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( Source of the document: ICC Digital Library )
SWIFT shows surge in renminbi L/Cs
SWIFT has released figures showing that the third-biggest currency in the global issuance of letters of credit by value is now the renminbi (RMB) (see page 1 story). The Chinese currency has usurped the Japanese yen as the third most-used currency in global L/C issuance according to the global payments network. The value of RMBdenominated L/Cs is now more than half of those denominated in euros, according to SWIFT.
But with a share of 4 per cent of the market, RMB-denominated L/Cs have a long way to go to catch up those denominated in US dollars, which have an 84.4 per cent share of the market.
Some of the increase in RMB-denominated L/Cs may be a result of countries such as India relaxing overseas borrowing rules. Amongst other things, this allows firms to raise RMB-denominated debt in order to leverage the low cost of capital offered by the Chinese currency. Asian countries, meanwhile, are experiencing high inflation levels, which may be another reason for increases in the use RMB denominated products in that region.
Saudi Arabia L/C boom
Saudi Arabia's booming economy is driving substantial growth in the kingdom's letter of credit and bank guarantee markets. Both trade financing instruments posted double-digit growth rates last year, according to recently released data from Cash Management Matters (CMM).
The value of bank guarantees grew by 11 per cent, while L/Cs and acceptances grew by 18 per cent in 2011 compared with the previous year, according to CMM. It published the data in a newly launched publication, Tajara Monitor, which analyses trade finance and corporate banking performance of a dozen Saudi banks. The first edition of Tajara Monitor also reported strong double-digit growth in both imports and exports in 2011 over 2010. Exports increased by 45 per cent and imports by 23 per cent last year compared with the previous year.
L/C shortage hits Egypt fuel shipments
Difficulties obtaining letters of credit has caused delays to current shipments of fuel into Egypt. Now it looks as though the L/C shortage could deter suppliers from bidding to sell oil in Egypt's next big import tender.
According to traders based in Egypt, oil-laden vessels were queuing up outside the country's ports unable to unload because L/Cs cannot be found to release their cargoes. An official at Egyptian General Petroleum Corp (EGPC) denied the L/C shortage.
Trade sources reckon shipments were being delayed for up two weeks as buyers persuaded banks to provide the required financing facilities. They say that some suppliers were put off by the L/C shortage and, for that reason, might not decide not to offer oil in forthcoming import tenders.
Wells Fargo offers mobile L/C access
Wells Fargo & Company has announced that users of its online trade portal will now be able to access information on letters of credit using their mobile phones. The bank's international trade services application, TradeXchange, is already available on the Internet.
Now, Mobile TradeXchange is available on the Wells Fargo CEO Mobile service. It enables customers to immediately view import and export L/Cs and submit online queries over their mobile phones.
Mobile TradeXchange aims to provide customers with a quick and secure way to view critical information about their trade transactions at any time and in any place where there is a mobile signal. Wells Fargo says TradeXchange helps importers and exporters better manage and streamline the complete trade transaction lifecycle, from purchase order issuance to final settlement.
L/C shortage in Syria
A shortage of letters of L/Cs is contributing to burgeoning levels of sugar smuggling into Syria. Syria's domestic sugar refining operations are at a virtual standstill, while intentional sanctions have made it difficult for importers to obtain trade finance. Sanctions imposed by the EU, the US and other western countries in attempts to moderate President Bashar al-Assad's government's response to civil protests are not intended to hamper food imports. But according to a Syrian trade financier, the sanctions mean that import L/Cs are now very difficult to obtain and that an L/C shortage has led to virtually no sugar shipments arriving by sea. Meanwhile, Syria's four sugar refineries have been either closed down or are operating at reduced capacity. These circumstances have led to opportunities for smugglers to bring sugar into Syria, mainly by truck from neighbouring countries.
UK plan to use L/Cs for export growth disappoints
In June, just five firms had used a scheme designed to increase L/C-backed British exports, according to reports in the UK media. This was supposed to be a flagship scheme to help exporters. The Export Enterprise Finance Guarantee Scheme (EEFGS) was launched in April 2011. It was supposed to provide access to trade finance, which became hard to come by during the global financial crisis. According to figures seen by the Independent, only £2.9 million had been lent as of June under the scheme. The EEFGS provides lenders with a guarantee of 60 per cent of credit extended while the customer pays an up-front premium of 3 per cent, plus any fees.