JPMorgan and the Asian Development Bank (ADB) have issued a statement to say they have entered a Risk Participation Agreement (RPA) designed to boost international trade in developing countries in Asia.

The RPA, which falls under the umbrella of ADB's letter of credit (L/C) focused Trade Finance Facilitation Programme (TFFP), will expand trade finance facilities to selected financial institutions on a risk-sharing basis.

Programme features

The TFFP aims to help banks in target ADB areas provide better quality trade finance services to help private sector exporters and importers.

It has two main components. The first is a revolving guarantee facility under which ADB guarantees payment to participating regional and international confirming banks, covering commercial and political risks under a L/C or other trade finance instrument.

The second is a revolving credit facility under which ADB provides short-term loans to each issuing bank that receives guarantee support under the guarantee facility for on-lending to private sector exporters and importers for trade-related purposes.

International banks

The RPA was launched under the TFFP in 2007 and will be implemented through 2008. It is similar to the initial revolving partial credit guarantee facility, but it is aimed specifically at forging closer partnerships with international banks.

According to the ADB, the RPA will provide its partners with a new and efficient vehicle for trade portfolio management in less-developed markets.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.