Banks increase financing under IADB trade scheme

Standard Chartered, Wachovia and Citi have signed a master participation agreement to provide additional lending to the Inter-American Development Bank’s trade finance facilitation programme (TFFP).

The document was signed during the Feleban Latin American banking federation’s meeting in Miami this week.

Under the terms of the agreement, the banks provide B loans to supplement the A loans extended by IADB to issuing banks in the trade programme.

Commenting on the agreement, IADB’s financial markets division chief, Daniela Carrera-Marquis, comments:”Speed and agility are fundamental in trade finance. This master agreement will allow us to respond literally in a matter of days to issuing banks’ requests for liquidity.

“We plan to invite other confirming banks in the TFFP to sign on to this agreement.”

The first deal to be made under this new agreement is a loan of up to US$50mn in A and B loans to the Brazilian bank, Banco Industrial e Comercial (BicBanco). StanChart, Wachovia and Citi are extending these B loans.

BicBanco was also the first bank to use IABD’s trade finance guarantees, and is the most active issuing bank under the programme. It will now be able to take advantage of loans structured as A/B loans from commercial banks and the IADB.

The IDB made a wise decision in providing loans under its Trade Finance Facilitation Programme,” comments BiBanco executive vice-president Paulo Celso del Ciampo.“

This gives issuing banks a much-needed assurance that, even during difficult times, they can count on a strong partner to be a stable source of trade financing for their clients.”

The IADB launched to TFFP in 2005, providing partial credit guarantees to boost trade finance volumes in Latin America and the Caribbean. It has now created a network of 59 issuing banks and 222 confirming banks in this region, as well as in North America, Europe, Asia and Africa. The programme has supported transactions involved around US$800mn, with most beneficiaries being small exporters and around 75% of deals being under US$1mn.