Around 300 delegates gathered in Zurich near the end of March for the Spring meeting of the ICC Banking Commission.

In this, one of its most well-attended meetings, Commission participants deliberated on a range of issues - from the Basel III provisions on capital adequacy to several new sets of rules the Commission proposes to develop. No fewer than six working parties reported to the assembled delegates.

One of the most widely awaited presentations was delivered by Karl Cordewener, Secretary General of the Basel Committee on Banking Supervision (BCBS), who outlined the BCBS provisions on trade finance. The changes to Basel II have sent shockwaves through the banking industry. Of particular concern are proposed increases in the 20 per cent credit conversion factor for trade finance under Basel II to 100 per cent in Basel III and the change to a one-year maturity floor for all lending facilities, including trade finance, which is usually short-term in nature, based on between 0 to 180 days maturity.

Largely in response to these changes, the Banking Commission has two ongoing projects to gather market intelligence on trade finance. One is the yearly Global Survey on Trade and Finance; the other is the ICC Trade Finance Default Register. Both projects are aimed at providing the BCBS with evidence that trade finance is largely a self-liquidating, lowrisk sector, which should not be grouped with high-risk instruments such as collateralized debt obligations (CDOs), which led to the market collapse. Early ICC Register statistics show that even during the global economic downturn, trade finance transactions experienced low levels of default, with fewer than 500 defaults for 2.8 million transactions.

Mr Cordewener didn't give anything away in his presentation, but he did say the BCBS was looking carefully at trade finance and would maintain an open door for dialogue with the Banking Commission.

On the rule-making side, the Commission is considering five different sets of rules and guidelines. The first is a revision of the current ISBP 681, which dates from 2007. The ISBP Drafting Group has two aims: first, to update the existing provisions of ISBP 681; second, to expand the current version to take in a range of new topics - such as transfer, amendments, etc. - not presently covered. Gary Collyer, who heads up the Drafting Group, said that a first draft, covering only changes to the present ISBP, would likely be circulated in May. A subsequent draft, to include additions to the text, would come later in the year. No tentative date has been set for completing the revision, which was expected to take two-three years.

A second set of rules, new to ICC, will be developed to cover the Bank Payment Obligation (BPO). As originally developed by SWIFT in support of open account trade, the BPO is an irrevocable undertaking by a so-called obligor bank (or banks) to pay the recipient bank based on an electronic presentation of compliant data. Though SWIFT tied the BPO to its Trade Services Utility (TSU) and sought ICC endorsement of the BPO, the Banking Commission has decided to create an independent set of rules on the instrument, not linked to the TSU. A SWIFT representative, Andre Casterman, will co-chair the new ICC Drafting Group with a Banking Commission Vice Chairman (Dan Taylor). An early meeting on the proposed BPO rules was held in Zurich.

Other projects underway include a Task Force on Anti-Money Laundering, a Group looking into terrorist financing and financial crimes and a Drafting Group on Forfaiting (see p. 24). It's clearly an active agenda and one that takes the Banking Commission into a range of new fields.

Next stop for the Commission will be Beijing, where its semi-annual meeting will be held in October.

Readers wishing to obtain copies of ICC's 2011 Global Survey on Trade and Finance can find it on the ICC bookstore website,