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Bank of America courts China

The Bank of America is pushing its Vendor Financing Programme (VFP), which includes lower-cost L/Cs, as part of its bid to win potentially lucrative China mandates. The bank says a recent example of how it is capturing new business with Chinese companies is its recently awarded mandate to help restructure the trade finance arrangements of Dongguan Kingsun Metals and Plastics Manufacturing (Kingsun). Bank of America global product solutions (GPS) says it won the trade finance mandate from Kingsun because of the advantages the VFP provides. The bank, says Kingsun, a manufacturer and exporter of Christmas lighting, barbecue gas grills and steel household products, was seeking a more flexible, efficient and cost-effective solution for its trade financing needs. Another reason why Kingsun selected the bank is because the Chinese manufacturer wanted to leverage the bank's relationships with buyers. Around 80 per cent of Kingsun's major US buyers are already Bank of America customers. Through the VFP, Bank of America says it offers lower-cost trade financing solutions including conventional L/Cs, private label L/Cs and open account bills.

Iran feels L/C sanctions

The Iranian economy is starting to feel the sting of banking sanctions applied by the US to pressure Tehran over its controversial nuclear drive and its support of what Washington sees as terrorist groups, according to a recent report. The report prepared by the Agence France Presse (AFP) news agency includes comments from an Iranian businessman who says his business activities are being curtailed because he cannot obtain L/Cs. The US has blacklisted Iran's three main banks - Bank Melli, Bank Mellat and Bank Saderat - and has also successfully encouraged most major European banks to cut business links with the Islamic republic. "It is no longer possible to wire money by dollar into Iran, and for the payments in euros there are just three European banks. They could stop cooperating with us at any moment," according an anonymous official at Iran's Export Development Bank. "Practically all the major European banks have ceased their cooperation with Iran," the official reportedly said.

India's L/C surge

Letter of credit (L/C) business is set to grow in India, and banks should prepare for a surge of trade finance business as the country's economy grows. But as well as more L/C business, banks should expect to offer a broader range of trade finance services, according to speakers at a banking seminar in Mumbai. Trade finance opportunities in India could be worth in excess of USD 2 billion in the next five years, compared with today's figure of USD 1.2 billion, said an Indian official. He suggested banks could increase their profitability by offering not just traditional products such as L/Cs and bank guarantees, but also additional services such as forex and derivatives. Forex income could account as much as 60 per cent of total L/C income, he reckoned, and suggested that trade finance bundled with cash management and other services would become more popular than stand-alone products.

China/Russia L/C platform

China and Russia have formally launched a trade platform that will allow L/C transactions and futures trading between the two countries. The move comes as part of both countries' efforts to strengthen bilateral ties. In the preliminary stages of building the Sino-Russian trade platform, trading companies will be set up in Jilin and St Petersburg for the direct exchange of cement, construction materials and other goods. Russian businessmen will be able to use L/Cs with values up to USD 200 million in transactions. "Russian companies will give L/Cs issued by European banks to Chinese firms," said a Chinese official. Until this move, L/Cs had not been accepted in recent years for Sino-Russian trades of this type.