Fimbank, a Maltese trade finance-oriented bank, has been granted issuing bank status under the Global Trade Finance Program (GTFP) of the International Finance Corporation (IFC), a member of the World Bank Group. Fimbank already participates in the IFC programme as a confirming bank.


The GTFP was launched in 2005 to support the development of trade with and between emerging economies. Under the US$500mn programme, IFC offers full or partial guarantees to confirming banks participating in the GTFP, effectively taking on the payment risk of issuing banks in emerging countries. The GTFP guarantees are transaction specific, and apply to letters of credit, promissory notes, bills of exchange, bid and performance bonds, advance payment guarantees and suppliers “credit for the importation of capital goods.


“This is the first time since the establishment of IFC that an individual bank has been accepted on both the confirming and issuing sides of the programme,”Margrith Ltschg-Emmenegger, Fimbank’s president says. “The IFC is placing a great deal of trust in Fimbank. This is a show of confidence in both the bank and in Malta.”


The IFC has also doubled Fimbank’s GTFP facility, raising it from US$5mn to US$10mn. This also follows the conversion of part of the IFC’s US$10mn subordinated loan to Fimbank to shares in the company in October 2005. This move made the IFC the group’s third largest shareholder with a 7.18% stake.


“What this means is that when an issuing bank in a riskier emerging economy of an IFC member country issues a letter of credit to cover a trade deal with our clients, Fimbank as the confirming bank can request IFC’s guarantee thus eliminating the commercial and political risk of the country and bank in question,” explains Ray Busuttil, executive vice-president and head of business development.


Fimbank’s status as both a confirming bank and an issuing bank implies that it benefits from both sides of the programme. If so required, IFC is willing to issue its guarantees to other banks to cover the risk of Fimbank. Alternatively, the bank can also benefit from IFC’s guarantees when confirming letters of credits issued by banks in emerging countries.
“While we are known to and transact with most major financial institutions worldwide, there are occasions when we may need to deal with a bank with which we do not have established relations. In this case, the IFC guarantee would serve as an access tool which would facilitate and speed up the transaction,” Nassif Chehab, senior vice-president and head, financial institutions adds.


Banks granted issuing bank status under the GTFP are vetted by the IFC. In order to benefit from the programme a thorough due diligence process on the company involved is required. The GTFP supports the development of trade in emerging economies by making it easier for banks to work together. Through the programme, the IFC reduces or eliminates the country risk associated with emerging economies and allows banks the opportunity to build up confidence in each other.


“The mere fact that IFC granted Fimbank the issuing bank status under GTFP has enticed major trading firms to accept Fimbank as a trading partner even without relying on the guarantees of IFC. With the support of the GTFP, Fimbank’s capabilities to reach a wider market and expand its relations with the major trading firms globally are substantially enhanced,” Renald Theuma, senior vice-president and head of corporate business, says.