “SEC”), earnings releases, press releases and other financial, operational and governance information are available on the Company’s website at loganridgefinance.com.

Contacts:
Logan Ridge Finance Corporation
650 Madison Avenue, 3rd floor
New York, NY 10022

Brandon Satoren
Chief Financial Officer
Brandon.Satoren@bcpartners.com
(212) 891-2880

The Equity Group Inc.
Lena Cati
lcati@equityny.com
(212) 836-9611

The Equity Group Inc.
Val Ferraro
vferraro@equityny.com
(212) 836-9633

Finance

The brave new world of Open Finance

Published

23 hours ago

January 16, 2025

Press Room

Don Cardinal of Financial Data Exchange (FDX) explores how Open Finance extends beyond Open Banking, revolutionising financial data sharing.

Much ink has been spilt on the topic of Open Banking, but I wanted to take a step today into a larger world of Open Finance. Whereas Open Banking is most commonly associated with current accounts (checking, savings, credit cards), Open Finance is concerned with the totality of your financial world.

While current accounts are important in the personal financial management use case, when you look at more sophisticated needs, liability accounts like auto loans, home loans, and student loans are required to help give context to a personal balance sheet. Finally, the addition of investment and retirement accounts gives the wealth management user a full 360-degree view of the consumer’s financial health.

Additional use cases – such as account and balance verification, bill payment, and payroll needs like verification of income/employment and pay stub retrieval – along with the ability to retrieve tax forms like W2, 1098, 1099, and capital gain statements for tax preparation, round out the most common consumer demands for linking accounts.

These are all important use cases for consumers and small businesses, but it is also important to address why data providers like banks, brokers, and others would benefit from data sharing.

We know that one in three digitally-enabled consumers has shared access to their financial data in the last year and similar polls of financial institutions tell us that at least one-third (if not more) of their online banking traffic was credential-based access (screen scraping) to power these use cases.

Imagine if a data provider could reduce one-third of its entire load on its online infrastructure in favour of a portal 100 times more efficient than screen scraping. The introduction of secure APIs does just that. Lowering costs of hardware overall.

One of the other uses by data providers is data-in, to pre-fill new account applications as well as provide strong signals for Know Your Customer (KYC), including account tenure at a predecessor institution. Better data means faster, more accurate decisions leading to fewer abandons or declines, meaning more revenue for the institution.

As a banker for a number of years, one of the biggest questions we had was ‘What was our share of a given customer’s wallet?’ We often had to try to infer based on monies in and out, but with Open Finance, you can link to other institutions and know in real time what your share of wallet is. This allows you to be almost surgical in your marketing and product offering.

All this is made possible by secure, permissioned data sharing via a common API standard.

Looking forward

Avoid FUD (fear, uncertainty, and doubt). Many jurisdictions have implemented Open Banking (the UK, EU, Australia, Brazil, among others) and there has yet to be a mass exodus of consumers in any of these nations. Why? If you are confident in your product, your pricing, and your service, making data available via an API does nothing to incent consumers to leave, rather the opposite. The largest credit union in Brazil said at the FDX Spring 2024 Summit that they saw a net increase in digital engagement and accounts per customer after Open Banking was introduced.

A last bit of advice: APIs are a net new channel and will be the third leg in the digital stool. Online, Mobile, and API will be the troika. APIs are much more efficient and can deliver data that cannot be displayed visually. As you make your plans for 2025 and 2026 for your digital roadmap, you would be remiss in not including Open Finance APIs in your product mix. Your competitors are.

This editorial piece was first published in The Paypers’ Open Finance Report 2024, the latest comprehensive market overview and analysis focusing on the key players and products within the Open Banking and Open Finance ecosystem. Download the full report to discover more insightful content.

About Don Cardinal

Don Cardinal is Managing Director of Financial Data Exchange (FDX) and has led it since its inception. Previously, he spent over 20 years with Bank of America, serving as head of digital for its Military Bank, VP of Digital Banking & Senior VP of Information Security. Don holds 18 US patents and CPA, CISA, CISM certificates.

About FDX

The Financial Data Exchange (FDX) is dedicated to unifying the financial industry around a common, interoperable, royalty-free standard for the secure and convenient access of permissioned consumer and business financial data: the FDX Application Programming Interface (FDX API). FDX is a global 501(c)(6) nonprofit organisation with no commercial interests operating in the US and Canada.