Article

BNP Paribas and Cyprus

BNP Paribas is lining itself up to become a prime contender for new banking business likely to materialize in Cyprus when it adopts the euro in January 2008. One way the bank intends to win new trade business is by appealing to customers on the basis that a big banking name behind L/Cs will help their international trade prospects. A new market for large, locally based international players who have traditionally not done business in Cyprus is expected to emerge on the island once it joins the eurozone. An officer of the bank claims that his bank's ability to provide a quick, efficient and internationally recognized L/C service will help it win new business. He argues that trade financing via L/Cs or international guarantees can be much faster and cheaper and says that with its Standard & Poor's and Fitch AA ratings and its network spanning Singapore, Hong Kong, Shanghai and other emerging markets, "BNP Paribas' signature is always accepted, which can ensure clients lower costs." The bank has been particularly aggressive in seeking new L/C business.

L/Cs clamp down on oil traders

L/Cs are being employed by some US states in new laws that aim to prevent unscrupulous oil traders selling and subsequently failing to deliver oil for heating purposes to customers who put money up front. To combat the growing problem, several states are adopting a combination of stricter written contracts and requirements for dealers to secure a portion of the supply ahead of time through pre-buy deals. Under a bill passed by New Hampshire lawmakers, dealers would have three choices to secure the pre-buy deals:. either they could buy futures contracts for 75 per cent of the oil; they could obtain a surety bond for 50 per cent of the oil; or they could open a L/C for 100 per cent of the oil. New Hampshire oil dealers have said requiring bonds or L/Cs could boost prices as much as 12 cents per gallon, and it would be difficult for smaller dealers to stay in business.

German business fights Iran sanctions

German firms have hit out against their government's support for UN sanctions imposed on Iran's financial institutions that, amongst other things, restrict L/C transactions between the Islamic republic and countries in support of the sanctions. German business leaders argue that increasing financial pressure on Tehran is the wrong way to pursue Iran over its nuclear ambitions. "It is definitely wrong to further aggravate the situation," the executive director of Germany's industry association of plant and machinery makers, Hannes Hesse, told the business daily Handelsblatt. "What political sense does it make to generally block current L/Cs and (financial) transfers of the state-owned Bank Sepah and thus largely delay payments to German firms?" asked Hesse. Germany's business community is concerned that it may lose out in burgeoning Iranian markets to competitors from countries not in support of the UN sanctions.

Michael Rowe

It is with great sadness that DCInsight reports the death of Michael Rowe, this magazine's technical editor for the last several years. A fine journalist, Michael once was the policy manager of the ICC Banking Commission before he decided to go independent some years ago. He produced widely acclaimed books on letters of credit and countertrade for Euromoney and contributed to a number of leading trade journals, as well as the International Herald Tribune and the Financial Times. Michael's wise counsel and irreverent sense of humour will be sorely missed. Michael is survived by his wife, Veronica, and two sons.