RBS has been approved to trade letters of credit (LCs) with the Dubai Mercantile Exchange (DME) directly from Singapore.
It means the bank will be able to issue LCs to guarantee deliveries of Oman Blend crude oil on the DME, which previously had to be done via the US. It will lead to a reduction in costs for the banks, which it says in a statement that it hopes to pass on to its clients.
Christopher Fix, the CEO of the DME, says that customers in Asia have “requested us to facilitate the financing of their crude oil deliveries and we have responded with this initiative to facilitate LCs directly from banks based in Singapore”.
It’s indicative of the much talked-about rise in west-east trade. Banks in the Middle East, in particular, have been keen to increase their presence in Asia, with NBAD, the UAE’s largest bank, planning to open eight global hubs, with three of them to be in Asia.
Japan, for instance, has become the largest importer of LNG in the world, after the decommissioning of its nuclear facilities. Much of this trade has been facilitated by a combination of Middle Eastern and Asian banks.
Furthermore, Asian banks have been highly active in the Mena region, particularly on large projects. The Korean and Japanese banks have followed their contractors into large works in the UAE, Saudi Arabia, Qatar and Kuwait.