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EU's Instant Payments Regulation (IPR)

The EU's Instant Payments Regulation demands urgent upgrades, presenting both challenges and opportunities for banks and payment companies.

In brief
• From 9 January 2025, EU banks must be able to receive instant payments, requiring significant infrastructure upgrades and operational adjustments.
• Enhanced sanctions screening and robust fraud detection are critical to mitigate risks associated with real-time payment processing.
• By October 2025, banks must be able to send instant payments, which means addressing verification of payee, bulk payments and liquidity management challenges.

The European Commission’s Instant Payments Regulation (IPR) is set to revolutionize the region’s payments ecosystem, with banks and payment companies across the eurozone required to comply by 9 January 2025, followed by those in the rest of the EU from 2027.

Instant payments – fund transfers settled within 10 seconds and available 24/7 – are more than just a technological upgrade. They are a response to customer demands for speed, security and reliability in financial transactions.

The IPR aims to accelerate adoption of instant payments to support Europe’s growing digital economy and the evolving needs of its consumers and corporates. It seeks to remove barriers such as security concerns, accessibility gaps and operational challenges that have hindered the widespread adoption. By standardizing these capabilities, the EU envisions a financial system that is fast, secure and inclusive. This move is part of a broader strategy to strengthen Europe’s financial infrastructure and enhance strategic autonomy in the digital economy.

Instant payments accounted for just 0.08% of all EU credit transfers in 2018. Today, they still represent less than 20% of transfers. With the upcoming IPR regulatory deadlines and increased customer demands, the volume of instant credit transfers is expected to increase rapidly.

UBS to pay €835 million to settle French tax evasion case

The Swiss bank agreed on Tuesday to pay €835 million for illegally helping wealthy French clients open undeclared accounts in Switzerland.

Swiss banking giant UBS will pay €835 million ($985 million) to settle a long-running French legal case over helping wealthy clients dodge taxes, the group and French authorities said on Tuesday, September 23.

UBS will pay a €730 million fine and €105 million in damages to the French state to close the 14-year legal saga.

"UBS AG is pleased to announce it has resolved the legacy matter concerning its cross-border business activities in France between 2004 and 2012," the bank said in a statement.

The settlement is much lower than the €3.7-billion fine and €800 million in damages it had originally been ordered to pay in 2019. The total penalty was lowered to €1.8 billion on appeal in 2021.

The appeals court at the time found UBS guilty of concealing serious tax fraud and illegal banking activities in France between 2004 and 2012, when it was sending Swiss bankers to court well-heeled French clients.

ECB cuts interest rates to support flagging eurozone economy

The European Central Bank (ECB) reduced its interest rates on Thursday afternoon during its October meeting, marking the third consecutive cut since June.

New interest rates have been set at 3.40% for main refinancing operations, 3.65% for the marginal lending facility, and 3.25% for the deposit facility.

The interest rate on main refinancing operations is the rate banks pay when they borrow money from the ECB for one week, while the marginal lending facility rate is the cost banks pay when they need to borrow money from the central bank overnight.

The deposit facility rate, meanwhile, is the interest rate banks receive when they deposit money with the ECB overnight.

"The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission," the ECB said in a statement.

"The incoming information on inflation shows that the disinflationary process is well on track. The inflation outlook is also affected by recent downside surprises in indicators of economic activity. Meanwhile, financing conditions remain restrictive," it added.

Bank of England holds interest rates and warns it's too early to cut

The UK economy is likely to see zero growth until 2025, while interest rates remain high for longer or rise further, the Bank of England has warned.

It came as the Bank left rates on hold for the second time in a row at 5.25%, the highest level in 15 years.

Rishi Sunak has pledged to get the UK growing by the end of the year, but the lower forecasts put this in doubt.

Despite the subdued outlook, Bank boss Andrew Bailey said it was "much too early to be thinking about rate cuts".

However, the Bank expects inflation - the pace at which prices rise - to fall sharply in the coming months.

This means the prime minister is on track to meet his promise to halve inflation to about 5% by the end of the year.

Up until September, the Bank of England had raised rates 14 times in a row to tame soaring inflation, which has been squeezing household budgets.

It has led to increases in mortgage payments, squeezing borrowers, but also resulting in higher savings rates.

"We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target," said Mr Bailey.

"We'll be watching closely to see if further rate increases are needed."

The most recent inflation figure was 6.7% in the year to September.

The Bank expects it to continue to fall as energy and food price rises ease and predicts that it will remain at around 3% throughout next year, above the 2% target.

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Analysts worry the German economy could become "the black sheep of Europe"

Germany fell into recession in the first quarter of 2023, putting Europe's largest economy out of step with the rest of the continent.

The seasonally adjusted figures from the national statistics institute, Destatis, meet the technical definition of a recession: two consecutive quarters of economic contraction.

This puts Germany in recession for the first time since the decline in GDP in the first and second quarters of 2020, when the Covid-19 pandemic began to bite.

With German consumers and businesses battered by high inflation and rising interest rates, the country's Gross Domestic Product (GDP) fell by 0.3% between January and March – following a 0.5% decline between October and December last year.

So why is this happening?

Under pressure

The downturn is due in particular to the fall in domestic consumption as a result of inflation.

People are simply belt-tightening, with skyrocketing prices meaning there is less cash to splash.

Inflation remains very high at more than 7.2% in April, despite a gradual decline.

Top of the list of factors fuelling price rises is the war in Ukraine. German industry, long dependent on cheap Russian gas, was hit hard last year after Moscow supplies were cut off and prices soared.

Still, the economy at first seemed to be holding up better than expected at the start of the year, thanks to massive public aid, increased use of liquefied gas and a fall in gas prices since autumn.

Industry also benefited from the reopening of China from COVID restrictions and an easing of supply difficulties on international markets, boosting exports.

The European Central Bank's steady drumbeat of interest-rate hikes to combat inflation has put a considerable brake on activity.

The country's trading partners imported fewer "made in Germany" products than usual. The cause: "geopolitical turbulence, high inflation rates and loss of purchasing power", according to the DIHK economic institute.

Black sheep

Despite this slowdown, the German government remains optimistic, with a growth forecast of 0.4% in 2023.

"The outlook for the German economy is very good, and we are in the process of overcoming the challenges we face", Chancellor Olaf Scholz assured the press.

His Ministry of the Economy spoke of a "weak winter" before "a clear improvement" was expected thereafter.

But not everyone is so upbeat.

The IMF forecast in April that German economic activity would contract by 0.1% this year, before rebounding by 1.1% in 2024.

The German situation stands in contrast to its European neighbours, where the risk of recession has gradually faded thanks to lower energy prices. In Belgium and France, economic activity grew by 0.4% and 0.2% respectively in the first quarter of 2023 compared to the previous quarter. Italy saw its GDP rise by 0.5%.

Even the UK, which has been stuck in the economic doldrums for some time, received some good news this week: The IMF predicted it is not expected to fall into recession this year after all.

As Guillaume Dejean, an analyst for Global Market Insight, put it: "Germany is widely seen as the potential black sheep of Europe."

Central banks are buying gold at a record pace so far in 2023

Central banks accumulated gold at the fastest pace on record in the first two months of 2023, according to a report by the World Gold Council’s (WGC) Krishan Gopaul. In January and February, central banks collectively bought a net 125 tonnes of the metal, the highest amount for the year-to-date period since banks became net buyers in 2010.

The countries reporting the largest purchases in the first two months were Singapore (51.4 tonnes), Turkey (45.5 tonnes), China (39.8 tonnes), Russia (31.1 tonnes) and India (2.8 tonnes).

Meanwhile, very few countries’ central banks shrank their gold reserves. Net sellers were Kazakhstan, Uzbekistan, Croatia and the United Arab Emirates (UAE), though year-to-date purchases far outweighed sales.

How rising interest rates are exposing bank weaknesses

The end of historically low interest rates was billed as good news for banks, which make more money as the difference widens between what they charge borrowers and what they pay for funding. But recent crises on both sides of the Atlantic show that the reality is more complex, upending the conventional wisdom.

Some banks, notably in Europe, are stuck with big loan books at interest rates fixed far below current levels. Others with a higher share of their book at variable rates can immediately charge more for outstanding loans but risk a wave of defaults from borrowers who can no longer afford to service their debt.

Then there is the issue of government bonds, where banks have been holding ever more of their liquidity after post-financial crisis regulations curbed their risk-taking. Bonds bought a year ago have fallen in value because they offer lower interest rates than those sold today, which is fine unless banks are forced to sell them to meet depositors’ demands.

Another concern is the unpredictable behaviour of depositors as they look for more lucrative places to park their cash, including money market funds and crypto, if banks are slow to raise rates for savings.

Will Deutsche Bank be the Next to Fall? Worried Investors Are Already Turning to Gold

After Silicon Valley Bank became the second-largest bank of all time to fail, investors and analysts across the world have been sounding alarm bells. Some fear that the entire banking system is still at risk, but many think that the Treasury Department’s decision to bail out depositors was enough to solve the problem.

The crisis raised concerns about the stability of all major banks, but Deutsche Bank, one of the world's largest and most scrutinized financial institutions, is worrying investors more than others. Deutsche Bank was already not in the best shape when the recent banking crisis started.

The German banking giant has faced numerous challenges in recent years, with its stock price dropping about 30% in less than two months. Despite a small recent rebound, investors remain skeptical about the bank's future prospects. Moreover, Deutsche Bank's interconnectedness with other financial institutions heightens the potential for a domino effect should it run into major liquidity issues.

With trust in banks plummeting, investors are looking to protect their portfolios with gold and silver. Gold and silver prices shot up after news of Silicon Valley Bank’s predicament was unearthed. One of the best things about investing in gold and silver is that you don’t need to trust anyone. You can keep it in your safe at home and not worry about losing it all because your bank screwed up. Precious metals are also some of the only assets that have been highly valued across the world for thousands of years.

The European Central Bank Raises Rates Half a Point Amid Uncertainty

The European Central Bank pushed ahead with a half-point increase in interest rates on Thursday, sticking to its previously stated inflation-fighting plan, but said the recent turmoil in financial markets had made the path ahead less certain.

Over the past few days, since the collapse of three midsize banks in the United States, investors have been gripped by worries about other banks, including the big Swiss lender Credit Suisse, and about the sector’s ability to withstand higher interest rates. The European Central Bank was the first major central bank to set monetary policy since the volatility began late last week.