DC Insight

The centrepiece of this issue is our special section on the Bank Payment Obligation (BPO), the new set of rules approved by the Banking Commission in April. The definition of the BPO in article 3 of the rules reads: "[The BPO] means an irrevocable and independent undertaking of an Obligor Bank to pay or incur a deferred payment obligation and pay at maturity a specified amount to a Recipient Bank following Submission of all Data Sets required by an Established Baseline resulting in a Data Match or an acceptance of a Data Mismatch pursuant to sub-article 10 (c)." Put simply, once the requisite electronic data matches up between two banks using a minimum of data (purchase orders, etc.), the recipient bank must pay.

Readers may wonder why we're devoting so much space to an instrument that only a limited number of banks have signed up to use. Simply because it's our job, not just to report on what's happening in trade finance now, but also to take a look at the shape of the future.

Yes, we know that commentators for years have been forecasting the end of paper L/Cs. And we're aware of the barriers to widespread adoption of the BPO, but these obstacles are not insurmountable; indeed, they are being overcome even today. So time will tell. Consider the prediction of Merlin Dowse in this issue's special section: "The world of trade finance," he says, "is likely to feel a seismic rumble."

We haven't forgotten the second major document approved by the Banking Commission in April, the revised ISBP. In our Expert commentary and Insight interview, Pavel Andrle and Carlo DiNinni comment on the importance of the new ISBP 745. But significant as this text is, it's well to remember the cautionary words of Pavel Andrle: "ISBP's main goal and mandate is not to rectify incorrect credit terms and conditions."