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Renminbi L/Cs and guarantees in Germany
Commerzbank has introduced renminbi services that will include letters of credit and bank guarantees in the Chinese currency for its customers in Germany. The use of the renminbi in trade with China should provide those customers - who have hitherto tended to trade with China in US dollars - with additional flexibility to manage their foreign exchange exposures. Commerzbank's renminbi accounts will allow customers to transact in the Chinese currency when making payments directly to China from Germany and when receiving payments from China. The bank will provide a range of renminbi services, including L/C opening and settlement as well as bank guarantee issuance. Commerzbank already provides renminbi services at its branches in Shanghai, Beijing and Hong Kong.
USD 1 billion for Bangladeshi L/Cs
Bangladesh's central bank has injected more than USD 1 billion into the country's commercial banks to help them cope with demand for the US dollar, which they mainly need to settle import L/Cs. Support from Bangladesh Bank (BB) follows in the wake of a sharp reduction in the country's foreign exchange reserves and a significant depreciation of the Bangladeshi taka. BB has pumped USD 1.02 billion into the commercial banking sector, mainly to settle outstanding L/Cs for imports of petroleum products, grain, fertiliser and power plant equipment. During May, Bangladesh's foreign exchange reserve shrank to US$10.43 billion from USD 11.316 billion.
Increase in Saudi import L/Cs Saudi
Arabia reported a substantial year on year rise in import letters of credit, although the value of such credits was lower than earlier in 2011. The rise reflects substantial overall improvements in the Kingdom's economy. According to official data, the value in April of new L/Cs opened to import goods was 12 per cent up on the same month last year. However, the value of import L/Cs opened in April was down 11.4 per cent from March levels, substantially due to lower machinery, vehicle and food imports. Strong oil prices have helped the Saudi economy, which is increasingly driven by the government as it undertakes massive investments in areas such as education and infrastructure development.
Banking Commission to Beijing
The ICC Banking Commission will be heading to Beijing for its autumn meeting. The meeting, which will be held on 26 and 27 October, will be preceded by meetings of working parties on 25 October. A large attendance is expected, both from within and outside China. Items on the agenda will include updates on the ISBP revision, the Trade Finance Default Register, terrorist financing and the draft of the joint ICC/IFA rules on forfaiting. Information about the meeting can be obtained from Natalie Montelongo at e-mail: firstname.lastname@example.org
L/Cs and captive trusts
Captive insurance companies should consider using captive trusts instead of letters of credit as collateral according to a vice president at Wells Fargo. Roger Quinn, who sells captive trusts, reckons they are less expensive than L/Cs and will provide the insurance subsidiaries of large corporations known as captive insurers with several additional benefits. Quinn told the 7th Annual Captives and Corporate Insurance Strategies Summit that around 70 per cent of captive insurers used L/Cs as collateral. But he argued that the spiralling cost of L/Cs since the 2008-09 financial crisis has now made them prohibitively expensive for captives relying on them for collateral. Before the crisis, the cost of L/Cs for on a cash collateralized basis ranged from ranged between 15- 45 basis points, Quinn said. He now reckons the pricing of similar L/Cs is in the range of 45-100 basis points, with the average being around 75 basis points.