JP Morgan has signed a credit guarantee agreement with the Asian Development Bank (ADB) to help support international trade in Asia.
The agreement falls under ADB’s trade finance facilitation programme, a scheme through which ADB provides risk mitigation on trade finance transactions.
The guarantee agreement will ensure that ADB provides guarantees to confirming banks such as JP Morgan that will cover country risk as well as risk on issuing banks’ letters of credit, and other trade instruments. Via this credit guarantee, ADB will share the risk with confirming banks to help reassure exporting companies that they will get paid for shipments to developing markets in Asia.
Philip Erquiaga, director general of private sector operations at ADB, comments: “Trade is an important component of economic development and ADB works to achieve this, in part, by developing public-private partnerships involving risk-sharing arrangements."
In addition to this agreement, JP Morgan also signed a risk participation agreement with ADB last year, which also forms part of the development bank’s trade finance facilitation programme.
This previous initiative meant that ADB and JP Morgan would share risk on trade finance transactions ranging from short-term letters of credit to tenors of up to two years in frontier markets in Asia.
"We are pleased to further broaden our partnership with ADB to help bolster trade flows to a wider range of Asian countries recovering from recent market instability,” says Yanti Agustin, Asia Pacific head of global trade services, JP Morgan Treasury Services.
“As a pioneering member of ABD’s trade finance facilitation programme, we will continue to build upon our entrenched relationships with financial institutions in Asia Pacific by leveraging this important programme to help our clients raise important trade financing.”
Conor O'Dowd, global head of trade distribution at JP Morgan, adds: “With Asia recovering from the global economic crisis, this credit guarantee agreement will open new avenues for JP Morgan to provide stronger support in financing trade for emerging markets.”
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