A Maltese bank specialising in trade finance says it has become the first bank worldwide to be granted both confirming and issuing bank status in the International Finance Corporation (IFC's) recently launched letter of credit (L/C) oriented programme to make trade finance easier to access for emerging market trades.

FIMBank had already been participating in the Global Trade Finance Programme (GTFP) as a confirming bank.

Payment guarantee

The Maltese bank said it had been granted permission to act as an issuing bank in the US$500 million programme by the World Bank affiliated IFC in January 2006.

Under the programme, the IFC offers full or partial guarantees to confirming banks participating in the GTFP, effectively taking on the payment risk of issuing banks in emerging countries.

Debt for equity

The IFC, which has provided support for the Maltese bank in other respects, has also doubled FIMBank's GTFP facility, raising it from US$5 million to US$10 million.

This follows the October 2005 conversion of part of the IFC's US$10 million subordinated loan to FIMBank to shares in the bank, a move that made the IFC the bank's third largest shareholder with a 7.18% stake.

Trade flows

The GTFP was launched in 2005 to support the development of trade with and between emerging economies.

The programme supports trade with emerging markets worldwide and aims to promote flows of goods and services with and between emerging countries (DC World News 24 November 2004).

Transaction specific

In October 2005 the IFC said it had completed its first GTFP transaction with the confirmation by ABN AMRO of an L/C issued by Pakistan's Metropolitan Bank(DC World News 19 October 2005).

The GTFP guarantees are transaction specific, and apply to L/Cs, promissory notes, bills of exchange, bid and performance bonds, advance payment guarantees and suppliers' credit for the importation of capital goods.

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