denotes premium content | Jan 7 2009 Trade & Forfaiting Review magazine archive
Volume 9 Issue 7
Many financiers believe Basel II is unlikely to improve the risk landscape. They argue it will only ‘appear’ to be improved as banks seek to conform to its requirements. In reality, they say, additional risks – notably operational – will ultimately arise from compliance. One source close to the market believes Basel II has no place in the commodity finance/structured trade market. “Most defaults are caused by fraud. The more remote ops people are from the deal itself, and the less experienced they are, the harder it will be to avoid it [fraud].”
The market has already witnessed a certain degree of dissent over the relevance and practicalities of the second act. And as institutions gear up to be compliant, they are being forced to look beyond the recognised talent pool to fill positions. “There is a dearth of experienced talent to meet the needs, resulting in the potential for risk actually being increased,” says one source. “Banks are having to advertise for collateral managers and mid and back-office controllers because they simply can’t be found in the usual way.”
But while much has been written about the impact of Basel II on banks, there has been less talk of its effect on borrowers. “If you were taking a cynical view,” says Clyde & Co partner Robert Parson, “you might think that some banks had jettisoned certain customers as the smoke bombs of Basel II went off ”. Indeed. But as Trade & Forfaiting Review discovers in this month’s cover story, a number of new funding mechanisms, such as trade finance hedge funds, are already waiting in the wings – and are poised to take full advantage (see ‘The curtain rises on Basel’s second act’).
Elsewhere in this issue, we look at the drivers behind the growth of reserve-based lending (‘Riding the wave’). We examine the potential of Ukraine as an emerging trade-finance destination in ‘Operating on the margin’ and in our legal focus, ‘Taking security in Ukraine’. In addition, we get an insider’s view on buyers’ charges that political risk insurers aren’t fulfilling their obligations when it comes to paying out claims in full (see ‘Claims of a bad name’). Meanwhile, Rouben Indjikian at UNCTAD in Geneva and Lloyd Edgecombe at the World Bank explore the development opportunities for trade finance in the digital age in ‘Trade Finance, ECAs and IT’. We hope you enjoy this issue.
Michele Martensen, editor
Features
Taking security in Ukraine
Oleksiy Levenets and Andriy Grushyn, partners in law firm Levenets, Maciw & Partners, and Veronika Koroleva, a solicitor in the structured trade finance group at Denton Wilde Sapte, discuss the legal issues surrounding secured lending in Ukraine.
Trade finance, ECAs and IT
Specialised trade finance in the digital age: a new possibility for development. By Rouben Indjikian at UNCTAD and Lloyd Edgecombe at the World Bank.
Claims of a bad name
Some buyers believe too many political risk insurers are getting away with not paying out claims in full, giving the industry a bad name. Andrew Underwood, head of political risk at Hiscox, answers back.
Operating on the margin
As margins and pricing in some Central and Eastern European nations reach levels similar to Russia’s, bankers begin to focus more on the Ukraine – despite its political uncertainties. Amanda Greene reports.
Riding the wave
Banks began expanding their oil finance operations long before it topped $70 per barrel. But now that oil has reached such dizzying heights, those banks that have refined their reserve-based lending techniques are well positioned to take full advantage. Erika Morphy reports.
The curtain rises on Basel’s second act
Up to now, Basel II has largely been an internal issue for banks. But as the implementation date looms, borrowers are wondering how they will be affected. For some, the answer to this long-standing question is still surprisingly opaque. Erika Morphy reports.
Nerves of steel
From Pittsburgh paperboy to Hong Kong CEO, Stephen Greer finds the American dream in South-East Asia. By Michele Martensen.
Regulars
Arrangers of trade-finance loans by region - Q1 2006
League tables for first quarter 2006, including top mandated arrangers and arrangers of global trade finance loans. Data compiled by Dealogic.
And now to cap it all
SiloBank has hired external risk management consultants to review its preparations for Basel II. Trade and commodity specialist Ace Banker has been asked to represent his business line…
Country risk appetite
Spreads continue to tighten, some marginally, some significantly, as investors continue to increase their lines for emerging market trade-related paper...
Emerging-market debt pricing
Both politically and economically, Venezuela is increasingly seeking confrontation with developed Western countries, and the US in particular. Left-wing president Hugo Chavez is seeking to decrease dependency on international (both bilateral and multilateral) lenders and decrease its debt repayment obligations...
60-second interview
Trade & Forfaiting Review questions Corina Muller Monaghan, newly appointed vice president in the commercial department at Coface North America.
The risk supermarket opens its doors
Falling margins may be a challenge for banks – but increased liquidity in the forfaiting market is an even greater opportunity, says Shalini Khemka, head of the recently-expanded risk and portfolio management department at Lloyds TSB cash and trade services.
Letter from Hong Kong
Recently, I was on a domestic flight from Beijing to Lanzhou in North West China. With my weight increase in recent years, which is obviously due to stress as opposed to overeating or overdrinking, I barely squeezed into my ‘first class’ seat...
Market view
When is the law in fact the law? I attended an industry conference here in São Paulo recently and a highly regarded Brazilian lawyer gave an instructive presentation on the enforceability of Brazilian security interests in the context of soft commodity financings. By Charles Johnson, senior associate at Clifford Chance in Sao Paulo.
