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, info@itfa.org.

Best wishes,

Sean Edwards

ITFA PANEL EMPHASISES ROLE OF DISTRIBUTION FOR TRADE GROWTH by Jonathan Bell , TXF Editor-in-Chief

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.

NEW ITFA MEMBERS

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.




UPCOMING EVENTS - SAVE THE DATE

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 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.

UPDATE - SPEED OF ITFA WEBSITE

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, info@itfa.org.


2016 ADB TRADE FINANCE GAPS, GROWTH AND JOBS SURVEY

Following ITFA's invitation, earlier on in March, to participate in this year’s annual ADB Trade Finance Gaps Survey, we are pleased to inform you that the results of the survey have been quantified.  In collaboration with the Asian Development Bank, this is ITFA's third year of participation.

This survey quantifies global trade finance gaps and their impact on jobs and growth. The outputs have been used by regulators and financial institutions to understand where and why market gaps remain. This year's resulting report is highly aggregated - see the 2016 report 
here.

We thank you for taking the time to reply to this survey, which made the results more robust.

Friday, 16 September 2016

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

Dear Members and Friends,

The after-glow of a successful conference in Warsaw is still bright on my face as this newsletter reaches you. The event encapsulated all that ITFA is famous for - substantive and relevant education and information, effective networking and camaraderie all enjoyed in a social setting par excellence. The presentations and panels highlighted a number of our achievements throughout the year, the guide to Basel-compliant non-payment insurance policies for example - but also expertly signposted a number of the issues our market will need to face in the coming year.
    
One of these is, of course, Brexit. From the UK to the remainder of the developed world, as well as emerging markets, investors were highly cautious as the long term ramifications of the UK exiting the European Union were yet to be quantified. However, markets and investors were quick to shrug off the short term dent to investor sentiment as markets pared losses and swiftly recovered.

The announcement by the Bank of England of a fresh wave of monetary stimulus bolstered both investor confidence and the continuous global search for yield. With the global commodities market trading sideways for most of the summer months, monies were promptly redeployed into emerging market economies, as the potential for an uptick in economic activity whet investors’ appetite.

With summer out of the way, it is safe to say that all major economies, both developed and EM, have come out of the gruelling summer months relatively unscathed. However, with the European Central Bank falling short of expectations, all eyes are now on the forthcoming US Federal Reserve rate setting meeting, and particularly on how and when the next interest rate increase will impact the US dollar and subsequently the borrowing costs of emerging market economies. Inevitably, I guess we will all be tracking the performance of the dollar as history has taught us not to take movements in the Greenback too lightly.

In this month’s Newsletter, we present a technical paper titled ''Assignment of Proceeds under Letters of Credit - UCP600''. We then invite you to read an interesting article prepared by GTR Editor, Shannon Manders, on how the industry is facing the challenges and risks of the Trade Finance Learning Gap discussed in the session dedicated to Young Professionals during the ITFA conference.  Finally, a short tutorial has been prepared on how to effectively use the Search Function in the ITFA website.

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


Sunday, 11 September 2016

TECHNICAL PAPER - ASSIGNMENT OF PROCEEDS UNDER LETTERS OF CREDIT - UCP600 by Lorna Pillow, Senior Vice President, London Forfaiting Company Limited, ITFA Board Member

Introduction and Background

Banks have discounted Documentary Letters of Credit (“Credits”) for many decades, following the first set of uniform rules  published by the ICC (International Chamber of Commerce) in 1933. Yet when the infamous and much quoted case of Banco Santander SA vs Banque Paribas was heard before the  English courts in 1999, it raised serious concerns amongst trade finance practitioners.  Many articles were written at the time, resulting in one of the most important changes in the updated ICC Uniform Customs and Practice for Documentary Credits (‘UCP 600’) regarding the treatment of deferred letters of credit.

The ICC was compelled to ensure that there was consistency between regions on a point so critical  to the survival of secondary market trading. A new Article 12(b) was introduced into UCP 600 as follows: “By nominating a bank to accept a draft or incur a deferred payment undertaking, an Issuing Bank authorizes that Nominated Bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that Nominated Bank'' thereby facilitating the fundamental  business need for the discounting of deferred credits.

The provision applies where the Nominated Bank which has incurred a deferred payment undertaking discounts its obligation before maturity and subsequently fraud is discovered. The effect is that the Issuing Bank is not relieved of its obligation to reimburse the Nominated Bank, even if the fraud comes to light before maturity. The terms Issuing Bank and Confirming Bank are used interchangeably in this article mirroring the economic effect of the undertakings in Articles 7 and 8 of UCP 600 relating to Issuing Banks and Confirming Banks respectively.

The stipulations in Articles 7, 8 and 12 of UCP600 have established the independent rights given to a Nominated Bank to incur a deferred payment undertaking which includes the authorization to a Nominated Bank to prepay. The right to get reimbursed is not affected by the action of such Nominated Bank to actually prepay or discount such letter of credit.

Whilst this treatment of deferred payment credits addresses the main issue raised in Santander, the question as to whether Third Party Banks or forfaiters which further discount such Credits get the same protection as the Nominated Bank has not been resolved or dealt with by the changes made in UCP600.

What is the position, for example, of the Third Party Bank/forfaiter which gets an assignment of proceeds from a Nominated Bank or directly from the beneficiary? Furthermore, if an Issuing Bank gives an undertaking of payment at maturity to a Third Party Bank, and such Third Party Bank then assigns proceeds to another Bank, does this give the same rights to the Third Party Bank as those of the Nominated Bank? What can a Nominated/presenting Bank do if the Issuing Bank refuses to amend reimbursement instructions and insists that its obligations are limited to those set out in UCP600?

Most of the issues in this area relate to the vulnerability of assignees to defects in the rights being ''sold'' by the assignor. Before discussing these issues it is worth noting that these problems can be avoided by ensuring that the financial institution  intending to discount a deferred payment credit is appointed as  the Nominated Bank, either by having the Credit available with them or alternatively, available with any Bank. Needless to say however, this is not always possible.   

Under English law and many other common law legal systems, the basic starting point is that an assignee cannot obtain a better title than his assignor. This is sometimes known as taking “subject to equities” that is, rights which other parties have against the assignor and which the assignee must consequently respect as they existed on or before the date of assignment. Accrued rights to set-off against the transferred debt by the obligor of that debt are one example of such rights. In such circumstances, it would be unfair for the debtor to lose its rights simply because there had been a change of creditor.  

It is perfectly possible for a debtor, say an Issuing Bank, to agree that it will pay an assignee regardless of any defects in the rights which have been acquired from the assignor. In the case of letters of credit, Article 39 of UCP 600 allows for proceeds to be assigned to a Third Party Bank. Such an assignment is, of course, indispensable when a Third Party Bank buys the right to receive payment from either a Nominated Bank or a beneficiary. Such an assignment does not, in and of itself however, cure or resolve the issues relating to defects or adverse claims affecting the assignor’s rights explained above [1] but these can be overcome with a suitably worded acceptance of the notice of assignment by the Issuing Bank. Obtaining an acceptance of assignment of proceeds is, and has been for some time, standard forfaiting practice but care needs to be taken as whilst UCP 600 makes it clear that a beneficiary may assign proceeds, the Issuing Bank is under no obligation to either accept such requests or to acknowledge them. This has become more of an issue with some Banks becoming increasingly wary of accepting such requests from non customers, or in some circumstances where it is claimed that the assignment will result in a conflict with local law. Needless to say this is a barrier to the prepaying/discounting by third party institutions and is therefore to be discouraged.

It is of course at the discretion of every Bank to take into consideration other mitigants and specifics of the transaction that may well allow them to discount a Credit. 

It is good practice however that in all cases any Third Party Bank/forfaiter discounting a Credit advises the Nominated Bank of its intention to do so. 

Apart from ensuring that there has been an assignment of proceeds under Article 39 of UCP 600, the assigning Nominated Bank or beneficiary must ensure that the assignment is valid and has been created before the SWIFT advising such assignment is sent to the Issuing Bank.

Whilst a notice of assignment and acceptance should be obtained in all cases where proceeds due under a Credit are assigned to a Third Party Bank, an endorsement of a draft can in many legal systems provide similar protection under national legislation e.g. under the English Bills of Exchange Act 1882 where an endorsee can benefit from the protection afforded to holders in due course. It is understood by all parties that Issuing Banks can only pay Third Party Banks subject to the satisfaction of their KYC procedures. Whilst many Issuing Banks do not charge assignment fees to encourage trading of their own name, this is not always the case. Where fees are charged it is a matter of commercial negotiation as to the amount that the Issuing Bank will charge for such assignment although one hopes that these are restricted to KYC expenses and changes in payment instructions.

In addition to the Issuing Bank carrying out KYC on the bank it will pay at maturity, it is also practice for the Third Party Bank (usually not a party to the Credit) to carry out due diligence in relation to the underlying transaction and counterparties. Although this may be no easy task, Uniform Rules for Forfaiting (URF 800) [2], Introduction to the Primary Forfaiting Market and The Forfaiting Money Laundering and KYC checks all published by ITFA and available to its members, give guidance on this issue to Third Party Banks wanting to discount Credits. The Rules and Guidelines take into consideration other measures that banks may take to protect themselves (at least to some extent) on issues that relate to the underlying trade and its counterparties, specifically as they may not be a party to the Credit. It is of course imperative that such an analysis takes place before the discounting of a transaction. Whilst for established clients this process may be one of routine, tools exist to facilitate detailed analysis of the transaction, for example to track vessels and Bills of Lading. The Third Party Bank should insist that although the transaction is being discounted on a ''without recourse basis'', there is an ability to retain recourse in the event of  a breach of any representation and warranty that such Bank may have on the Bank or counterparty selling the asset/transaction.

The other key question is that when a beneficiary presents documents through an Advising Bank (not the Nominated Bank) under the Credit, and the acceptance of documents is sent to such Advising Bank confirming a payment undertaking, could that Advising bank discount the proceeds under the Credit and seek the same remedy as that of a Nominated Bank under UCP 600?  In our opinion when an Issuing Bank gives a reimbursement undertaking to a presenting bank, that presenting bank is effectively authorized to then discount a deferred payment undertaking. It is advisable though that such presenting bank should still advise the Issuing Bank of its intention to discount the proceeds under the Credit before doing so.

Whilst URF 800 allows for specific provisions under Article 4a, 13e and optional clauses to limit the liability of each party, such representations and warranties are as strong as the party you are dealing with. Therefore, the due diligence process including the analysis of the balance sheet of your counterparty to whom you will discount on a ''without recourse'' basis cannot be undermined.  For a Third Party Bank to mitigate the risk of fraud that could happen from the time the documentation is accepted to maturity, the Third Party Bank should insist on having recourse to the Seller whether the Nominated Bank or otherwise together with other representations and warranties [3] set out in the agreement between the two parties.

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.





[1] Note than where the assignor is a Nominated Bank it should not be subject to any defences to payment based on fraud given the changes to UCP mentioned above and so the rights it passes on to an assignee should be similarly unaffected.
[2] Uniform Rules for Forfaiting (URF) 800 is the first standard set of rules for forfaiting transactions by ICC in partnership with International Trade and Forfaiting Association (ITFA).
[3] Refer to Uniform Rules for Forfaiting (URF 800) and Introduction to The Primary Forfaiting Market 

Saturday, 10 September 2016

TRADE FINANCE LEARNING GAP PRESENTS RISKS TO INDUSTRY - Shannon Manders, Global Trade Review (GTR) Editor

The trade finance learning gap should be bridged before it’s too late, said speakers at the International Trade & Forfaiting Association’s (ITFA) conference, hosted in Warsaw between 7-9 September.
ITFA formally launched its mentoring programme at the end of last year, and invited some of its mentees to speak at its annual conference. In a session titled “Teaching the next generation”, mentees Asif Dad and Michel Meylacq told the audience that mentoring plays a fundamental role in the careers of young professionals. They called for the industry to assist them in attracting more mentors and mentees to ITFA’s programme.
''Young professionals are the future of the industry, and you can help shape that,” Dad said.
The session addressed the needs of young professionals in the trade finance arena, finding these to chiefly be: access to resources, training and qualifications, and networking.
The speakers highlighted the fact that the trade finance industry is ''skewed towards experienced professionals''. According to a 2014 survey by GTS on global trade and transactional services, only a small minority (2%) of trade professionals currently working in the industry have less than two years of experience in the field.
They recommended that the learning gap within the trade finance industry be tackled ''before it’s too late''.
Speaking on the sidelines of the event, Sean Edwards, ITFA chairman, told GTR there is going to be a ''deficit in the sort of people that understand trade. There are a lot of very experienced people in the industry, which you see if you come to these conferences. But eventually they do retire,'' he said.
Edwards called for those leaving the industry to transfer their know-how, gained through their cumulative experience, to their younger colleagues. ''It’s really important for them to pass on their knowledge: you don’t get that through any training programme or through any textbooks – you can only get it through the one-to-one interchange with people who have been doing this business for a long time.''
As the world of trade evolves, so banks – and their customers – are finding new and different ways of doing business. ''So if we, as an industry, don’t evolve in the same way as our customers, then the industry does run the risk of potentially being not relevant to our customers. And we can’t have that,'' Chris Hall, ITFA board member and head of its Young Professionals network, told GTR at the conference.