Cannes was the setting for this year’s International Forfaiting Association (IFA) conference. With its beachfront location, the conference continued in the vein of its predecessors providing plenty of opportunity for networking, socialising, dining, and in the case of this year even taking a dip in the sea, writes Rebecca Spong.
Cannes has a legendary reputation for attracting the rich, famous and fabulous from Hollywood or aristocrats and royalty, with most arriving by private jet or mooring their yacht in the harbour. Unfortunately our journey was not quite as glamorous, delayed in London after being informed 10 minutes before take-off that our plane had a ‘hydraulic leak”. With the captain announcing that our flight was indeed ‘terminal’, and evacuating us from the plane, my trip to Cannes began with a slight sense of foreboding rather than the expected excitement.
However, once the taxi swung onto the spectacularly sunny seafront of Cannes, my concerns had abated, and the three-day IFA conference – my first – lived up to my expectations.
Yet the expectations of those who have regularly attended IFA’s annual gatherings may well have differed from mine. Over the years they have become used to seeing some kind of debate, argument or straightforward booing break out between delegates and speakers. But this year there weren’t even any IFA board members up for re-election, and so for the second year running everything ran smoothly. The forfaiting market crowd has seemingly mellowed, or perhaps they were too busy topping up their tans this year to voice any complaints.
A contented crowd
Even in the aftermath of the conference, the general feeling among delegates is that it was another positive event and a step forward for the IFA. This year’s conference also proved to be the largest to date, attracting over 200 delegates from 120 different countries and 32 different countries.
Sean Edwards, European legal counsel at SMBC, who acts as the legal advisor to the IFA and co-chairman of the IFA’s Market Practice Committee (MPC) remarks: “The feedback was universally excellent. There was something for everyone: interesting presentations, extensive networking opportunities and enjoyable parties.”
Simon Lay, managing director at LFC similarly comments: “The conference was again well-managed with a good balance of speakers, and created a unique forum for the global participants in forfaiting to meet and exchange information and ideas.”
The role of the IFA
Over the years, the IFA has been trying to extend its role from being a networking forum to becoming more of a regulatory body, or at least an organisation providing some form of guidance about market practices within the relatively unregulated forfaiting market. However, it is the IFA’s attempts at standardising forfaiting practices that do not sit easily with some in the market.
Edmondo de Picciotto, general manager at Intesa Soditic Trade Finance, remarks: “I think the IFA conference should be more of a networking conference. This industry is all about building relationships. Some of the market practice bulletins are useful in terms of setting out what has become accepted as market practice. But I believe it’s a mistake to impose too much regulation on a banking sector that should remain relatively unregulated.”
However, LFC’s Lay remarks that the introduction of market practice guidelines can help “introduce a discipline and greater understanding between members as to what is ‘acceptable’s market practice”.
He adds: “Increasing regulation in the financial services industry is a fact of life. The Anti Money Laundering Regulations issued by the HM Treasury now specifically mentions forfaiting as a product which will be covered by the broader regulations being introduced at the end of this year. Consequently anything which we do as an industry to clarify the practices upon which we operate should be welcomed.”
Marina Attawar, managing director at DH Deutsche Forfait adds: “The updates on how new legal changes will affect our business were useful, and raise issues that I can pass on to the guys working in documentation. For instance, the presentation on methods of verifying facility letters issued by Swift to check that they comply with local laws is something I will raise with my team. These talks push me to reassess our company’s attitude towards particular procedures.”
Talking to GTR after the conference, Edwards explains some of the IFA’s current aims: “The IFA is not a regulatory body in the sense of say the FSA. Our mission is to provide guidance and education to the market, and to increase the number of people doing forfaiting in as many countries as possible. One sign of our success is the setting up of new regional committees in South America and Singapore announced during this conference. In that sense, I can say we are pleased with the speed and the scope of our successes. There is no master plan, but just a direction in which we want to head and that is going well.”
Yet he adds: “Personally I would like to see a more consistent approach to documentation. We have produced documentation to help this happen where it is possible, and there are many areas of forfaiting not capable of standardisation. But for the moment the value of such documentation is to provide a reference source of, and benchmark for, market practice. Over time this will change, but I think that this process will be very slow.”
It was this issue of standardisation of documentation that actually produced a momentary flurry of questions among the audience during the afternoon of the first day of talks. SMBC’s Edwards was presenting one the IFA’s market practice bulletins on facility letter and standby letter of credit structures. He made comments that the validity of loan agreements issued by Swift needs to be checked, as according to the jurisdiction in which the trade deal is being conducted there may be a need to fulfil other requirements as determined by local laws.
For instance, there may be a requirement for a facility letter to be physically signed by persons of specified authority or rank. This rule will not be overridden by the fact that the loan agreement has been issued via Swift. In order to get round this issue, Edwards suggests a loan is paid out under reserve, pending receipt of a signed copy of the agreement. This was an example that sent hands flying into the air, with questions fired from all corners of the room.
This slight outburst of activity brought the first day of the conference to a close. However, there was still much socialising to be done, with a night out at Baoli, a nightclub often frequented by the elite of Cannes, hosting film premieres and fashion shows. Take a look at the photos here to see how the forfaiting crowd upheld the venue’s glamorous tradition? !
Day two of the conference was mainly dominated by talks on UCP 600. The new regulations on documentary credits have been in force since July 1, and speakers Vincent O’Brien, member of the ICC Banking Commission and content writer of ICC’s officially certified online UCP 600 training, and Geoffrey Wynne, partner at Denton Wilde Sapte, provided updates on the implications of the regulations on the forfaiting market.
Simon Cook, partner from Denton Wilde Sapte, gave a presentation on the progress of the planned primary market guide being developed in conjunction with the IFA and the law firm. The guide will act as a reference point for various but not all aspects of managing, structuring and closing a forfaiting deal. It will cover origination of forfaiting transactions, various transactional phases such as carrying out the necessary due diligence, as well as how to place a forfaiting transaction in the secondary market.
Following Cook was Thierry Senechal from the ICC Banking Commission who provided a synopsis of current activities within the ICC, which includes the revision of the URDG (uniform rules for demand guarantees) rules.
The afternoon session was dominated by the annual general meeting of the IFA, which included a brief round-up of the association’s activities over the last year, including the presentation of IFA’s financial statements by treasurer Norbert Fritsch from Bayerische Hypo- und Vereinsbank.
It also updated members on the rapidly increasing network regional committees. The Middle East and North Africa committee has reportedly been the most active, having run a successful educational course for the regional forfaiting community. Another education course was also run in Beijing in July 2007.
With no board members up for election, the delegates were only required to vote the approval of Qian Xiao from Bank of China to remain a member of the non-executive board for a further year, as well as the approval of Greg Bernardi, from LFC New York, to remain a non-executive board member at IFA’s Americas branch, Association of Forfaiters in the Americas (AFIA), for a further year.
Following the close of the second day, the social highlight of the conference took place: the IFA’s annual gala dinner. Set in the dramatic location of Chateau de la Napoule, overlooking the coast, delegates enjoyed a fantastic dinner, complete with violinists to serenade diners.
The final morning of the conference concluded with an update on the impact of Basel II on the market, given by James Parsons from Bluecrest Capital Management, followed by a talk on improving the relationship between forfaiters and the media, before delegates enjoyed their final lunch out on the beachfront and were shuttled back to the airport.
The 2008 conference is already booked for Prague, not quite as warm and sunny in September as Cannes, but hopefully the medieval city will offer its own charms and the 35th annual conference will run just as smoothly as this year’s .