UniCredit and Bank of Tokyo-Mitsubishi have completed the first ever Bank Payment Obligation (BPO) transaction between Germany and Japan.

The irrevocable BPO is expected to challenge into the letter of credit's (L/Cs) position in some markets.

Transaction parties

The transaction involves German producer of industrial mixers, Rühr und Verfahrenstechnik, and supplier of plant and equipment to the infrastructure and industrial sectors, Mitsui & Co. Plant Systems of Japan.

The deal signals another bank going live with BPO, and brings the total number of banks processing the new trade finance instrument up to fourteen.

Market changes

Commenting on the transaction, global transaction banking co-head at UniCredit, Ernst Ohmayer, observed some of the key trends in the trade finance market.

"As the volume of global trade grows, there has been a significant shift from the use of traditional trade instruments, such as L/Cs, to trading on open account, and the market has demanded solutions to help manage increasing cost and risk challenges," he said

Ohmayer added that the BPO solution fully supports automated processing and provides cost savings and payment assurance.

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