Message from the Chairman

Paolo Provera, Chairman ITFA / General Manager ABC International Bank Plc.- Milan Branch

Dear Members and Friends,

It’s Christmas again and the time for cheer. With increasingly positive news from the U.K., the US and from markets like India, it certainly looks a far brighter Christmas than one might have thought at the start of the year. 

We are very pleased to bring you an interview with Maria Castillo Fernandez of the European Commission and she’s highlighted how important it is for us as an organisation and for each of us as individual bankers to look at markets like India more positively. We at the ITFA will look at ways to work more closely with the Commission to enhance business opportunities for trade and forfaiting products but each of us as individual members needs to look into the opportunity and build our own market print in the region even within present constraints. 

Ms. Fernandez highlights that this is a key need and while pointing out that we can still look at the glass as half empty in terms of market access constraints, she also brings out a vital point—trade in India is big and it is an opportunity. 

Given the ITFA’s focus on the Middle East, South East Asia, the Far East and South Asia we are cognisant of taking steps be taking steps to continue to improve our knowledge and positioning in these fast growing sectors of the globe. The Annual Conference in Dubai next year is only one step in that direction. 

I look forward to seeing you all soon and take this opportunity to wish you all a Merry Christmas and a Happy New Year and may your Santa’s stockings be full with the growth potential that 2015 should bring!

DF Deutsche Forfait AG is back after acquittal from OFAC

ITFA has received the following statement from DF Deutsche Forfait. ITFA is pleased to welcome Deutsche Forfait back into the trade and forfaiting community.

German forfaiting specialist was removed from sanctions list without having to pay a fine

A great relief for German forfaiter DF Deutsche Forfait AG: The company has been recently removed from the SDN sanctions list of the US-Office of Foreign Assets Control (OFAC), where it had been placed in February 2014. The delisting goes along with a full acquittal. It does not involve any payment of a fine by the company. Following its removal from the SDN list, the company is free to resume  USD-denominated business without restrictions and to pick up its suspended business.

Marina Attawar

“We are glad to have managed to get off the list in a record time of 249 days”, said Marina Attawar, member of the Board of Management of DF Deutsche Forfait AG. The average OFAC listing period is around 850 days. "The listing has hurt us financially but we are convinced we will restore business in due course. One of the reasons for our confidence is the great support of our business partners that have signalled their readiness to transact with us again. Our key personnel are in place and are looking forward to getting back to business. Currently the company is considering a number of new deal opportunities,  including export facilities for Africa and Asia.

The investigations of the past months mean that DF Deutsche Forfait has been subjected to the toughest sanctions compliance checks imaginable and the adjusted compliance system of the company meets highest international standards. As a result the company feels well prepared for the task ahead i.e. continuing the trade finance business in these challenging times where we are all surrounded by international sanctions.

India’s outlook looks very positive, banks must look at ways to operate there

Maria Castillo Fernandez

Teresa Casal and Vivek Y. Kelkar spoke to Maria Castillo Fernandez Head of the division of India at EEAS

Foreign banks could not afford not to be in India and need to look at ways in which they could work there even with the current problems of market access, especially in facilitating trade, even as the EU was looking at ways and in dialogue with the Indian government to open market access. This was a key message given by Maria Castillo Fernandez in an exclusive interview with ITFA. 

The Indian market was looking increasingly positive for banking and insurance following the government change earlier in 2014 and banking industry organisations should be working closely with their counterparts in India to drive the changes required to bring the country’s banking into the international sphere, she pointed out. Ms. Fernandez also highlighted that these contacts would augment the work that the European Union is doing in its efforts to seek greater market access to India, especially in the banking and insurance sectors. 

The EU had also presented a memorandum to the Indian government with the following recommendations, result of the views expressed by the EU business representatives in India:

· The exploration of further flexibility in PSL requirements and lower the limitations to the opening of pure corporate banking outlets in tier -1 cities;

· Removal of regulatory constraints to the introduction of financial leasing and factoring

· Ensuring a stable and dependable full national treatment (FNT) to WOSs in future.

But the new Indian government led by Prime Minister Narendra Modi was seen as taking steps to open up the Indian economy across all sectors including in banking and insurance, she pointed out. While still spelling caution since the implementation of the policies was still to be seen, Ms.Fernandez said, “It is very early to say where the Modi government will make a difference but there is certainly a change in India happening. There are a lot of initiatives and he is really focused on economic growth.”

“There are equity caps in the service sectors, especially in banking and the shareholding and voting rights are limited to 26%. There are restrictions on banking products that for importers factoring and financial leasing are not possible. That is certainly a block but India does recognise that it has to open up and we are positive that there will be more flexibility in finance. The Indian central bank, The Reserve Bank of India, has been in the latest months taking steps in this direction,” she said.

Ms. Fernandez pointed out that the key to opening markets like India was continuing dialogue. “One of the issues that we feel we need more is the business to business dialogue in all the sectors. This is where I see where associations like the ITFA play an important role especially since it can promote trade and best practice,” she said. 

She pointed out that banking was one of the key sectors on the European Union’s agenda when it came to India and said that the Modi government’s “Make in India” initiative could be an opportunity for both sides to improve trade and develop trade related banking products even within the present constraints. “The Indian market has a huge potential across all sectors and we have seen the markets taking the new trends in the initiatives and the new change in a very positive way. There is 5.6% GDP growth predicted next year so let’s see. 

A copy of the Memorandum is available to our members on request which we trust you may find of interest. It is the result of views expressed by EU business representatives and not an official document representing the views of the European Union - is aimed at offering a snapshot of these comments and recommendations. These recommendations are without prejudice to the EU position on the EU/India FTA (Free Trade Agreement) negotiations as some of these sectors and policy issues may be addressed under those negotiations.The Memorandum refers to untapped growth possibilities for further investment and trade growth between the economies of the European Union and India and how European investment in India remains significantly lower than that in the other BRICS (Brazil, Russia, India, China and South Africa) nations.

The importance and challenges of insurance for the world trade

Silja Calac-Schneider discusses the new developments at the ITFA on Insurance

With growing trade volumes and increased pressure from regulators on capital requirements, banks are no longer in a position to provide for all the needs of world trade finance on their own. Insurance has become a key element to mitigate risks in trade finance.

As the Basel III regulations are being integrated in local legal systems, the impact on a bank’s capacity to finance trade increases. As banks seek ways to optimize the use of their ever scarcer capital resources, insurance becomes the perfect partner for those active in trade finance. This is because:

1.      Insurance companies are not competing entities. They will not enter into the funding and clearing business of transaction banks.

2.      Large parts of the trade asset class can't be accessed by insurers directly as they are not in a position to negotiate documents under LCs or to finance a supply chain directly.

3.      There is still large capacity available in the insurance market. As statistics from the FCI show, world exports have grown by nearly 15% over the last 5 years and cross-border factoring has achieved a growth of nearly 25% but credit insurance has grown by less than 10%.

To meet with the rising demand from the world of banking, insurance companies offer now an ever-growing range of insurance solutions to help mitigate risk-weighted assets:

Certainly political risk insurance and credit insurance, which banks often obtain via specialized insurance brokers, are the best known and established methods among those in the Trade Finance business. More recently, some insurance companies have also developed ways to cooperate with banks in the surety business offering risk cover for the issuance of performance guarantees, bid bonds, import LCs or even entire aval facilities for corporate customers. Some credit insurers cooperate with banks actively in supply chain finance to cover whole portfolios of small-to-medium sized corporate risks. And insurance companies have even entered the trade finance secondary market as investors on the assets side– i.e. with funding.

But there are still a few challenges to this partnership. Restrictive regulations put stringent requirements on the wording of a policy so that banks can use them as RWA reducing securities. Further, regulators also push the market towards standardisation. The European implementation of Basel III, CRD IV offers tight definitions based on which securities provide for regulatory capital relief. It also imposes on the way security wording has to be monitored. A legal opinion from a neutral party is required for each security document to confirm enforceability and legal effectiveness on a regular basis. Having to monitor policies with different wording usages might be costly for the Trade Finance business.

Also, IRBA requirements on rating of insurance companies might lead to insufficient reduction of risk weightings. Insurance companies might seriously consider cooperating with banks on this issue and increase their lobbying efforts with regulators in order to make sure that their products are properly taken into account. The Insurance Committee of ITFA will support its bank and insurance members to meet these new challenges and to reunite forces. For any questions, suggestions or initiatives please contact Silja Calac-Schneider at silja.calac-schneider@itfa.org

.................

Best Wishes and Great Times, Per!

We send Mr Per Fischer, Head of Financial Institutions covering CE, CIS, Russia, Turkey, Baltics and Mongolia every good wish on his retirement from Commerzbank after 28 years of service and wish him continued personal and professional success and happiness in his next phase and adventure in life.

Message from the Chairman

Paolo Provera, Chairman ITFA / General Manager, ABC International Bank Plc – Milan Branch

Dear Members and Friends,

As you will have read across the trade media, our annual conference in Barcelona was a great success and this is thanks to you. I wish to express my heartfelt thanks to each and every one of you for your trust and vote of confidence in the Board, and equally, for making our forum a dynamic business environment of reference. 

We are already working hard on the organization of the 2015 ITFA Conference, which will take place in Dubai in late October. We will once again be ready to offer to our members a valuable contribution on relevant market topics and to build again a stronger and more extended forum for networking. Mark your diaries!

We continue to strive to be a partner for you in business, deal generation and best practice, driving trade in the emerging markets and to this end I hope you will enjoy this, our second newsletter.

With my best wishes,

Paolo Provera

Barcelona: The Success and the Highlights

The 41st Annual Forfaiting Conference

It was at Barcelona that the new bigger and better The International Trade and Forfaiting Association was launched! As Paolo Provera, the Association’s Chairman said the organisation would now be even more of a facilitator for global trade. 

ITFA will seek to spread knowledge about global trade developments and global best practices (the ITFA’s” know how”), offer networking platforms networking to facilitate both deal-making and career development and offer dispute resolution through conciliation and arbitration. It would also work closely with organisations like the ICC Supply Chain Forum which were now emerging as critical to global trade.

The Barcelona conference was attended by 173 participants representing 35 countries reflecting the ITFA’s broad global reach and access to expertise. For the complete set of presentations click www.itfa.org.

For GTR News report on the Barcelona Conference and the revamp of the ITFA click  http://www.gtreview.com/trade-finance/global-trade-review-news/2014/September/IFA-becomes-ITFA_11947.shtml

For TXF News report on the Barcelona Conference and the revamp of the ITFA click http://www.txfnews.com/News/Article/3201/Ambitious-ITFA-revamp-looks-to-the-future

For the report on the Russia and Iran sanctions from TFR with a quote from Grant Eldred’s presentation at Barcelona click 

http://www.tfreview.com/news/legal-regulatory/latest-useu-sanctions-puts-russian-energy-exploration-and-lending-deep-freeze

Message from the New Board Member

Luiz Simione: MD, Global Head of Forfaiting & Risk Distribution, GTRF, HSBC Bank Plc 

I am delighted to be to be appointed to the ITFA Board with responsibility for institutional relations. 

My role is consistent with ITFA’s ambition to become a stronger representative of the Forfaiting and Risk Distribution industry. The aim of the “Institutional Relations” function is to actively cooperate with other subject matter experts and associations (such as the ICC, BAFT and Supranational Institutions such as the EBRD) and share best practices, participate in working groups and coordinate amongst regulators to ensure an outcome that is satisfactory to all industry stake holders (including regulators). 

I am writing to you directly from the USA where I attended Sibos conference in Boston. Most of the participants here articulated the demand for more training in Trade instruments, focusing on the secondary market, and the relevance that regulatory aspects have in their current business environment. Once I had the chance to talk about ITFA and our aspirations to represent even more the Trade Finance market, the reaction was very positive. Though most of participants demonstrated concerns about volumes, margins compression and the macro-economic environment, they still believe that international trade remains a solid proposition for financial institutions and ITFA can assist them developing that business. I am excited about the challenges ahead and will devote all the necessary energy to achieve our objectives. 

With my best wishes,

Luiz Simione

Message from the New Board Member

Damian Austin: Director, Head of Trade Finance Syndications, Corporate Banking Origination, Barclays

I was delighted to be voted onto the ITFA board last month and I am sorry I was unable to attend the conference. As most of you will know, I was otherwise engaged having become a father for the second time, so had a valid excuse for my non-attendance

I am very pleased to be given the responsibility of looking after the ITFA Regions, something I am hoping to bring energy and drive to. Having been an active participant in the market for nearly 20 years, I will look to bring the knowledge and industry contacts I have gained during that time to the table.

For me personally, the ITFA represents a voice across the industry and wider trade finance markets and is a platform not just for marketing and networking but also thought leadership, promotion of best practice and personal and professional development.

So what is on my agenda at this time? Like many of you, ongoing and ever-changing banking regulation is a key focus for me. These proposed regulatory changes may result in a number of unintended consequences for the trade finance industry, and it is therefore essential for us to have a voice as an industry around such matters.

ITFA has therefore taken the initiate to help lead discussions and provide support in lobbying on several regulatory topics including Dodd Frank and Capital Requirements Regulations (CRR) under CRD IV, both of which have specific reference to ITFA members. I would therefore encourage all members to reach out to ITFA, through their Regional Committees, when such issues arise.

With best wishes 

Damian Austin

Retirement from the Board of the ITFA

Sema Zeyneloglu, Global Head Financial Institutions EM at Rabobank

Sema Zeyneloglu retired from the ITFA Board after three terms of service. Her successful career has developed in new directions and has left her less time to devote to ITFA. She does not leave the association behind however. In her speech at ITFA’s AGM she expressed her continuing support for the association and her continued willingness to help with new projects in the future.

African Simbas are ready to roar: What makes Africa the ‘hot’ continent?

Dr Benedict O. Oramah, Executive Vice President, Business Development & Corporate Banking at AFREXIM Bank

Africa is Forfaiting’s New Frontier! This was the crux of the message delivered by Dr. Omrah who highlighted that forecasts indicated that African economies would grow by an average of 5.5% to reach US$10.4 trillion in 2050 with trade the major driver of growth, significantly with Asia. African trade was expected to rise by about 7% per annum to US S 2.1 trillion by the year 2020 with about 40% being with China and India. Intra-African trade, too, would exceed 16% of the total trade in 5 years, he said. Cross-border trade and investment flows that had been long suppressed by socio-political challenges and customs procedures have seen a rebound over the last decade, he pointed out. FDI inflows, which stagnated at around US$9 billion, have grown four-fold in a decade, consistent with the kind of FDI inflows that propelled Asia in the 1980s.

Dr. Omrah highlighted the changes across the industrial and agricultural spectrum across the continent pointing out that bankers would soon be required to finance cement, fertilizer and similar exports from West Africa and elsewhere.

The opportunities therefore were significant in areas like:

1. Large pre- export financing deals in the coming years as investments go into agriculture and heavy industries

2. Credit insurance, especially if the credit insurance market expands its risk appetite for non-traditional markets.

3. Forfaiting and factoring which was expected to grow from current volumes of US$23 billion in 5 countries to US$35 billion in 15 countries by 2017. 

He highlighted that, as with Asia, Africa is today a beneficiary of many initiatives to promote African trade, including AGOA, EU-ACP initiatives, etc. Further access to Asian markets is becoming an important factor. Not only does the Asia region have a large population, its effective market is growing — due to an expanding middle class — and the region’s success in addressing poverty. A striking feature of the recent growth performance is Africa’s relative resilience and robustness to external shocks. Relative to the contractions suffered during the early 1980s and 1990s on account of the Latin American debt crisis and the Asian debt crisis, Africa was one of the few developing regions that weathered the global financial and economic crises that broke in 2008/9, Dr. Omrah said. For the complete presentation please click www.itfa.org

Cautionary Note on Russian Sanctions

Sean Edwards, ITFA Deputy Chairman, Head of Legal EMEA, Sumitomo Mitsui Banking Corporation Europe Limited

Guidance is needed on the recent extension of the EU sanctions on Russia which came into effect on 8th September (EU Council Regulation 960/2014) and which contains a number of unclear provisions:

· The new sanctions prohibit making, or taking part in the arrangement of, new loans or credit after 12th September 2014 with a term of more than 30 days. It is unclear whether this refers to new loan agreements entered into after that date or if drawings under pre-12th September committed loans will also be impacted by the sanctions regime. (OFAC sanctions permit drawings of any length under pre-sanctions agreements).

· The term “credit” is not defined and it is unclear whether letters of credit are impacted by the sanctions regime or if only certain roles under L/Cs would be impacted eg.it might be possible to advise an L/ C but not act as negotiating bank.

· Trade Finance appears on the face of it to enjoy an exemption from the prohibition on the granting of loans or credit mentioned above where they “have a specific and documented objective to provide financing for non-prohibited imports or exports …between the Union and Russia”. This exemption does not, however, include imports or exports from outside of the Union e.g. from China even where those goods are not prohibited. As a result EU based banks may not be able to finance such transactions and will be at a disadvantage compared to non-EU banks.

ITFA will issue a notice to members if the EU clarifies these questions. Until then caution must be exercised and legal advice sought as necessary by EU members of ITFA if they are involved in situations where these issues rise.

Important Survey on Dodd-Frank Title VII

Paul Coles, Director, Global Trade Risk Distribution. Global Treasury Services, EMEA, Bank of America Merrill Lynch

Whilst the market still appears to be generally awash with appetite for trade assets (and a relative shortage of suitable assets for sale to meet the demand), there are always some challenges brewing that can affect our industry.

One such matter is the confusion in past months around Dodd-Frank Title VII. This is highlighted by the fact that a number of players in the trade finance risk participation market are still trying to reach a definitive conclusion as to what the impact might be, whilst an even larger number are seemingly unaware of the issue at all. This isn’t too surprising, as it is buried in legislation that is not actually aimed at the world of trade finance and therefore wouldn’t naturally appear on the radar.

We will very shortly be posting a more detailed explanation on the website of what it’s all about and what steps are being taken, however in the meantime we would like to remind you that ITFA is conducting an important survey in order to help resolve this issue. The data will then be aggregated and will be passed to BAFT only, to assist in lobbying the US authorities.

Banks who have not yet responded to the survey are strongly encouraged to do so in the interest of the industry as a whole.

Please take a few moments to collect the following data and feed it back directly to ITFA via the following email address: info@itfa.org

* How many sub-participation agreements does your institution have in place by number?

* What approximately is the value of the transactions completed by your organisation during the last financial year under such agreements?

* What proportion of these transactions were unfunded?

* What proportion were unfunded participations in underlying funded assets?

The information provided to ITFA for this survey will be treated as confidential. ITFA will collect the information and combine it with existing data which will be passed to BAFT only, to assist in lobbying the US authorities. No identifiable information for any organisation will be shared with any other party.

We hope that some positive progress will have been made by the time our next newsletter comes out!

The ITFA and the EBRD working together - Call for Membership

We are working to build stronger links into central and Eastern Europe, Southern and Eastern Mediterranean in collaboration with the EBRD. The ITFA was invited to attend the EBRD TFP Trade Finance Forum, which as you all know, is focusing on the development of Trade Finance and Forfaiting in the EBRD countries of operation covering FI's and SME's. The EBRD is working with over 800 banks in 77 countries. We hope many of you attending the Forum will join us as members and we look forward to working with you in building strengthened ties across the trade finance markets globally. We encourage you to go to our website for the ITFA membership form. 

Here is a link courtesy of TXF on the EBRD TFP conference.

http://www.txfnews.com/News/Article/3238/EBRD-annual-TFP-forum-focuses-on-overcoming-regional-challenges

Upcoming Events

The Association of Trade and Forfaiting in the Americas (ATFA) is holding its 4th Annual Canada Networking Seminar Reception in Toronto, Canada, on Tuesday October 21, 2014. To register click https://atfa.memberclicks.net/index.php?option=com_mc&view=mc&mcid=form_179132

 In Memoriam                                                  

Emilio Botin: The Legend

As we were about to kick off our annual conference in Barcelona earlier in September, we learnt with great sadness, of the passing away of Emilio Botin, Chairman of Banco Santander. He was 79.

Emilio Botin was responsible for the transformation of the Bank from a medium-sized Spanish lender to one of the world’s most successful banking entities. He is survived by his wife Paloma O’Shea and his children. 

His eldest daughter, Ana Patricia Botin, the former Chief Executive of Santander U.K. has succeeded her father as the group’s Chairman.

On behalf of all our members, friends and colleagues we express our sincere condolences to his family, friends and the whole of the Santander team of professionals worldwide.

ITFA Board

Chairman's Message

Paolo Provera on what Change will mean for the IFA and Trade and Finance

Dear Members and Friends,
As I write this today, we stand in the midst of change.

Change, not just for us at the IFA, but indeed right across the world as political events unfold that signal challenging days ahead for world trade and indeed for all of us in trade and forfaiting. 

Change that makes us at the IFA an even more meaningful and valuable organisation for all its members in the midst of current events.

Political events across the world, from Europe to Russia to the Middle East, are signalling that we may face continued uncertainty in the world of trade going forward. Who knows, they might even be signalling a new order in the coming years. As we wait for these to unfold and their consequences to be clearer and more decipherable than they are today, we need to be aware of what the change might mean.

At the IFA, we've recognised this and as a starting point we're presenting you, in this newsletter, with an interview with Per Fischer, Head of Financial Institutions covering CEE, CIS, Russia, Turkey, Baltics and Mongolia at Commerzbank.

And now about the IFA! As an organisation that exists and delivers value to its members we stand at a crucial juncture. We're committed to our fundamental objectives of delivering value, through knowledge, competence and networking and to do this we're taking several new steps. We're redefining our Mission to make ourselves the foremost source of value to our members and we're now embarking upon an ambitious round of restructuring our internal systems to truly deliver.

To do this we've appointed Teresa Casal as an Adviser & Special Projects. Teresa is currently finishing her Masters in Executive Coaching with an interest in Organisational Change, at Ashridge. She was formerly with Banif Bank, Standard Chartered, Standard Bank and Santander and is well-known to many of you. She will advise on our transition to make the IFA the most sought after body in Trade and Forfaiting.

The first step towards this is this newsletter which we now commit to bring out on a monthly basis. We're also revamping our website to make it an interactive platform that can deliver not just information but knowledge; not just names of members but true networking that can ease both deal making and career growth among our members. A date for the launch of this exciting web platform will be conveyed to you soon.

I am also excited by what is in store for all of us at the IFA in the coming weeks and months. We have the 41st Annual Conference in Barcelona coming up from the 10th-12th of September. Numbers are growing and we expect around 200 delegates. The focus as you all know is Africa – a most promising continent for trade and finance, especially forfaiting. We are delighted to welcome ATFA to our conference and hope that you will be able to join them at some of their events.

I am equally excited to announce the creation of a team led by Johanna Wissing (Barclays Bank), which will be presented at the Conference in Barcelona, formed by young people with the aim to bring youngsters into the next generation of trade and forfaiting. We think this is an important initiative and I know you will lend them all your support "The youngsters are coming!"

At the IFA, we plan to be at the forefront of the change; offering news, knowledge and insights drawn from across our wide and expert member-base, all of you, to deliver through our new platforms, the web and this newsletter.

Our success as an organisation can only come about if we all set about it together and co-operate to make our new platforms a success! Teresa, with some of the members of our Committee, will be in touch with all of you to see how you can contribute with knowledge and insight to deliver to our goals. She will also be at our conference in Barcelona, where I invite you all to interact with her and offer suggestions on how we can make the IFA your global organisation for Trade and Forfaiting.

See you in Barcelona in September!

Best wishes,
Paolo Provera,
Chairman

The Deputy Chairman's Message

Sean Edwards on Two New Regulatory Challenges

Nobody likes regulation. Full stop. End of. Bankers like the law a little bit more but not much. One of the jobs of the IFA is to help the market find its way through some of these issues. We have published market practice bulletins commenting on topical issues and giving guidance on difficult areas. We have not published any new bulletins for a while but we would like to hear from you with suggestions for fresh bulletins.


As we detail below, we are also taking the fight directly to the regulators. This is an area in which we must operate collaboratively with other associations. Just as importantly, we need input from all members as to where and what we should be pushing and lobbying on.

The financing of trade-related receivables – through forfaiting and other forms of supply chain finance – is a growth industry which we all want to be a success. The aim of the IFA is to help all of you achieve that success.

TWO REGULATORY CHALLENGES – A CALL TO ARMS!

Two regulatory issues which have been lurking in legislation on bank regulation and capital are starting to be felt by the forfaiting and wider trade finance community. In one case, the issue is an unintended consequence of rules designed for quite different purposes but which have, as has proved to be the case on more than one occasion, hurt the provision of trade finance. Your association is working to provide solutions for both these issues.

The first, which has already been the subject of consultation with the membership, regards the need to produce reasoned legal opinions on the effectiveness of credit risk protection under the European Capital Requirements Directive (commonly known as CRD IV) which implements the terms of Basel III into European law. Paragraph 194 of the associated regulations requires affected institutions to ensure that their credit mitigation techniques are "legally effective and enforceable in all relevant jurisdictions." Sub-participation agreements, in particular the BAFT form, are one such form of credit risk protection.

We are consequently looking to produce, possibly with BAFT itself, a market standard opinion to satisfy, so far as possible, this obligation and provide guidance on dealing with questions where this not possible. This opinion would be published on the IFA website for the benefit of all IFA members. Only IFA members will be able to rely on it.

The second issue originating in the United States but is very likely to have consequences for foreign banks directly and indirectly. Under the Dodd-Frank Act the wide definition of swap in the legislation had the potential to cover sub-participation agreements as well as classic swaps. Changes were made to ensure that funded sub-participation agreements would not be caught by the new provisions but those changes left the legal status of unfunded sub-participation unclear. Extension of Dodd-Frank to unfunded risk participation would result in the application of very onerous reporting and other requirements to these agreements which would make them impractical to use.

We are therefore looking to help BAFT in lobbying the US Government to produce clarity on this point. We urge members not yet engaged in lobbying on this point to contact their regulators and express their opinions.

INCREASING USE OF THE URF

Whilst off to a slow start, the popularity of the Uniform Rules for Forfaiting (URF) ICC Publication No. 800, is increasing with more transactions incorporating these rules and using the forms of optional model agreement attached to them.

Interest in the URF is especially notable in Asia one of the world’s largest forfaiting markets where the existence of an internationally recognised standard is appreciated in what is sometimes a fragmented market. Amongst other changes, the URF brings clarity to questions of recourse and examination of documentation.

All members have been sent a free copy of the rules. Further copies are available from the ICC Bookshop.

Happy forfaiting!

Have you confirmed your participation yet?

Our 41st International Forfaiting Conference

Dates: 10th-12th September, 2014

Venue: Barcelona, Hotel Rey Juan Carlos

To register for the conference (please copy paste the url in your browser): 

https://www.eiseverywhere.com/ehome/84379

You can also contact:

Faye Hamilton
Director

International Conference Solutions (Europe) Ltd

Tel: +44 7940 507 741

Email: fayeh@intl-solutions.com

www.intl-solutions.com

Other Industry Events

IFG 52nd Annual Meeting

Dates: 28 September – 1st October, 2014

http://www.ifgroup.com/events/annual-meeting/

ATFA Networking Seminar Cocktail

Date: October 21-14

Location: Bank of Montreal

Address: 100 King Street West, 68th Floor, Toronto

Contact: Genny Martinez-Campos

genny.atfa@gmail.com

Interview: Per Fischer on the Russia Conundrum

What the events in Russia mean for trade and finance

A key question today for bankers and the trade finance community is the impact of the sanctions on Russia and the unfolding economic dynamics from the political developments in the region. In a free-wheeling interview Teresa Casal and Vivek Y. Kelkar speak to Per Fischer, Head of Financial Institutions covering CEE, CIS, Russia, Turkey, Baltics and Mongolia at Commerzbank about what the developments might mean.

Q: With the recent events in Russia and Ukraine what are people are looking for in Central and Eastern Europe and Russia? What is happening with liquidity? Is there a retrenchment of lines, a change in the price perception of the risk, etc?

Per: Let’s look at the region overall. The Russian economy had deteriorated already at the end of last year. The overall growth in the Russian economy was only about 1.3%. This is much too low for an economy that is developing or emerging. Russia also saw capital flight towards the end of 2013 and we’ve also seen a downgrading by at least one rating agency. Many Russian corporates have had already some problems in tapping the capital markets for refinancing. All this was before the sanctions were imposed in April 2014.

So we’ve seen that many banks had already either raised their pricing for Russian risk or in some cases had even decreased their lines. This trend has only been accelerated by the sanctions. The preparedness of banks to take Russian risk decreased even before the sanctions and it is much lower today.

The other countries in Central and Eastern Europe have had a continuing growth path and have so far not been affected by the sanctions on Russia. Poland is doing quite well; the Czech Republic is doing quite well, as indeed are Hungary and some of the Balkans. Most of these countries have their trade with Western Europe and in particular with Germany and benefit from the robust German economic performance.

Further east, however, we might see many countries that will be negatively impacted by the Russian issue both politically and economically. Of course, those that produce oil and gas are much less dependent on Russia and will continue with moderate growth. But everything is very volatile. If harsher sanctions are decided, economies in western and eastern Europe would suffer.

Q: How severe is the problem for the Russian corporates? How is the Russian banking sector poised?

Per: All the big Russian corporates, including Gazprom and others from the commodities sector, were very active in placing bonds abroad, in issuing syndicated loans and tapping the capital markets. But from April-May 2014 these markets have been more or less closed for Russian corporates and many of them have lost access to the capital markets. Western banks in many cases are not prepared to issue bonds or refinance bonds or loans. This is putting pressure on the Russian corporate sector.

The question, therefore, is will the Russian banks be able to raise funds on the capital markets now? I doubt it. With the sanctions coming in even the Russian banking sector is going to be affected, especially for refinancing purposes.

Q: How do you think the smaller Russian banks will fare?

Per: Overall, of course, they will also be hit by the deteriorating Russian economic situation. This affects the whole economy. Russia has about 900 banks. The Russian Central Bank has been trying to consolidate the Russian banking sector by minimising the number of banks.

If the sanctions hit mostly the state owned banking sector then non state owned banks will maybe benefit gradually. There is, however, no doubt that that the whole Russian banking system is suffering already by the deteriorating economic situation and the sanctions. Small and very small banks with no international business might be less or later affected.

Most significantly, the EBRD is considering cancelling their Trade Financing Programme to Russian banks. This TFP programme is very important to a lot of smaller banks for their international business. If the EBRD programme is cancelled the cost may be high.

Q: The EBRD cancellation is a very serious issue. Would other commercial banks follow suit? Or is there an opportunity for commercial banks to enter some of that business? Would the sanctions affect that opportunity?

Per: It is indeed very serious because others might follow suit given the Russian political situation. This trade facilitation programme gives smaller banks access to trade financing, especially in cases where there is little or no credit history and the risk is perceived as very high. The onus of volume that was channeled through the TFP programme will now fall on the commercial banks and they might not be in a position to bear it.

Each bank will certainly make its own analysis. Those that are focused and strong on trade finance may not immediately withdraw their short-term lines, sanctions permitting. The general appetite today for Russian risk is not bullish. It will be difficult to make an opportunistic move and now to enter business that others have exited.

Q: How is the Russian central bank reacting?

Per: The Central Bank has clearly shown that it has two priorities. One, it is committed to consolidating the banking system. So rules have been eased to enable bank mergers or raise equity.

Two, the Central Bank is focused on making the banking system Basle III compliant. It has taken several positive steps. For instance, subordinated loans that were granted to state-owned banks during the crisis days of 2008-09 have now been changed or swapped into first rank capital. That has helped some of the state owned banks raise their capital adequacy ratio. This will help Russian corporate clients turn to these state-owned banks to get the refinancing that they may lose from the capital markets. The overall demand for credit from the Russian corporates to the state owned banks has already significantly increased.

Q: How much pressure will the additional demand for credit put on the state-owned banks. Is their capital adequacy ratio healthy enough to take that pressure?

Per: We have to remember that more Russian banks may be hit by the sanctions. The Russian Central Bank will have to formulate a clear strategy to deal with the situation. By raising the capital adequacy ratios, the Central Bank has already to some extent taken mitigating steps.

The other important point is that the Russian central bank is working extensively to strengthen and improve compliance mechanisms, setting up structures, etc. to improve the Russian banking system.

Q: How do you see Russia going forward?

Per: Don’t forget that Russia has the fourth biggest currency reserves in the world so they can weather some economic problems as they did in 2008-09. I expect that the Russians will come up with some counter-measures. But everything will depend upon what sanctions might come in the future and the degree of the sanctions.

Q: Beyond Russia, what will be the impact on other countries in the region especially Ukraine?

Per: Ukraine plays a much smaller role in the region’s trade. But Ukraine for a number of years has faced a difficult banking situation; the capital position of many Ukrainian banks has deteriorated because of the devaluation of the Grivna. The Ukrainian economy has had almost no growth during the last 2 years and for 2014 a decrease of 5% is forecast. Many foreign banks have exited the Ukrainian market. And since the Russia-Ukraine tensions started, the Russian banks, which are quite important to the Ukrainian banking system, have stopped to credit the Ukrainian economy. The negotiations between Gazprom and Ukraine about gas prices have failed.

Given this scenario, the IMF programme to stabilise the Ukrainian economy assumes great importance. This is an $18 billion programme which includes a re-capitalisation of the Ukrainian banking system. The Ukrainian Central Bank also has a big role to play to stabilise internal structures, set policies and ensure liquidity.

The IMF programme is both short term and long term and will work at different levels. But we have to remember a lot will depend upon the political situation.

Q: How do you see Kazakhstan?

Per: Kazakhstan has economically almost everything. Fundamentally the country is in a good situation with its tight budgets, reserves, etc. But even Kazakhstan had to devalue its currency, the Tenge.

Yet, a lot more needs to be done to strengthen the banking system. There is a restructuring of several banks going on and we hope that this ongoing merger of KKB and BTA will help to stabilize the country’s banking system. The good parts of Bank TuranAlem (BTA) are now being merged with Kazkommertsbank (KKB), the bad parts of both banks will be merged into BTA.

But what is interesting is the strengthening of the corporate sector. For the first-time in post-Soviet history a government, i.e. the Kazakhstan government, will allocate substantial money to a team of specialists from International finance institutes (IFI) led by EBRD which will then choose projects in different fields like energy, transport and mining among others.

The Kazakhstan state will act as co-financier, will provide grants and technical assistance and will of course oversee the projects.

In my opinion this model or experiment could be a show case if it is producing positive results also for other countries in emerging markets.

Q: As a banker in trade finance where do you see the most opportunity? Is there still a case by case basis to invest in Russia?

Per: Turkey has done much better than expected. There is still of course a substantial current account deficit but it is narrowing which is good. The Turkish economy is in quite good shape. It’s growing quite stably with ca. 3 % as forecast for 2014.

Investing in Russia is actually more risky than ever before – but the country still offers big opportunities for FDI and trade – now it is a political question whether investors become bullish again for Russia.

In Central Europe I would certainly prefer Poland and Czech Republic and I would also add Azerbaijan and Kazakhstan. Latvia and Lithuania are also doing better than expected. Soon we will see all three Baltic states belonging to the Euro zone. Who would have thought about this 10-15 years ago?

Q: Given their trade levels with Russia how much could the countries on the Russian rim be affected?

Per: The Russian Customs Union countries will of course be impacted but those that have opened trade, and can raise trade levels, for instance with China may not be quite as severely affected. It depends on the degree of inter-trade dependency. Some are more dependent other less. For instance, Azerbaijan is less dependent since they can shift a part of their exports, especially agricultural commodities to other countries. Azerbaijan has also managed to export part of their commodities to the West. Kazakhstan does have a significant trade with Russia but it also has flexibility. And it has significantly increased trade relationships with China.

Thank you, Per.

IFA's New Network for Young Professionals

Let's Build the Future!

Johanna Wissing on youth initiatives at the IFA

It’s no secret that the development of young potential is key to the continued growth and on-going success of global trade in today’s world, and in the ever-evolving and growing trade finance markets. Therefore, the IFA is delighted to introduce its newly-founded initiative: Let’s build the Future! – Young Professionals in Trade Finance & Forfaiting. 

As the name suggests, our aim is to help support young trade finance practitioners’ professional growth by developing a strong network that fosters education, knowledge exchange, transfer of ideas and skills, and a lot more.

The team running this global venture currently consists of two young professionals with some years’ experience in trade finance, located in key European markets; Philipp Moulas (UniCredit Bank AG) in Germany, and Johanna Wissing (Barclays) in the United Kingdom.

All young colleagues working in trade finance and forfaiting are invited to join us and become part of IFA’s investment into the future. Over the coming months we will be launching various initiatives, including networking events, courses and mentoring programmes, and we are hoping to get as many of you involved as possible. First and foremost of course, we hope to see as many of you as possible at the annual IFA Conference in Barcelona!

Email: johanna.wissing@barclays.com

Feature: The Youth Guard

A New Generation of Trade Financiers

Duarte Pedreira is currently a director at the emerging markets trade and commodity finance advisory boutique, Caspian Sea Capital – “CSC”. Duarte’s trade finance experience began with a Portuguese bank in London, where he spent most of his time as a trader, working side-by-side with some of the forfaiting market’s best known professionals, originating and trading not only traditional forfaiting market products, but also syndicated and bilateral loans. 

Duarte then spent two years in Luanda with the newly established Standard Bank Angola, initially as head of trade finance and later as head of transactional products and services, following which he was invited to work in the Standard Bank Group’s head office as head of trade finance sales for Africa. In April 2013 he returned to London and joined CSC with the mission of providing customised trade and commodity finance solutions and specific know-how to clients in jurisdictions less explored by mainstream international banks.

At CSC, Duarte is responsible for advising both financial institutions and corporate clients on structuring and placing trade and commodity finance. Although he is primarily based in London, Duarte travels extensively to countries such as Azerbaijan, Georgia, Turkey, Angola, and South Africa, amongst other emerging markets. 

“The greatest challenge in financing frontier emerging markets is still the prevailing information and knowledge asymmetries between borrowers and lenders”, he says, “and it is our role to bridge those gaps by studying those markets’ legal, regulatory and business environments to the greatest extent possible, enabling financing structures that make sense both to our clients and to the liquidity providers which have the risk appetite to fund them.” 

CSC’s commitment to delivering high quality financing advisory solutions to its clients is further enhanced by having Tom Hoffman as its Chairman. Tom is one of the City’s most seasoned and best known bankers, with more than 40 years’ experience in investment banking and international banking. Tom is also a Member of the Council of the City of London and its Finance Committee and its Financial Investment Board.

IFA Regional Committees

Chair of the RC committee

Ms. Silja Calac, UniCredit AG, Munich

Email: Silja.calac@unicreditgroup.de

German Regional Committee

Chairperson: Waltraud Raderschall 

Email: waltraud.raderschall@commerzbank.com

Deputy: Sandra Beck

Email: sandra.beck@kfw.de 

North European Regional Committee

Chairperson: Paul Jennings

Email: paul.jennings@arabbanking.com

Deputy: Damian Austin

Email: damian.austin@barclays.com

Southern European Regional Committee

Chairperson: Stefano Belucci

Email: Stefano.belucci@cariparma.it

Deputy: Stefano Cesari

Email: stefano.cesari@unicredit.it

Central and Eastern European Regional Committee – CEERC

Chairperson: Semih Oezcan

Email: semih.oezcan@rbinternational.com

Deputy: Robert Fleischmann

Email:robert.fleischmann@ba-ca.com
North East Asia Regional Committee - NEARC

Chairperson: Guo Lixin

Email: guolixin@bankofchina.com

Deputy: Wang Qijie

Email: wantqijie.zh@ccb.com


South East Asia Regional Committee-- SEARC

Chairperson: Kenneth Tay

Email: kennethtay@hsbc.com.sg

Deputy: Sophie Zhong

Email: sophiezhong@bankofchina.com


Brazil Regional Committee – BRC

Chairperson: Renato Schulman

Email: renato.schulman@finantia.com.br

Vereinigung eidgenössischer Forfaitierungs Institute – Vefi

Chairperson: Dieter von Boddien

Email: boddien@atlanticforfaiting.com

Deputy Chairperson: Stefan Vögeli

Email: stefan.voegeli@credit-suisse.com

Welcome New Members

FCMB (UK)

FCMB (UK) Limited, established in 2008, is the latest member to join the

International Forfaiting Association (“IFA”). Terry Rust who is well

known in the forfaiting community will Head the Trade Finance activity of

the bank. Terry will also be responsible for all matters relating to the

IFA.

FCMB (UK) Limited, is a UK incorporated and regulated bank, member of FCMB

Group Plc, a leading banking group headquartered in Nigeria. It provides

Trade Finance, Corporate and Investment Banking Services along with Stock

Broking Services for Institutional clients, wishing to trade in Nigerian

equities.

On the announcement, Mr. Paolo Provera welcomed Terry Rust to the IFA

community, wishing him and FCMB (UK) Limited many years of growth and

success. The IFA is delighted to continue to attract new members all over

the globe.

IIG Bank (Malta) Ltd.

The IFA is pleased to welcome a new Member to the Association, IIG Bank
(Malta) Ltd.

IIG Bank (Malta) Ltd has been established in Malta since March 2010. The

bank is an affiliate of the International Investment Group LLC, an

established global trade finance manager based in New York specializing in

the global commodity export sector with a focus on the emerging markets.

The IFA Chairman, Mr. Paolo Provera welcomed IIG Bank and said “I have

known Ray for many years and I am very pleased to welcome IIG Bank in our

association as the Bank is now looking to implement its second phase of

growth to build the bank’s profile in international trade and commodity

finance."

We look forward to greeting you all soon in Barcelona

Best regards

The IFA Board

Paolo Provera, Sean Edwards, Sema Zeyneloglu, Daniel Schär, Lorna Pillow,

Guo Lixin, Silja Calac

For details of membership please contact the IFA website at:

http://itfa.org/membership/benefits/

In Memoriam

"Having had a blissful year of full retirement, living in France".

Martin Robert Valentine Ashurst

In remembrance of Martin, banker, passed away on the 22nd of March 2014,with fond memories and love from all his friends in the banking world and beyond.

A man blessed with an amazing sense of humour and a love for all that made him a legend.

His wife Teresa Ashurst has kindly sent us this photo with the caption above.