Monday 5 December 2016

CHAIRMAN'S MESSAGE - Sean Edwards, ITFA Chairman / Head of Legal at SMBC

Dear Members and Friends,

As we come to the end of this pivotal year, let me first take the opportunity to thank all those members and guests who attended our Christmas Cocktail Party, which was held earlier on this month at the remarkable Victorian Bath House. This hidden gem in the middle of the hustle and bustle of London was host to one of the most enjoyable (I still hear the ringing in my ears) seasonal parties we have yet put on, giving us all the opportunity to further cement those friendships and relationships which are, I think, unique for a financial market and reminisce on the challenges faced in 2016. For the ITFA Board, this event was an opportunity for us to thank you, our members, for your continuous support of this association. To view photos of the event, please click here.

As I write this final message for the year, I cannot but emphasise enough how busy the year has been. Brexit, the US Presidential Elections, the Italian Referendum, tensions in Turkey, the Fed and ECB meetings coupled with the endless list of sometimes surprising economic data across all regions of the world: the improvement of US economic data; an uptick in inflation in the Eurozone; the strong recovery in EM (in the first 9 months of the year); the continuous slowdown in Chinese economic activity; the strong dollar; a strong recovery in commodities and the stability of the price of oil. These are all but a few of the events which characterised and continue to shape what’s left of 2016.

To say that markets have been topsy-turvy ever since Donald Trump emerged victorious is a bit of an understatement. What surprised many, however, is the way markets reacted. And one of the largest movers has been the US dollar as the greenback has proven its worth, with Trump’s pro-business policies pushing the currency towards new year-to-date highs against major Emerging Market currencies.

The dust is still settling, but in the meantime, the administration in waiting is drawing up and short-listing its candidates to take over key roles and is currently in the process of meeting US allies and has already indicated that it is trying to bridge gaps with those countries whose diplomatic ties with the US has turned sour over recent years. Emerging markets are inevitably going to be impacted with this transition in US leadership, in what way and magnitude is still uncertain but the situation is expected to be fluid, at best, in the coming months.

As announced in last month’s newsletter, the regular feature: our ‘Chart of the Month” contributed by Dr. Rebecca Harding of Equant Analytics, has a Christmas twist to it this month: ‘’Imports Roasting on an Open Fire’’. Chris Hall writes about another ITFA event hosted in collaboration with Bank of China (Singapore), and which took place in Singapore last month. Also, for those who were unable to attend Agnes Alderson's presentation at the ITFA Annual Conference in Warsaw, ITFA has provided you with some insights into its sister association, ATFA.

Even as the year comes to an end, we have been busy by taking up the cudgels on behalf of the SCF industry and meeting with Moody’s to seek clarity on their methodology for rating the debt of companies using this form of finance. This follows on from their now slightly notorious paper on Abengoa’s use of these arrangements. Some useful clarifications were given by the ratings agency but further discussion needs to take place and we will let you know when we can report more concrete findings.    
In other news, may I remind you all that we are currently finalising the venue for next year’s ITFA Annual Conference. And, as some of you might have already heard, next year’s location takes us to Edinburgh, Scotland’s capital. This magnificent, enchanting and historical, but completely contemporary city awaits us. The dates are now confirmed - the conference will be held between 6-8 September 2017, so please start savouring the tartan moments ahead of us and save the date!

Let’s all hope that the tumultuous events of 2016 translate into the opportunities of 2017. In the meantime, I wish you all the very best for the festive season, sacksful of presents and joy and a new year full of health and prosperity.

We look forward to hearing from you with any feedback you may want to share with us by sending an email to myself, any of the Board Members or to our general email,  

Best wishes,

Sean Edwards


For the benefit of those who were unable to attend Agnes Alderson’s presentation at our annual conference in Warsaw last September, here are some brief insights into our sister association ATFA – The Association of Trade & Forfaiting in the Americas.

The association was originally established in 1995, and rebranded itself to its current name in 2007. It is constituted of a 10-member board, and as at July 2016 has around 80 paid-up members, comprising bankers, insurers, insurance brokers, law firms and Trade Finance-related service providers. Similarly to ITFA, it always aims to keep its annual membership fees low and to deliver value to its members.

For example, ATFA has staged a dozen networking events since June 2015, including a successful Annual Conference in Miami alongside CLACE (a LatAm-focused trade conference).

It has also recently initiated a mentor-mentee programme, which is being used as a great way to foster closer collaboration with ITFA: by leveraging our recent experience from setting up the Martin Ashurst Mentorship Forum, and by enabling mentees from either association to connect with mentors from the other association.

Agnes went on to highlight some of the trends that were affecting the US trade finance market – and in turn the global market too in many cases:
  • Growing reach of regulators (Fed, OCC, FDIC, etc) – unlikely that it could ever be reversed
  • Costs of being compliant are steep and often result in loss of revenue, in turn leading to the exiting of relationships and/or lines of business
  • Sanctions – which can be unpredictable, and getting it wrong can be costly
  • Adjusting to a world of low growth rates and sustained lower commodity prices
  • US EXIM Bank – should I stay or should I go?
  • Unexpected overseas events (Brexit, attempted coup in Turkey, impeachment of Brazil’s President Dilma Rousseff)
ATFA have also kindly shared two presentations that accompanied some engaging speakers at their Autumn Seminar and Cocktail at the Yale Club in New York; one can be accessed here, and the other here. Whilst not all the predictions were correct, it’s fair to say that there have been some unexpected results along the way this year, which can be perfectly summarised by the title of Robert Powell’s presentation, “2016: the Return of Political Risk”.

We at ITFA are looking forward to continuing our working relationship with ATFA, and hope that our members can benefit from further mutual cooperation and knowledge sharing on trade matters.


As we move closer to the festive season, it’s good to know that trade is booming, in the important sectors at least. This year, the UK will import some $633m worth of beer. This is 2% more than last year so clearly the Brits will be drinking away any impact of Brexit. Mind you, when it comes to pure indulgence, the US will import over $2bn of chocolate. This is nearly 7% higher than in 2015 so President Elect Trump may need to hold back on revoking any aspects of Obamacare that related to dentistry! Not to be outdone by the Americans, however, the Chinese are importing $188m of sweets and sugar confectionary. This is 5% higher than last year and suggests that the Chinese government’s move to make China a more demand-led economy is playing out well in this luxury segment. Finally, the German’s are upholding the real tradition of wholesome food at Christmas, we would expect nothing less and their imports of Turkeys are over 4% higher than last year.

And on that note, here’s to the $32bn of global trade in wine this year! At least some of that, we hope will be offered to Father Christmas!

A joyful festive season and a happy and peaceful New Year to you all.

We look forward to working more with ITFA in 2017.


Following the success of the ITFA Insurance Committee, we thought it would be a good idea to introduce an Insurance Committee section in the ITFA website. Since, its formation in August 2015, this Committee has been very active, and it is for this reason, that we decided to dedicate a part of the ITFA website solely to the Insurance Committee.

The information included in this section gives a brief background of how and why the Committee was initially formed, it describes the achievements of the Committee and lists all Committee members. Please click here to view the Insurance Committee section in the ITFA website.

Moreover, to further enhance the ease of finding any documents relating to the Insurance Committee such as Presentations, Published Guidelines, etc, we have gone a step further, and in the member area of the ITFA website, we have also included another section where all documents concerning the Insurance Committee can be found. Please click here to view the link, however bear in mind, that this area of the website is restricted to ITFA members only.

As we continually promise, ITFA is always working in the best interest of its members and we do hope that this additional information on the ITFA website is useful and also easy to find and refer to in case of need.


The ITFA Board is pleased to announce the following two new members.

Zhejiang Mintai Commercial Bank Company Ltd. is the strongest bank in Zhejiang. China. They employ more than 5500 employees, working from 11 branches, and having 116 sub-branches in many areas of China. Until  the end of 2015, the bank's total assets were USD 162billion. Moreover, since 2010, the bank has gained its position as one of the top 1000 global banks on a British magazine titled ''The  Banker''.

The Bank has expanded its International business from 2005. Through this increased business, it has brought about huge profits of USD 13billion  by the end of  2015. They currently hold business relationships with 263 correspondent banks, covering 53 countries from all areas over the world. They offer 16 different sorts of products in the line of international business.

Lili Jiang will be the main contact for all ITFA related matters.

British Arab Commercial Bank (BACB) is a London-based bank with 45 years’ experience specialising in providing finance for commercial clients in developing markets who want to trade and invest internationally. It provides trade finance, commodity finance and lending solutions for major corporations and financial institutions in these markets, acting as a bridge between local markets and international markets.

John Fussell will be the Main Delegate for all ITFA related matters.


ITFA is very pleased to report upon a highly successful inaugural Trade Finance Symposium in Singapore on 9 November for the South East Asia Regional Committee (SEARC), jointly organised by Bank of China Singapore Branch and ITFA. It was a well-attended event, with over 80 attendees from more than 50 banks and other institutions.

The symposium started with an address by Mr Deng Lei, Assistant General Manager and Assistant Country Head for Bank of China (hereafter “BOC”) Singapore Branch, discussing the links between BOC and Singapore and the wider ASEAN markets, as well as the continuing internalisation of the RMB and the opportunities therein.

There were several other BOC speakers at the event, including Mr Zhang Mei, Mr Ai Hao and Ms Sophie Zhong Fei, who covered a range of topics, including the evolution of trade finance, discussions on forfaiting and changes in the financial markets.

The keynote speakers were Dr Duvvuri Subbarao (former Governor of the Reserve Bank of India) and Mr Tan Kah Chye (CEO of Tin Hill Capital) who gave very interesting speeches, respectively on the economy and future regulatory changes.

Paul Coles, Head of Trade Risk Distribution, EMEA at Bank of America Merrill Lynch and ITFA Board Member (Head of Market Practice) and Chris Hall, Head of Trade Asset Management for Lloyds Bank’s Global Transaction Banking and ITFA Board Member (Head of Young Professionals) delivered a presentation to the audience on ITFA’s activities, including educational seminars, mentorship forums and the work we undertake for our members on market practices and our liaison work with BAFT, ICC and other industry bodies.

Most importantly, our market is collaborative by its very nature, and bringing key participants together is an important part of our Association’s role. It was therefore very rewarding to hear that the Symposium was very well received by the attendees, who were delighted to see a dedicated distribution event in the region. Discussions are already underway about repeating the Symposium in the future.

ITFA would like to thank both Bank of China Singapore Branch and the SEARC for their work in organizing the Symposium and we are particularly grateful to Sophie Zhong Fei and her team for their individual efforts.

To view photos of the event, please click here.

Monday 14 November 2016

CHAIRMAN'S MESSAGE - Sean Edwards, ITFA Chairman / Head of Legal at SMBC

Dear Members and Friends,

My nine-year old son is very fond of a collection of books entitled “A Series of Unfortunate Events”. This is an apt description of the two big political events that have hit the trade finance market this year: Brexit and the Trump victory in the US presidential elections. But let’s not be too pessimistic; these are unfortunate rather than death-dealing, planet-exterminating events. Short-term indices and measures have held up relatively well although some might say this is placing a premium on the absence of an immediate descent into darkness. The risks to the UK economy because of Brexit have been well rehearsed but this is maybe more of a domestic than an international problem. The bullying of the trade community in the presidential campaign is more worrisome. Both candidates have criticised free trade agreements with Mrs. Clinton performing a volte-face on her position such was the US electorate’s antipathy to liberalising trade. Mr. Trump never wavered in his opposition to TPP and TTIP and his nationalist, protectionist noises appear to presage even greater threats to global trade as the US builds an even bigger wall to the rest of the world than the one planned with Mexico. But on Brexit, the need and desire to protect the UK’s trade position with Europe is well understood and will be fought very hard for. As for Mr. Trump, his vaunted commercial pragmatism may yet contradict some of the gloomier predictions. What if the calculation is that the US does benefit from free-ish trade? And what if his promised expansionist fiscal policies produce opportunities not just for the American blue-collar workers but for industry (and their workers) in the rest of the world? There will certainly be opportunities, although these may be harder to spot than before and require even more invention and creativity. But who’s better at that than you, our members?

These “unfortunate events” are a fitting background against which to launch what we anticipate will be a regular feature in this newsletter: our ‘Chart of the Month” contributed by Dr. Rebecca Harding of Equant Analytics. Attendees of our Warsaw conference will remember her impressive opening presentation. This month: “Why do Trade Finance Professionals need to worry about the price of Oil?’’
In other news, may I remind you that with the Christmas season just around the corner, the ITFA Board is pleased to invite ITFA members to attend our yearly seasonal gathering; the ITFA Christmas Cocktail Party. As previously communicated, we kindly ask all ITFA Main Delegates to RSVP by latest 25 November 2016 (the invite is for a maximum of 5 delegates per member institution). The event is being held at The Victorian Bath House, Bishopsgate, London on Monday 5th December 2016 at 18:30 hrs. To view the invite please click here. As always, we encourage our ITFA members to attend this valuable networking opportunity, so please…save the date (and don’t miss the unlimited bar)!

May we also take the opportunity, to inform ITFA members about the ITFA Insurance Presentation which will be delivered directly before the Christmas party. Admission to the presentation is at 15:30 hrs and will be held at Liberty Specialty Markets, 20 Fenchurch Street, London. Please RSVP by 25 November 2016.

In addition to our new feature, this edition of the Muse features an article by Robert Kowit of Federated Investors, on ‘’Trade Finance as a Financial Asset: Risks and Mitigants for non-bank Investors’’. Finally, we present a write-up following the ITFA SERC event held in Verona, Italy at the end of last month.

We look forward to hearing from you with any feedback you may want to share with us by sending an email to myself, any of the Board Members or to our general email,  

Best wishes,

Sean Edwards

Wednesday 2 November 2016

TRADE FINANCE AS A FINANCIAL ASSET: RISKS AND MITIGANTS FOR NON-BANK INVESTORS - by Robert Kowit, Federated Investors, Senior VP - Product Specialist

Global trade volume in 2014 was estimated at USD 18 trillion. According to the WTO 80-90% of that volume requires some form of financing. Trade finance plays a critical role in the international finance and in the domestic finance of both advanced and developing economies.

Traditionally the financing of global trade has been provided by commercial banks around the world. Over many years and in some cases many centuries, these banks had developed effective and adaptive risk management procedures that allowed them to lend to developing economies which often faced significant headline risks. Now with balance sheets constrained, banks can be hard pressed to meet the demand for financing especially in the developing world.

According to a survey by the Asian Development Bank in 2014 as much as USD 1.6 trillion of demand for trade finance was unmet with a significant amount of the shortfall residing in Asia and Africa.

Financial investors who cumulatively control well over USD 100 trillion in assets worldwide have been largely absent from the market. The worlds of commercial banking and financial investment management have remained essentially invisible to each other.

The mechanics of more structured trade finance facilities present formidable barriers for financial investors, and although the trade finance market is huge it is also fragmented with few sources of comprehensive data.

The high risk adjusted returns from trade finance, especially those domiciled in developing economies, deliver a return profile that is very competitive when compared to financial assets while maintaining low to negative correlations with the major equity and fixed income indexes.

It is for this reason that Federated have been successfully investing in trade finance assets since 2006 and currently manage approximately half a billion USD. Their trade finance strategy is based on the credit culture of Federated. They analyze each deal to identify the risks embedded in the transaction and the structural elements which mitigate those risks to an acceptable level. For example, in the course of a given year Federated might see 600-800 discrete deals and make investments in only 80-100 of those.

So what are the risks that might adversely impact performance of a transaction? They can be broadly categorized into credit risk, market risk, liquidity risk, and operational risk. 

Risk Management

Credit Risk

Credit risk is the risk that the counterparty to a deal is unable or unwilling to make good on its payment obligations. Traditional credit risk analysis is focused on assessing a counterparty’s ability and willingness to make financial payment at a future date.

Structured trade finance deals, however, are often also dependent on production risk. This is the risk that the minerals cannot be mined, the oil cannot be pumped, or the crops cannot be grown. Once the goods are produced they can serve as the collateral for the transaction and in turn the risks involved in the deal are significantly reduced.

The success of trade finance deals depends on the actual production of the physical commodity underlying the transaction. The ability and willingness of a counterparty to successfully produce this commodity is often treated distinctly from performance risk.

In general, credit risk analysis often begins with a macro-level assessment of the country risk associated with the transaction. Sovereign credit ratings from the major rating agencies are reviewed along with independent and internal country credit and economic analysis. A similar sector-level risk analysis can also be performed where the current state and outlook for the relevant industrial sectors are examined. The relative importance to a sovereign of a particular industry sector or, in some cases, individual firms can also be taken into consideration in order to estimate the level of implicit support that might exist for an obligor or market.

Establishing limits is one way to manage credit risk as well as to encourage diversification, such as in Federated’s Project and Trade Finance investment strategy. In this particular case, there are geographical limits on the percentage of the overall strategy that can be invested in any one of four regions. Investments are also subject to per-country limits that depend on the specific sovereign rating of the country. Limits are also placed on the underlying transaction security types to further enhance credit risk protection.

To measure and manage performance risk, Federated begins with S&P Capital IQ ratings, a review of independent technical reports and credit analysis, and in-depth Q&A (questions and answers) on the credit with the mandated lead arranger (MLA) credit team. The MLA will also liaise with the agent bank (usually a wholly owned subsidiary operating in the country in which the deal is originated) which is responsible for monitoring the deal locally and for the control of the collateral pledged to the transaction.

Further research on the performance of the deals which the MLA has originated in the past and how the bank has dealt with stressed situations, can also be performed. If the banks investing in the deals provide stress scenarios, these are used as baselines and stressed further where deemed appropriate.

Once an investment has been made real time follow up is important. The agent bank provides direct information to investors on the performance of each transaction. This information would include confirmation on the production status of the goods, the transfers of money, collateral monitoring, and delivery schedules. 

Market risk

Market risk is the risk that changes in market factors that can adversely affect the value of a transaction. Most international fixed income bond funds are exposed to two primary types of market risk - interest rate risk and foreign exchange risk. Interest rate risk is primarily the risk that rising interest rates will reduce the present value of future interest and principal payments, while foreign exchange risk is related to the possibility that an adverse change in foreign exchange rates can reduce the value of those payments when they are translated back into the base currency of the fund. In the case of trade finance, it is possible to reduce market risk exposure greatly due to the structure of many of the deals.

As trade finance is dominated by short-maturity, floating-rate commitments, direct interest rate risk is inherently low. The impact of changing interest is minimal given that deals are floating rate indexed to either one month or three months.

Foreign exchange risk is minimal as virtually all elements of the transactions invested in are denominated in US dollars. There is no currency mismatch as the goods being financed trade in US dollars and the buyer pays in US dollars. Interestingly, in situations where the local currency in the borrower’s country of origin comes under pressure, the hard currency earned by a trade transaction becomes even more valuable. Local governments tend to make significant efforts to insure the performance of deals which bring hard currency into their country.

Further measures that can be applied to an investment portfolio include adopting limits on the weighted average maturity and effective duration of the portfolio.

Liquidity risk

The primary form of liquidity risk relating to a trade finance fund is the risk that a fund or account managed in accordance with the strategy will not have the ability to meet investor redemptions. There is generally little or no secondary market for structured trade finance deals and liquidation of existing deals prior to maturity can prove difficult and, if possible, costly.

Having said that, neither internal (i.e. investments by other Federated funds) nor external investors in Federated’s Project and Trade Finance investment strategy face lock-up provisions. All investors are, however, strongly advised about the relative illiquidity of the asset class and their investment, and internal investments are formally defined as illiquid and are held in the investing fund’s illiquidity allocation bucket, which typically range from 10 to 15 per cent of assets. While these measures do not guarantee that redemption requests will not come from either internal or external investors, they do help in ameliorating liquidity risk.

Given the illiquid nature of the assets, it may take an extended period of time to fund a liquidation or redemption request. For example, it may take up to 31 days to return cash to the investor. Trade finance assets held in the strategy’s portfolio typically make interest and principal payments either monthly or quarterly and are self-liquidating with an average maturity of 15 months. In addition, in the event of extreme market stress where it is impossible to sell assets, investors may receive investments held in the portfolio in-kind. As ever, the reality can be somewhat more favourable, and, for example, in the 3 years that the Project and Trade Finance investment strategy has been available to outside investors, investors have in fact been able to receive cash with little need to sell assets.

The second major operational risk relevant to trade finance deals is known as structure risk. Structure risk can be further broken down into counterparty risk, agent risk, legal risk, payment risk and damage/loss of goods and quality/quantity risks.

While some of these risks (e.g. counterparty risk) might appear to be more appropriately handled under other risk management efforts (e.g. credit risk) there are certain aspects of these risks that should properly be considered a form of operational risks. An example of this could be the reliability and timeliness of the information provided by the borrower on which the risk assessment is made and the ability to gather accurate information from the borrower to measure and manage the risk throughout the life of the deal.

Given the importance of the banks’ monitoring role in these transactions, an accurate assessment of counterparty risk, from an operational risk perspective, is highly valuable.

To manage agent risk, it is worth verifying that all the transactions have agency teams from top banks, which are also deemed to be reliable, and have extensive and appropriate experience and resources.

Legal risk is largely handled through the use of outside counsel and by careful selection of the controlling legal venue. For example, all deals for Federated’s Project and Trade Finance investment strategy are governed by ether US or UK law, which Federated feels affords an appropriate level of creditor rights as well as a stable means of exercising those rights.


With a global volume estimated at US$18 trillion in 2014, trade finance plays a critical role in international finance and in the domestic finance of both advanced and emerging economies. Trade finance is a significant business line for many banks and is an area of growing interest for non-bank financial players as well. Trade finance, critical and attractive as it is, however, is not for the unsophisticated or faint-hearted, especially in complex structured transactions. There are many risks faced by investors in trade finance that could seem quite daunting to the novice in this arena.

Disclaimer: This information does not constitute legal advice and is for education purposes only.  You should not rely on this opinion as an alternative to seeking legal advice.


Chart of the month - November 2016

Why do trade finance professionals need to worry about the price of oil?

Value of world trade vs WTI Crude average annual prices, 2000-2016

Source: Equant Analytics,

The drop in the value of trade in 2015 has gone largely unreported. Yet many trade finance practitioners will admit that last year was particularly tough. The chart tells us why. Between 2014 and 2015 there was a 15% drop in world trade values. This compares to the 23% drop in 2009.

Since 2000 the value of world trade has, largely, moved in a similar direction to the average price of WTI crude. The correlation between price movements and movements in trade monthly is over 90%. This is unsurprising since oil accounts for such a large proportion of world trade. If oil prices remain at their currently low level, the WTO forecast of 1.7% trade growth in 2016 and even the Equant Analytics forecast of 1% look over-optimistic.

Tuesday 1 November 2016


With the festive season only a couple of weeks away, all the ITFA Main Delegates have received the invite to the ITFA Christmas party which is taking place on Monday 5 December in London. We kindly ask all Main Delegates to RSVP by no later than 25 November 2016 (invite valid for a maximum of 5 delegates per member institution). We look forward to another celebration, and encourage ITFA members to attend this invaluable networking opportunity. May we kindly point out that this event is strictly for ITFA members and access to the event is restricted to confirmed guests only. We look forward to seeing most of you at the Christmas Party!

Also, following the success of last year's December event, the ITFA Insurance Committee is again pleased to host an Insurance presentation which will be held just before the ITFA Christmas Cocktail on Monday, 5 December 2016. The event will take place at Liberty Specialty Markets, 20 Fenchurch Street, Londond, EC3M 3AW, and addmission is at 3:30pm. Attendance is limited to three participants per ITFA member institution. Please register by sending an email by latest 25 November 2016.


We really wish to encourage our readers to be active on our Facebook page, to view photos of our events and to like and share our posts in order to provide more exposure to ITFA. Also, do not forget to follow ITFA on Twitter and LinkedIn.

May we take the opportunity to clarify that when accessing the ITFA Facebook page, individuals do not need to have access to Facebook in order to check our ITFA page, but simply need to like our Facebook page. 

Also bear in mind that even though access to Facebook is restricted in a number of institutions, one can always access it via a mobile device such as a smart phone in order to keep breast of event news and photos posted there. For example, we recently put up a post titled ''SERC Educational Seminar, Verona - 31 October 2016''. Read all about it in the next article of this Newsletter.


ITFA is very pleased to report another successful Educational Event, which was organised thanks to the revamped Southern European Regional Committee (SERC). A well-attended event which attracted individuals coming from Italy and France, representing ITFA members, as well as non-member entities.  

This Educational Event was held on Monday, 31 October, 2016 at the premises of Banco Popolare, at Piazza Nogara 2, Verona. Following the seminar, an enjoyable reception was held in an informal setting, together with a visit to the Roman Villa. The event was held in both English and Italian and provided a balanced mix of the two languages, so that everybody was able to catch the spirit.

The Educational Seminar started with an opening speech by Barbara Salazer, Manager Trade Finance of Banco Popolare, who emphasized that banks which normally look at one another as rivals were on this occasion, asked to share their knowledge and experience, creating a relaxed environment, having education as a prime and common objective. 

Silja Calac, ITFA Board Member (Head of Insurance Relations and Head of Treasury) and Senior Surety Underwriter at Swiss Re, delivered the first presentation, wherein she briefed the audience about our Association, who we are and our achievements. Silja mentioned the cooperation ITFA currently enjoys with associations like BAFT and ICC, and explained the ongoing collective efforts aimed, for instance at improving the MRPA. She also presented the achievements of the ITFA insurance committee and discussed other active topics and events concerning ITFA.

A second presentation delivered by Lorna Pillow - Senior Vice President, London Forfaiting Company Limited and ITFA Board Member (Head of Communication and Membership), entitled “Trade Finance and Risk Mitigation”, dealt with Trade Finance and touched upon a number of key definitions and articles from the URF800 as well as UCP600. In the second part of her presentation, Lorna addressed Risk Mitigation, discussing in further detail new Insurance Law, CRR, as well as BAFT Risk Participation Agreements.

A panel discussion conducted in Italian then ensued, with Lorna Pillow and Barbara Salazer as moderators, while experts from the top three banks in Italy (Vittorio Ballerio from Intesa Sanpaolo, Stefano Cesari from Unicredit and Roberto Ruffini from Banco Popolare) interacted with the audience. Ettore Santinelli, from UBIBanca contributed to the panel bringing the perspective of a Bank Credit department.

The greatest achievement was detected in the unconditional attention received by the speakers, the contributions and questions from the audience and a kind plea from the Italian smaller banks to make the occasion a periodic event, focussing every time on more specific aspects. The Insurance element attracted a lot of interest by the Italian banks.

Please visit the ITFA Facebook page to view photos of the event. 

Tuesday 18 October 2016

CHAIRMAN'S MESSAGE - Sean Edwards, ITFA Chairman / Head of Legal at SMBC

Dear Members and Friends,

Believe it or not, we’re already approaching the end of October and we’ve entered the final stretch of 2016, with risky assets including emerging markets having had their better share of what was a roller-coaster ride in the first few months of the year. The rally which ensued post beginning of year sell off, saw a lot of winners within the recovery in commodity prices, stability in the price of the US dollar and search for yield (investors deployed monies from low yielding economies to higher yield emerging market economies). But this does not mean that it was a smooth joyride, and neither does it mean that the last few months are expected to be a piece of cake…far from it.

Analysts expect Q4 to be the most challenging of quarters. To top it all up, mixed economic data points, key central bank meetings, the US presidential election, the price of oil, a weaker sterling, weakness in the European banking sector, Deutsche Bank in particular, and an endless list of ongoing events is expected to keep everyone on their toes. What is certain is that at these levels, there is no longer any margin for error, and following the remarkable performance emerging markets have had to date, a pull-back might be on the cards.

The ICC’s 2016 survey of trends in international trade ''Rethinking Trade & Finance'' confirms, at a macro level, a stagnation of world trade volumes with international trade growing at less than annual GDP. Some of the usual actors are relatively well known: low investment; a readjustment in China.  The report also points, however, to the lack of availability of trade finance.  And this here, is where ITFA and its members can make a difference. As our contribution to the report (pp.96-101) shows there is enormous potential in forfaiting and receivables finance in general.  Forfaiters, whatever their current job tile, are brilliant and creative individuals. Never, it seems, have we been needed more.  

On a more cheerful note, in this month's Newsletter, TXF Editor-in-Chief, Jonathan Bell, summarises the discussions held at the ITFA Annual Conference emphasising the role of distribution for trade growth. GTR Editor, Shannon Manders has prepared an article entitled ''ITFA's Insurance Guidelines to Shake the Market'' - two very interesting articles emanating from sessions presented in Warsaw. ITFA also brings you up-to-date with improvements in the ITFA website and last but not least, presents the findings from the 2016 ADB Trade Finance Gaps, Growth and Jobs Survey.

May I remind you all that with the Christmas season just around the corner, the ITFA Board is pleased to invite all ITFA members to attend our annual equivalent of minced pies and mulled wine: the ITFA Christmas Cocktail Party. In the coming days you will be receiving the invite, so we would greatly appreciate if you could RSVP by latest 25 November 2016. As always, we encourage our members to attend this valuable networking opportunity, so please…save the date! May we kindly point out that this event is strictly for ITFA members only and access to the event is restricted to confirmed guests only.

We look forward to hearing from you with any feedback you may want to share with us by sending an email to myself, any of the Board Members or to our general email,

Best wishes,

Sean Edwards


One of the key themes to come out of the recent ITFA conference held in Warsaw was the increasing importance of the role of distribution and syndication within trade to help achieve success in the changing and challenging market environment.

“The role of distribution is crucial within trade finance today,” declared Robert O’Donoghue, global head of receivables and payables business at ING Bank. “The bank market is just not big enough, so distribution is all important. This paves the way for additional investors to come in,” he added.

Panel moderator, Anurag Chaudhary, global head of trade distribution and syndication at Citibank, pointed out that key alternative investors were institutions such as pension funds, hedge funds and a number of players within the insurance market.

This discussion took place in a mainstream panel on day two of the annual International Trade & Forfaiting Conference (ITFA) held in Warsaw, Poland at the beginning of September, with bankers from five international commercial banks exchanging views on the current state of the trade finance market.

John Monaghan, global head of supply chain finance at Citi based in New York stated: “There are tremendous attributes on distributing assets. There is a big debate going on as to when you have a good asset providing good yields why would you sell in such a circumstance. For every bank there is a different dynamic.”

Looking at the way each bank handles the role of distribution and syndication within their banks, Karl Page, head of trade syndications at Barclays, declared: “Within Barclays, it plays a key role in our business, and we are seeing further developments of this whole area, with an emphasis on capital and returns. And, the better our syndication capability then the more help we can give our clients.”

Page added: “It’s not always appropriate to syndicate to other banks. So we also look now more at the non-bank market.”

Taking this on a little further, Page also noted that his bank is trying to get a better understanding, through ITFA, of what regulators further want on risk mitigation. And this is an area which concerns almost every bank, with financial institutions having to interpret a never-ending range of directives from regulators on risk, balance sheet and capital, with many trade bankers feeling that they are not getting a fair deal from the regulators. However, bankers largely agree that proper regulation supports business development.

At Lloyds Bank, Clive Higglesden, global head of trade products, said: “In terms of what we are trying to achieve through distribution, a lot of parameters need to be considered. On return of regulated capital, distribution can significantly enhance returns. It can make a lot of a sense to have funded participation. But unfunded might be a way to go. Other options include the use of ECAs [export credit agencies], because of their high credit rating.”

He added: “We will need to look at regulatory treatment, as this can impact on the funded and unfunded models.”

Earlier, the debate focused on the development of supply chain financing and how that was impacting distribution. Monaghan remarked: “Some years ago, a $50 million supply chain finance programme would have been big. Today it is not - these programmes now run into the billions. The size of these programmes leads to thought on alternative investors. But we need better automation to help distribution to alternative investors.”

Also on the supply chain finance front, O’Donoghue stressed: “One of the things financial institutions will look at is the lack of standardisation. We do need clarity. We buy trade receivables and they sit in the capital bucket on balance sheet.”

Gerhard Schipp, head of product management, trade and supply chain finance at Commerzbank, also remarked that on the distribution front it was: “very difficult to find a standard for supply chain finance, compared to other programmes and products”.

While Monaghan pointed out: “Securitisation programmes out there today also include supply chain finance programmes.” He also noted: “Institutional investors want a big bundle.”

Monaghan added: “When you have a good quality asset, the trick is how do you put that into the right distribution model?”  

Chaudhary also asked the panellists who it was within their institutions that decided to sell assets.

Responding to this, Schipp at Commerzbank replied: “In our bank it is quite easy. The relationship manager decides what to sell. Our distribution team decides who to sell it to and how to sell it.”

Higglesden at Lloyds noted: “The hurdle to decide what to sell and when differs with each institution. At Lloyds, it’s a joint decision between product sales and distribution.”

For Citi, Chaudhary stated: “Trade distribution doesn’t decide what to see, relationship managers do.”

While for ING, O’Donoghue declared: “It’s a joint decision. He who shouts the louder probably does the best!”

Through an entertaining panel, the panellists also looked at other key issues such as pricing, liquidity, opportunities for growth, the handling and use of data, negative interest rates, the impact of low commodity prices, increased risks and threats to banking, and the impact of fintechs and potential of the blockchain in trade.

ITFA provides a unique forum

The ITFA annual conference has evolved significantly over the past few years, and certainly became much more encompassing of trade product sectors when the old IFA moved to wrap up more of the trade market in a natural progression, and with the subsequent name change to ITFA.

And the ITFA conference today is a valuable addition within the market allowing financial practitioners to gather and discuss existing and new business as well as trends within the industry. A formally organised networking afternoon provides a useful break between the main panels and presentations. While in addition, entertaining networking dinners allow delegates to socialise with ease. It is a very successful format which has a growing following.

In his opening address of the conference, Sean Edwards, ITFA chairman, and legal counsel at SMBC, reported that ITFA had done a lot over the past year, particularly within the realm of terminology and consistency on the trade finance front (forfaiting and trade receivables) through promotions in Moscow and seminars in both Paris and Vienna. He also noted that ITFA had been at conferences with Afreximbank in Nairobi and Cairo, where education programmes had been opened for Afrexim staff. He declared: “Education is an important part of what we do.”

ITFA is also now a key institution well placed to put forward the views of its members and the trade finance community. And this is something which would appear to carry additional weight as ITFA grows in stature. Edwards noted: “We have also engaged in some advocacy on Basel 3.5. We have written to the regulators to express the views of the association recently.”

Such direct action is not just something the members simply want, it is something which is sorely needed if trade is to get a fairer hearing and ultimately better deal with national, regional and international regulators alike.

ITFA’S INSURANCE GUIDELINES TO ''SHAKE THE MARKET'' - Shannon Manders, Global Trade Review (GTR) Editor

The International Trade & Forfaiting Association (ITFA) has published guidelines on the use of non-payment insurance policies. The ''guidelines on structure and content for CRR compliant non-payment insurance policies” were drafted by the association’s insurance committee and launched at ITFA’s annual conference in Warsaw last month. The documentation came about in response to a survey conducted by ITFA among its members last year.
In the survey, members called for guidelines concerning the use of non-payment insurance as an eligible unfunded credit protection to credit risk mitigation under the EU Capital Requirements Regulation (CRR) No 575/2013.
''For bank members, these guidelines are intended to provide a summary as to how the provisions of a non-payment insurance policy may comply with CRR,''reads the introduction to the guidelines.
''This document should be considered guidance only: there is no ‘standard’ wording for non-payment insurance and each insurance contract will be tailored to mirror the underlying payment obligations,'' the document explains. It adds that guidelines do not constitute legal advice.
Over the past six months or so we’ve seen some particularly poor wording,” says Geoffrey Wynne, trade finance partner and head of the London office of Sullivan & Worcester, speaking on the sidelines of the ITFA conference.
“The guidelines will help shake up the market – the insurance market in particular. There may well be at the moment some dinosaurs saying: 'It’s ok – I read that I can opt out, therefore you can have my same poor quality policy wording because I’m not changing it.' But in a market which has overcapacity, why would you, as a broker, go to an insurer who will not listen to the need to make change?''
The guidelines also provide an indication of what policy wording may be required in light of the new Insurance Act (IA) 2015, which came into effect in mid-August 2016.
IA applies to all contracts of insurance and reinsurance (or variations to current contracts) subject to UK law – covering the laws of England, Wales, Scotland and Northern Ireland – underwritten on or after August 12.
Wynne calls IA 2015 a ''revolution''. ''It is restoring a balance that, for the best part of 100 years, was in favour of the insurer, which had a lot of people in banks saying: ''There’s no point in taking insurance – they don’t pay.’ This reverses that,'' he says.
''Non-payment insurance is now a good product: that’s the message to get across. The fact that there are more players and there is more capacity is good news, because I think we will see more and more good use of insurance,'' Wynne adds.
According to Katie Fowler, a member of the ITFA insurance committee, the guidelines will target new entrants to the market – of which there are many – as these will benefit the most from the guidelines.
Sullivan & Worcester provided legal advice to the ITFA drafting group.
ITFA formally launched its insurance committee at its 2015 annual conference.


The ITFA Board is pleased to announce the following two new members.

Hogan Lovells International LLP is one of the largest international law firms with 50 offices around the world. It has recognised market leading practices in international trade, trade finance and trade regulation working from all the main global financial centres.

Andrew Taylor will be the main contact for all ITFA related matters.

Founded in 1908, Bank of Communications Ltd. (BoCom or BoComm) is one of the oldest banks in China. In June 2005 the Bank was listed on the Hong Kong Stock Exchange, becoming the first Chinese commercial bank ever listed out of China. In May 2007, it was listed on the Shanghai Stock Exchange. 

As of December 31, 2015 Bank of Communications is China’s 5th-largest commercial bank by asset, which has set up 14 branches or subsidiaries in Hong Kong, New York, Tokyo, Singapore, Seoul, Frankfurt, Macau, Ho Chi Minh City, London, Sydney, San Francisco, Toronto, Brisbane and Luxembourg, and one representative office in Taipei, with a total of 56 outlets (excluding the representative office) at overseas markets.

Bank of Communications is a commercial bank with services including asset management, bills of exchange, bonds, capital markets, corporate finance, correspondent banking, documentary credits, factoring, foreign exchange, guarantees, international settlements, internet banking, money markets, portfolio management, syndicated loans etc. Bank of Communications is among the first batch of pilot banks to provide cross-border RMB services and was named the RMB clearing bank in Seoul. The Bank offers a full spectrum of cross-border and overseas RMB services and products including settlement, financing, credit, capital, bond, wealth management and investment.

Liu Yang will be the main contact for all ITFA related matters.


Firstly, we would like to remind our readers about the SEARC event being held in Singapore on 9 November 2016. The Trade Finance Symposium 2016 is brought to you by ITFA in collaboration with Bank of China, Singapore. The seminar commences at 8:30 am, followed by buffet lunch. The event is for ITFA members only. Please RSVP by latest 26 October 2016.

May we also take the opportunity to remind you of the upcoming ITFA GRC Fall workshop which is being held on November 23, 2016 in Frankfurt am Main. The event is for ITFA members only. The workshop will be held in German. As is customary, the workshop will be followed by the traditional Christmas Dinner which will be sponsored by ITFA. The seminar (14:00 - 17:00 hrs) including refreshments will be hosted by Helaba Landesbank Hessen-Thüringen Girozentrale, MAIN TOWER, Neue Mainzer Str. 52-58, 60311 Frankfurt am Main. The ITFA Christmas Dinner, which is sponsored by ITFA, will be held at 17:30 hrs.

Last but not least, with the festive season only a couple of weeks away, we will soon be sending out the invites to the ITFA Christmas party. We kindly ask all ITFA members to RSVP by no later than 25 November 2016. We look forward to another celebration, and encourage all ITFA members to attend this invaluable networking opportunity. So the date! May we kindly point out that this event is strictly for ITFA members only and access to the event is restricted to confirmed guests only.


As we have always promised, the ITFA Board ensures to listen to members' constructive feedback and address it instantly (where possible). Following the feedback we received after the ITFA Annual Conference held in Warsaw last month, we immediately got to work to do our uttermost to find a solution to the issue that was brought up - the speed of the ITFA website. 

In order to address the problem, we instantly got into discussions with our IT consultants and have come up with a solution. As from the month of October, the ITFA website has switched to another host server in order to resolve the speed problem. The new server space also includes Sitelock and Cloudflare, which are two services that improve speed and keep the website safe against hacker attacks, brute force attacks, etc. 

Thankfully, the transition/migration of the ITFA website to the new server was a smooth process. I am sure that once you all access the website, one will surely tell the difference with respect to speed. We can now proudly boast of having a faster, more reliable website in order to continue to improve on efficiency.

As always, we take your comments very seriously, therefore should you have any feedback you may want to share with us, please do so by sending an email to our general email,