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( Source of the document: ICC Digital Library )
In September, some 270 delegates from 44 countries attended the most recent ICC Banking Commission meeting in Florida. The agenda was a full one.
Delegates were first introduced to the Commission's new Chair, Kah Chye Tan from Singapore, the first Asian to serve in this important post. Mr Tan is Global Head of Corporate Cash and Trade at Standard Chartered Bank and has a long history in trade finance. He is expected to be a hands-on Chairman.
An early item of business was the update of ISBP 681. Commission members had been offered three options to decide what the revision should contain. They eventually chose Option 2, which provides for the current text to be revised and updated to include increased document coverage along with an expansion of the text to cover other aspects of the handling of documentary credits. A Drafting Group has already been appointed, and ICC national committees have been requested to submit names, one per national committee, to be members of a Consulting Group to comment on early drafts. The revision process may take up to two years.
After an extended period of consultation, it appears that the Commission, along with representatives of the International Forfaiting Association, may have a draft of new rules on forfaiting ready by early 2011. The draft will cover both the primary and secondary markets.
The Commission also discussed the future of ICC's Market Intelligence Survey, conducted periodically for submission to world leaders at the G20 economic summits. The Surveys cover topics ranging from the supply of trade finance and transaction volumes to corporate demand for trade finance, the pricing of trade finance credit, the use of trade facilitation programs by financial institutions and the implementation and effectiveness of the G20 trade finance agenda. Answers from the Surveys are compiled from a questionnaire developed by ICC and its multinational organization partners, including the World Trade Organization (WTO). The aim is to provide data on trade finance transactions, which have been sadly lacking in the past. Some 165 banks responded to the last Survey, and ICC hopes to have responses by more than 250 banks in the next one.
On a related topic, Commission members heard updates on ICC's Trade Finance Register, a joint project of ICC and the Asian Development Bank (ADB), which aims to compile data on trade finance default to present to the Basel Committee on Banking Supervision (BCBS). ICC has long contended that the proposed new data adequacy requirements of the Basel III framework were unrealistic in that they would require far greater capital adequacy limits for trade-related transactions than in the past. Specifically, the BCBS proposals would require that the leverage ratio, the CCF Factor trade-related contingencies, be increased from its current 20 per cent to 100 per cent. ICC's data, obtained from a limited number of banks, show that in 2008-2009, during the worst economic downturn since the Great Depression, the banks reported only 445 defaults out of just over 2.8 million transactions. ICC representatives met with the BCBS in October.
Among other topics discussed in Florida was SWIFT's Bank Payment Obligation (BPO), which was discussed at length in the last issue of DCInsight. Under the BPO, an obligor bank is required to make payment subject to the presentation of compliant data through a central matching engine called the Trade Services Utility (TSU), a matching and workflow application that sits on the SWIFT network. According to SWIFT's David Hennah, "The TSU was conceived by its own user community as a solution to address the changing needs of the market in the face of an ongoing migration of trade to open account." The BPO is presently being tested by a limited number of banks that have signed up for the service. SWIFT's management has requested that ICC endorse the BPO, but these are early days and no action is foreseen on this request during the current year.