Ukraine strikes deal for US gas in bid to clip Russian energy influence

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Fintech has hit a bottom after plunge in valuations and squeeze on funding, execs and VCs say

Fintech executives and investors at the Money20/20 event in Amsterdam last week told CNBC that valuations have corrected from unsustainable highs from the industry’s heyday in 2020 and 2021. Iana Dimitrova, CEO of embedded finance startup OpenPayd, told CNBC in an interview at the firm’s booth that the market has “recalibrated.” The bruising impact of higher interest rates means that, for even the hottest and fastest-growing players, funding is either hard to come by — or being done at a lower prices than before. Long gone are the days when venture capital was flowing into fintech startups with bold ideas — and little to show in terms of business metrics and fundamentals. Bloomberg | Getty Images

AMSTERDAM — The financial technology industry is embracing a new normal — with some industry executives and investors believing the sector has reached a “bottom.”

Executives and investors at the Money20/20 event in Amsterdam last week told CNBC that valuations have corrected from unsustainable highs from the industry’s heyday in 2020 and 2021.

Long gone are the days when venture capital was flowing into startups with bold ideas and little to show in terms of business metrics and fundamentals.

Iana Dimitrova, CEO of embedded finance startup OpenPayd, told CNBC in an interview at the firm’s booth that the market has “recalibrated.”

Embedded finance refers to the trend of technology companies selling financial services software to other companies — even if those companies don’t offer financial products themselves.

“Value is now ascribed to businesses that manage to prove there is a solid use case, solid business model,” Dimitrova told CNBC.

“That is recognised by the market, because three, four years ago, that was not necessarily the case anymore, with crazy ideas of domination and hundreds of millions of dollars in VC funding.”

Iana Dimitrova, CEO of OpenPayd, talking onstage at Web Summit in Lisbon, Portugal. Horacio Villalobos | Getty Images

“I think the market is now more sensible,” she added.

Lighter footfall, talks happen on the fringes 

Around the show floor of the RAI conference venue last week, banks, payment companies and big technology firms showed off their wares, hoping to reignite conversations with prospective clients after a tough few years for the sector.

CNBC

Banks need to get more granular on risk

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The writer is a UK bank regulatory lawyer     

Banks are in the business of managing risk. To do so, they should have the fullest picture possible of where the potential pitfalls lie in their operations.

Yet in recent remarks, Elizabeth McCaul of the Supervisory Board of the European Central Bank highlighted weaknesses in data aggregation and risk reporting by banks. She said that many banks had not paid enough attention to this topic.

This points to a wider problem that regulators, managements and investors need to address. Existing bank rules, worldwide, require the gathering of data without sufficient granularity.

The data currently collected and reported to the regulators provides a snapshot of a “point in time”. This does not allow for a comprehensive, holistic evaluation of actual risk, even in aggregate, as the data is not continuous and not detailed enough.

Given the complexity of the regulatory environment, many banks are managing their liquidity and other calculations in line with the requirements of the relevant regulations and no more. The regulators know this and insist on additional capital to compensate.

The market then discounts the value of banks because liquidity problems and other risks can clearly be missed, as was seen in the cases of Silicon Valley Bank and Credit Suisse. This is one of the key reasons why the market value of most European banks is at, below or barely above their book value; and in the US, their market value is (with some notable exceptions) barely higher than that.

The current regulations arose from the global financial crisis of 2008, when the world’s regulators required significant increases in risk-absorbing capital and better management of liquidity. Most bank regulations are designed to address risks arising from banks’ essential functions, including so-called “maturity transformation”. Banks borrow on a short-term basis, often through deposits, and lend for the longer term in significant amounts. This exposes them to the possibility of having hurriedly to borrow or otherwise find monies to meet demands for repayment.

Also, trading positions and collateral calls on derivatives can lead to abrupt demands for cash. There is a separate possibility of a default on banks’ assets, such as loans. In extreme situations, banks can fall victim to a “run”, whereby substantial numbers of short-term depositors and other claimants call for their monies all at once. This problem has become

Dollar doomsters have got it all wrong

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As every connoisseur of the more excitable bits of the financial blogosphere can tell you, the dollar is on an unstoppable trajectory to disaster.

One recent post argued that the US has, like the Roman empire before it, weakened itself relative to other world powers. The dollar’s central role in the global financial system is in decline as “the people in charge never seem to miss an opportunity to dismantle capitalism brick by brick”.

That’s the argument. We’ve all heard it for more than two decades and we’ll hear it again, now with the added spice of dark geopolitical trends; the move in 2022 to punish Russia for its full-scale invasion of Ukraine by freezing its dollar reserves held abroad means lots of countries might now look to stash their rainy day funds in other currencies.

A global effort — co-ordinated or otherwise — to demote the dollar could happen. If executed at serious scale it would remove the exorbitant privilege from the US of issuing debt on its own terms safe in the knowledge that other national authorities will lap it up. This would change the game in markets and trade. But evidence to suggest it is already happening is limited at best.

The share of global central bank reserves held in dollars has declined in recent decades. Back in 2016, the currency made up more than 65 per cent of official reserves, according to data from the IMF. By the end of 2023, that had shrunk to 58.4 per cent. The amount held in Chinese renminbi at the start of 2016 was zero. Between the end of that year and 2023 it jumped 188 per cent. But while that sounds huge, it is still just a 2.3 per cent slice of the total.

However, a recent blog from the New York Fed argues that the apparent pullback away from the dollar is not down to a global cooling on the buck. Instead, the shift is attributable to a small number of countries, including Switzerland, where a long-running effort to hold down the franc just over a decade ago led to a huge accumulation of euros. “Indeed, increasing US dollar shares from 2015 to 2021 were a feature of 31 of the 55 countries for which there are estimates,” economists at the New York Fed

European CLO issuance hits record rate as investors chase yields

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Leverage Shares files to launch single-stock ETFs in US

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Leverage Shares, a pioneer in European leveraged and single-stock exchange traded products, has filed to launch 13 single-stock ETFs in the US, a regulatory filing shows.

Seven 2x Long ETFs will double the daily return of Apple, AMD, Dutch semiconductor company ASML Holding, Boeing, Coinbase, Nvidia and Tesla, the filing shows. The remaining six ETFs will seek two times inverse exposure to British semiconductor company Arm Holdings, Meta, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing Company, and Tesla.

Some $5.3bn of the $7.4bn single-stock US ETF space sits in products that track the performance of Nvidia and Tesla from issuers such as Direxion, GraniteShares and YieldMax, as of April 30, according to data from Morningstar Direct.

The Leverage Shares ETFs will be the first US single-stock ETFs to track Arm Holdings, ASML Holding and Taiwan Semiconductor Manufacturing Company, data from Morningstar shows.

Leverage Shares launched its first ETP on the London Stock Exchange in 2017, the company website notes.

The firm had $168mn across its European single-stock ETPs as of May 31, Morningstar data shows. Those funds pulled in $58mn during the year ended that date.

Together, 61 single-stock ETFs from AXS, Direxion, GraniteShares, Innovator ETFs, Kurv ETFs and YieldMax pulled in $4.5bn in net inflows during the year ended April 30, Morningstar data shows.

But there is still room for another entrant in the leveraged and single-stock space, especially given its size relative to the $7tn ETF space, analysts said.

“It doesn’t surprise me that Leverage Shares would do this, given their success in Europe,” said Amrita Nandakumar, president of Vident Asset Management.

An ETF that seeks two times the daily performance of Tesla will be functionally identical to other 2x Tesla ETFs, she said. To stand out from the pack, Leverage Shares will instead have to lean on its European experience, marketing and potentially try to undercut the incumbent single-stock ETF issuers on fees, she added.

Leverage Shares did not disclose the fees for its planned ETFs and did not respond to requests for comment.

Across other issuers, a majority of single-stock ETFs charge just north of 100 basis points, prospectuses show.

But Morningstar senior analyst Ryan Jackson is not convinced that fees would play a significant role in which single-stock ETFs investors buy.

Can Anglo American’s platinum division go it alone?

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