60 second interview

Face to face | 28 November 2016

Stefano Favale, head of global transaction banking at Intesa Sanpaolo, talks to TFR at Sibos Geneva 2016 about recovery from the Italian banking crisis, and supporting Italian exporters trade safely in new markets

Italian banking hasn't had the greatest of headlines recently. What does this mean for transaction banking?

As a large commercial bank, Intesa Sanpaolo supports the Italian economy to grow. It does this not only with new lending to the real economy, but also as conduit for Italian SMEs and corporates in their progress towards internationalisation.

Transaction banking lies at the heart of international commerce which is continuously growing; this is why we consider this business a strategic area for our investment. It makes it possible to build a day-to-day relationship with our business customers.

What about exports?

Italy is an export driven country which ranks second in Europe in manufacturing. Imports and exports have been growing in 2016 - particularly on capital goods as machineries where Italy has industrial excellence. The wider economy is recovering and in order to support Italian exporters, we are building a transaction banking platform (First Focus Europe) and, at the same time, we are enlarging our network coverage in countries with relevant trade corridors to and from Italy (such as the Gulf region).

Tell us more about your relationship with SACE

This does give us a huge advantage and our export credit agency puts our exporters in a strong position to win international business and compete with entrepreneurs based in other countries (such as France, Germany and the UK).

So, the co-operation in place with SACE is really important to us. It makes it possible to enhance the risk profile of the deal and, at the same time, the pricing to be applied as a result of the risk-weighted assets (RWA) benefits. One of our main drivers is the need to support Italian SMEs in their internationalisation process. This means we focus not only on the huge buyer's of credit transactions, but also on the small and medium-sized deals (up to €10m-€15m).

In addition to the traditional financings, we offer our customers, also in co-operation with SACE, the full range of internationalisation-oriented products (such as bonds, working capital and foreign investment facilities).

Sanctions have put Russia off-limits. How has this affected your trade business?

We are talking about a country with more than 150 million inhabitants and huge stocks of natural resources. Sanctions, for sure, had an impact on our trade business (Russia no longer imports certain food and fashion products) but the fall in commodities prices has had an enormous economic impact on the country.

If you think about oil and gas prices
and steel prices on the international markets, it is not difficult to understand why a country such as Russia that relies mainly on commodities exports is having a difficuilt time at the moment.

Iran might be opening up, but everyone is still treading carefully. How are you balancing compliance with trade?

Starting from the days of the first Shah of Iran until the sanctions were introduced, Italy and our bank were among the main commercial counterparties. Because of the sanctions and European withdrawal from the country to comply with the Office of Foreign Assets Control (OFAC) requirements, other exporters such as Chinese corporates have stepped in.

Our bank has an internal policy in place to support our customers dealing with Iranian counterparties. It is a strict policy in order to comply with European and OFAC regulations, but it is in place and we have already concluded some transactions and several negotiations are ongoing.

Digitisation and blockchain seem to be the main topics of conversation here at Sibos. Where does your bank stand in all of this?

On digitisation, we have recently launched a new version of our internet corporate portal "Inbiz", which completely redesigned the customer experience on trade finance products to digitise customer-to-bank relationship. This has been possible in just four months, thanks to the digital factory initiative.

Concerning blockchain, there are a lot of pilots and proofs of concept, but it does seem that we are focussing on technology to solve old problems. What is needed to enable the digitisation of trade finance processes and make the cost savings happen is, first of all, a common and accepted legal and compliance framework, and second, an ecosystem which includes all the actors of the processes. Not only banks and corporates, but also carriers and customs authorities.

The potential is huge.

Stefano Favale is head of global transaction banking at Intesa Sanpaolo

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