The European Securities and Markets Authority (ESMA), the esteemed financial markets watchdog of the EU, recently unveiled a comprehensive report spotlighting the market dynamics of the EU’s alternative investment funds (AIFs).
In a revealing segment of the report, ESMA casts a spotlight on the precarious standing of real estate (RE) funds. This particular focus is driven by a discernible downtrend in transaction volumes coupled with a downtrend in property values across various jurisdictions.
An added layer of complexity emerges with the existing liquidity mismatches within AIFs, a situation exacerbated by the significant presence of open-ended RE funds that boast daily liquidity options. This vulnerability takes on a systemic dimension in jurisdictions where the RE fund’s market share is notably substantial.
Broadening the scope to encompass the entire sector, ESMA’s findings paint a picture of a sector experiencing a slight contraction, with a 3% decrement bringing the total to EUR 6.8trn in 2022, accounting for 36% of the entire EU fund industry.
This downward adjustment in valuation is primarily attributed to the valuation losses sustained by funds with exposure to bonds and equities, a scenario precipitated by less-than-favourable market activities in 2022.
RE funds, in particular, find themselves at the crossroads of multifaceted risks, encompassing leverage concerns, market footprint, valuation inconsistencies, and liquidity mismatches. Meanwhile, the realm of hedge funds is not without its own set of challenges, with leverage remaining at elevated levels, potentially triggering significant market repercussions. However, a silver lining exists as most hedge funds maintain robust cash reserves, a strategic cushion against potential margin calls and a deterrent against forced sales.
The report also sheds light on the Liability-Driven Investment (LDI) funds, noting the continued prominence of the risks they introduce through their leveraged positions in the UK government bond market. Despite the precarious environment, the boundaries established post the intense market turmoil in September 2022 are deemed to still hold relevance and appropriateness.
In response to these multifaceted challenges, ESMA has detailed the array of measures deployed by regulatory authorities aimed at mitigating the identified risks. The authority remains committed to its financial stability mandate and pledges ongoing collaboration with National Competent Authorities (NCAs) to ensure a harmonised supervisory approach towards data reporting under AIFMD, enhancing its monitoring framework concerning market evolution and pivotal risk metrics such as leverage and liquidity.
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![Temenos (SIX: TEMN) today announced that National Bank of Iraq (NBI), part of the Capital Bank Group, has successfully gone live with Temenos core banking and payments. NBI, which has 27 branches across Iraq, offers a comprehensive range of services to individuals and businesses in the country. Since 2005, NBI has been majority owned by Capital Bank, one of the top financial institutions operating in the Jordanian and regional markets, with assets of approximately JOD 7.6 billion[1]. With this implementation, NBI moved from its legacy systems onto the same core banking platform as other entities in the Capital Bank Group. This will enable NBI to operate more efficiently and integrate seamlessly with other systems to develop new products faster and deliver an improved customer experience. Capital Bank Group is a long-standing Temenos customer with other entities in the Group including Capital Bank of Jordan, Bank Audi, Société Générale Bank Jordan and NBI Saudi Arabia, already on the Temenos platform. NBI also becomes the first part of the group to adopt Temenos Payments, which enabled the bank to process more than 100,000 transactions of incoming and outgoing domestic and international payments in the first 15 days of operation, with a 99% straight-through processing rate. The migration to the Temenos platform for core banking and payments at NBI was completed in under 12 months thanks to Temenos’ pre-configured banking and payments capabilities and APIs which reduced the need for complex customizations, as well as close collaboration between Temenos, NBI, Capital Bank and delivery partner ITSS. This success was recently recognized in the IBS Intelligence Innovation Awards, with Capital Bank winning ‘Best Implementation of Core Banking Services'. The implementation at NBI follows several other successful transformation projects with Temenos for Capital Bank in the last few years, including the launch of NBI’s branch operations in Saudi Arabia in just 45 days, as well as the integration of Bank Audi and the former Jordanian operations of Société Générale, each of which was achieved in under four months. Collectively, these projects helped Capital Bank to increase operational efficiency by more than 50% within three years, bringing significant cost savings and an improved customer experience. With faster, more accurate processing and immediate service requests, the bank has maintained high customer retention rates and a reputation for service excellence. Izzidin Abusalameh, Chief Operations Officer, Capital Bank Group, commented: “This achievement marks a significant milestone in our digital transformation journey and positions us as a leading player in the banking industry. We have seamlessly transitioned the National Bank of Iraq to a cutting-edge core banking system which will not only enhance operational efficiency but also support providing our customers with a superior digital banking experience. Our continued partnership with Temenos has not only provided us with an advanced technological platform but has also facilitated a culture of flexibility and adaptability, enabling us to execute our ambitious growth plans.” Lee Allcorn, Managing Director, Middle East & Africa, Temenos, said: “Congratulations to National Bank of Iraq and the Capital Bank team on this successful implementation that gives NBI business agility and the same modern technology platform and ability to deploy fast with pre-configured banking capabilities as the rest of the group. With Temenos, Capital Bank Group is future-ready, and we are proud to support them as they continue to innovate and leverage our platform to grow sustainably and enhance the banking experience for customers.”](https://fintech.global/wp-content/uploads/2024/04/rupixen-Q59HmzK38eQ-unsplash-2-218x150.jpg "Flutterwave teams up with Acquired.com to streamline outward remittances in EU and UK")
