denotes premium content | Dec 5 2008 Trade & Forfaiting Review magazine archive
Volume 7 Issue 6
Editor’s foreword
Collaboration is one of those woolly business buzzwords that can mean anything and nothing at the same time. Most simply, it just means working together. But with whom and how?
With regards to trade finance, it means insurers proving more willing to participate in bank deals (and being asked to do so more often). It means credit insurance being used in innovative ways to supplement capital-market trade transactions. It means the capital markets getting involved with risk mitigation. It means reducing costs and minimising risks in structured trade and commodity finance through co-ordinated support to traders/producers by banks, insurance companies, and through credit support and collateral management.
Internal collaboration came first, mainly in the form of a bundling of cash and trade functions that was all the talk a few years back. This led to such diverse domains as private placements, project finance, and power and utilities co-operating to provide clients with seamless financing solutions. Mainly, this involves getting past the idea of “competing” products, and competing units, within institutions.
All told, the various parties involved in trade finance, both within and among institutions, have figured out that there is more to be gained from working together, since the combination of all of their strengths makes success more likely than going it alone. The most obvious result of this new collaborative spirit is a blurring of the lines between trade finance, insurance, reinsurance and capital markets. What follows from this is the birth of new hybrid products that are difficult to categorise and that incorporate elements of insurance, working capital, trade finance and investment banking. For corporates, this means solutions that can be tailored to suit their specific needs and a wider range of financing options from which to choose.
Collaboration is very much the way forward. Basel II will require even closer collaboration, especially between credit insurance and structured finance. As customers’ needs become more complex and as they demand more customised financing solutions, the banks they work with will need to reach out to insurers, the capital markets and, in some cases, competing institutions in order to provide these solutions and cope with challenges that stretch across the industry. Almost certainly trade-finance institutions will have to make sure their own internal structures are designed to allow for integration of related finance services and cross-selling of related products.
Finally, in our own show of collaboration, we are pleased to include with this issue of TFR the global terror-risk map that we have proudly co-published with our friends at Aon Counter Terrorism & Political Risk.
Courtney Fingar is editor of Trade & Forfaiting Review.
Features
The American dream
After some dismal few years, North American credit insurers are finding salvation in the weak dollar, a booming Chinese market and a rise in the number of exporters offering credit. The three key players in this space – Coface, Euler Hermes ACI and Atradius – are expecting huge increases in demand during 2004. But, still, don’t expect big changes in pricing. Erika Morphy reports.
China: The other hot spot for trade credit insurance
Besides North America, the use of trade credit insurance is expected to grow significantly this year and beyond in China. Ironically, the reason is the projected decline in trade flows for 2004. Vice Premier Wu Yi, a former trade minister, announced at the end of last year that China’s exports are expected to grow only 8% this year, compared with the 33% export surge in the first 11 months of 2003. Citing these forecasts, she pressed the domestic trade community to explore the use of export credit insurance, in order to explore the newer but riskier trading markets of Africa, Latin America and Russia.
Taking a crack at collaboration
The barriers that once separated trade finance from insurance, reinsurance and capital markets are being broken down, ushering in an era of increased collaboration. The result is a new batch of hybrid products, interesting new financing options for corporates, and an ability to bring deals to market that previously would have never happened. Erika Morphy reports.
Internal collaboration: Working together for private-placement finance
When SG Corporate & Investment Banking was guiding the Sunrise Power Company’s private placement of $345m of senior secured notes to fruition last year, there was also a competing project with a similar risk profile going into the public market at the same time, remembers Roger Bredder, head of project finance for the Americas.
Sterling performances
While most banks found the UK export market to be fairly static in 2003, the outlook for 2004 is a lot more positive and signs of a pickup are already evident. This is reflected by ambitious performance strategies, product-development plans and launch activities announced by several UK banks despite problems associated with the strength of the sterling and the predicted rise in interest rates. Kathleen Williams reports.
Time for India to shine?
India’s trade flows are growing and the banking environment is becoming more competitive. As companies look to make their supply chains more efficient, banks are responding with integrated trade and working-capital solutions. Abraham Chacko, executive director and regional head of corporate trade sales for South-East Asia at ABN Amro Global Trade Advisory, explains.
Coming soon, the UCP revision
The International Chamber of Commerce’s banking commission met in New Delhi last December to discuss an upcoming revision of the UCP. Drafting and consulting groups working on the text will meet throughout this year, and they have some complicated issues to resolve. Karl Mayrl, head of documentary credits and guarantees at Erste Bank in Vienna, outlines some of the issues that are likely to be debated.
Mistaken payments and unjust enrichment
The fallout from the massive Solo Industries fraud continues to be felt in the trade-finance industry some four years on, most recently as a consequence of a judgment of the English Commercial Court. Sue Millar, a partner at Stephenson Harwood in London, summarises Gulf International Bank -v- Albaraka Islamic Bank and Wachovia Bank, decided in July 2003, and its appeal in February 2004.
Beyond traditional trade services
David Hennah of Misys Wholesale Banking Systems provides an overview of some of the trade-services pressures that banks are facing and what this means to corporates, particularly in terms of supply chain management. He also cites the important role that e-trade has to play in enabling a more efficient and cost-effective trade environment – one that will benefit all concerned.
Regulars
Market view: Christian Stauffer
Last year Asia was “Sarsed out”; this year it’s bird flue. What’s next?
Letter from Hong Kong: David Sullivan
A lot of foreign companies that set up sales and distribution networks in China are surprised when they go to their banker (eg in Shanghai) and the bank is unable to discount their trade receivables. This surprises them since they are able to do this in other countries where they have distribution offices, so why not in China?
Company profile: More than money
After a successful year in 2003 and with hopes of even bigger volumes this year, ABN Amro has been expanding its commodity teams in Amsterdam, London, Moscow and Sao Paulo. But, as global head of commodities Prabhat Vira tells Courtney Fingar, the emphasis is on providing clients with solutions rather than simply financing commodities.
Personal profile: Setting sail for new ventures
Hans Herold is a trade-finance pioneer. As Deutsche Bank’s global head of trade and export finance, as well as a key player at KfW for many years, he helped develop the project and export finance techniques that made trade finance the cutting edge of global corporate banking. At the end of March he retires – though not before reflecting on a greatly changed, and improved, market over his 36-year career. Courtney Fingar reports.
Emerging-market debt pricing
Omni Whittington Commentary, April 2004
Country-risk appetite
The analysis from Standard Bank London:
