Sector - Documentation
Trade finance 30 times less risky
New data shows that trade finance transactions are much less likely to default than other forms of lending.
A wide-reaching report commissioned by the International Chamber of Commerce (ICC) found that of more than 8 million short-term trade finance transactions, worth over US$2tn, fewer than 1,800 defaults were reported, which equates to a default rate of about 0.02%.
Spotlight on transaction banking
GTR and BNY Mellon gathered a group of experts in the transaction banking business to discuss key concerns facing the market today. The debate served as a follow up to a survey conducted by the two institutions which tested the market on a number of different points including trade, liquidity, foreign exchange and regulations.
BPO 'more relevant to Asia'
The bank payments obligation (BPO) will be more beneficial to Asian corporates than to other markets, according to a senior trade finance banker.
As world trade continues to grow much faster in Asia than in the rest of the world, the BPO is seen as a welcome alternative to letters of credit (LCs) on the continent, Ashutosh Kumar, managing director, transaction banking and global head of corporate cash and trade at Standard Chartered, tells GTR.
Japan tops trade finance charts
Japan was the most active trade finance market in 2012 despite a 5% fall in global volume, says Dealogic’s 2012 review.
HSBC names China FI payments head
HSBC has named Rani Gu as head of its global payments and cash management’s financial institutions group in China.
Bank signs China's first ePresentation
China’s CITIC Bank has processed the first end-to-end ePresentation business under letter of credit in China.
Video: Nordic corporates change export strategy
Corporates attending Exporta's Nordic region trade and export finance conference in Gothenburg tell GTR how the European crisis and the lack of banking liquidity has affected the way they do business.
Deutsche names Philippines TF head
Deutsche Bank has appointed Dave Fuentebella as head of trade finance and cash management in the Philippines.
ICC adoption crucial for BPO development
Adopting a clear set of rules is essential in rolling out the Bank Payment Obligation on a wide scale, according to supply chain finance experts.
Speakers at the International Chamber of Commerce supply chain financing conference in Paris on October 4-5 stressed the lack of a common definition of the BPO, and emphasised the importance of a harmonised framework. Vinod Madhavan, Standard Chartered’s managing director of transaction banking and global head of local corporates product, receivables and supply chain product management, said: “The fact that the ICC has still not fully blessed the rules for the BPO is an issue because that’s a question that corporate keep asking.”
ICC policy manager Thierry Sénéchal told GTR that the chamber expects to adopt the rules at its next committee meeting in Portugal in April 2013, but that a full consensus on the new draft must have been reached by then.
The adoption of the rules should also make it easier for smaller banks to start offering BPO services to their clients by reducing infrastructure costs. “The fact that we are developing standards on the legal and technological sides will reduce costs because technology providers will be able to offer standardised solutions that will be more affordable,” said André Casterman, head of banking and trade solutions at Swift, adding that banks can simply upgrade their portfolio of trade finance instruments without investing in a separate solution.
Anil Walia, head of trade and supply chain advisory, Emea, at RBS, added: “A quicker way to get on the supply chain financing bandwagon and start to earn money from that is to join forces with the larger banks, use the infrastructure, skills and knowledge of the larger banks to be able to provide the service to their clients.”
But beyond the lack of harmonised rules, experts pointed to a general lack of awareness of the BPO among corporates. Katarina Lodin, senior advisor at banking consultancy Cash Dynamics, told GTR: “Banks have not really created a clear strategy about how to implement this product. The corporates are not really that aware and don’t really see a need because they haven’t seen the impact it can have on open account trading. That is still for the banks to position, they need work more to [make corporates] look at it not as a replacement for letters of credit, but as a guaranteed bank payment.”
To corporates who questioned the BPO’s financial efficiency, speakers replied that the new instrument would reduce costs for banks, which should then reflect that on their clients. “In the BPO, the operational risk element goes to zero, or at least gets reduced a lot, and consequently, the banks would be passing on those benefits to the corporate,” said Madhavan.
ICC tackles trade 'deadlock'
The International Chamber of Commerce has announced recommendations to counteract the global trade slowdown.
In its Business World Trade Agenda initiative, due to be presented to governments in Doha in April 2013, the ICC has compiled advice from international businesses of all sizes to define practical governmental and multilateral measures aimed at boosting trade growth.
HSBC issues first Rmb documentary credit
HSBC India has issued its first renminbi (Rmb)-denominated documentary credit for a Mumbai-based pharmaceuticals company.
LMA creates PXF agreement
The Loan Market Association (LMA) has launched a recommended single currency term facility agreement for pre-export finance transactions.
EU trade surplus grows
The euro area's trade surplus with the rest of the world reached €15.6bn in July 2012, a rise from €2.1bn in July 2011, Eurostat reveals.
GTR editor moves on
GTR editor Rebecca Spong will be leaving the magazine on September 10.
Banks warned over fraudulent shipping documents
Banks are being urged to check shipping documents with particular caution as attempts to manipulate pre-financing have gained momentum.
The ICC’s International Maritime Bureau (IMB) has warned against a pre-financing fraud involving importers in West Africa and exporters in China, whereby false shipping documents are provided to unlock funds before goods are actually shipped.
