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, info@itfa.org.  

Best wishes,

Sean Edwards

IN THE SPOTLIGHT: ATFA & RECENT TRENDS IN THE AMERICAS

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.

IMPORTS ROASTING ON AN OPEN FIRE...HAPPY CHRISTMAS from Equant

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.

NEW INSURANCE COMMITTEE TAB IN ITFA WEBSITE

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.

NEW ITFA MEMBERS

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.

NEWS FROM SEARC - SINGAPORE EVENT

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.