Germany’s Commerzbank has successfully ‘gone live’ with two bank payment obligation (BPO) transactions, GTR has learnt.
The first is for Polytrade GmbH, a German SME supplier of polymer chemicals for use in plastic products and its buyer in Thailand. The second is for Belgium-based BP Aromatics, one of the world’s largest aromatics exporters, via Commerzbank in Brussels, and its Turkish client.
Bangkok Bank acted as participating bank in the first transaction and Isbank in the second.
“For corporates there is need for electronic handling of trade data and same time enhanced risk mitigation in trade business,” Commerzbank’s vice-president, product manager of international business, Angela Koll, tells GTR in an exclusive interview.
“The BPO as an instrument sits well between letters of credit (LCs) and open account trade business, and as a trade finance bank, Commerzbank wants to offer this new instrument to its corporate costumers.”
According to Koll, one of the biggest challenges when arranging Commerzbank’s BPOs was finding matching corporate buyers and sellers willing to go ahead with the relatively new instrument, and finding correspondent banks who’ve adopted the BPO so far.
“The BPO offers new opportunities for buyers and suppliers, especially in open account business regarding risk mitigation, working capital and process optimisation and provision of finance.”
“For existing open account business it will be challenging to motivate buyers to take up the BPO, but for new trade business the BPO could be a feasible new payment term, provided the BPO successfully enters the market.”
Frank-Oliver Wolf, global head of cash management and international business of Commerzbank, adds: “Commerzbank is a leading German bank for trade and we are very interested to offer the BPO to our corporate clients.”
“In the long-term, we need to grab more open account business and shift it towards the BPO.”
Commerzbank could not confirm if the BPOs replace letter of credit or open account business. GTR understands that another German lender, UniCredit, has also gone live with a BPO transaction between a German exporter and a Japanese buyer.