Category: Europe

R3’s KYC blockchain app completes fourth trial, but will remain a prototype

From Global Trade Review (GTR) | By Sanne Wass

Five French banks and 21 firms, together with blockchain firm R3, have completed a fourth trial of the CordaKYC blockchain application for sharing know your customer (KYC) data. But R3 now reveals it does not intend to bring the solution to market. CordaKYC is a prototype designed and built by IT and consulting company Synechron on R3’s Corda blockchain platform. It works as a “self-sovereign” model, where corporate customers can create and control their own identities, including relevant documentation. Banks can request access to the data, whilst customers can approve requests and revoke access. Any updates that are made become automatically visible to the banks that have permission to access the data. The new trial is the fourth in a series of tests that have been conducted for the solution. The first were known as Leia 1 and 2, and more recently as “CordaKYC”. A total of 26 firms participated this time around in what was a regional trial only, in which KYC requests were simulated amongst the group. Participants included AFTE, Allianz France Insurance Company, Alten, BNP Paribas, bioMérieux, Crédit Agricole CIB, Daher, Danone, Engie, Natixis, Natixis Assurances, Natixis Investment Managers, Ostrum AM, Pierre et Vacances, RCI Bank and Services and Société Générale. The trial saw 232 updates sent to banks through Corda, with data sharing being approved 185 times between corporates and banks, according to Estelle Roiena, a senior associate at R3 and responsible for its business development for France. Roiena tells GTR that the focus of this particular trial was on ensuring that the corporates’ experience of meeting KYC requirements through Corda was effective and aligned with their needs. “While previous trials have been focused on KYC from the standpoint of banks, with this trial we’ve focused on how the service will work for the corporates,” she says. “The trial involved companies from across a very wide variety of industries, including department stores, pharmaceuticals, finance and even aerospace. This allows us to demonstrate to corporates how KYC on Corda can be responsive to the challenges of any industry and helps companies to feel confident in the process to ensure the solution is fit for the needs of all businesses.” She adds that France was an “ideal country” for such a regional trial, given that enterprise blockchain activity in France is “accelerating”. While R3 describes the trial as a “big step forward in making blockchain-based KYC a common reality for corporate banking”, it says the CordaKYC application is “not a product in its own right” and the goal is not to take the solution to market. Instead, the aim is to “demonstrate the benefits” of running KYC through the blockchain for both corporates and banks, explains Abbas Ali, director of partner solutions at R3. “Our plan has always been to develop the ‘operating system’ on which other firms will build applications to tackle enterprise challenges,” he says. “By helping the community develop a greater understanding of how KYC applications on Corda operate, we are able to support the wider ecosystem and share our learnings with partners developing applications for end users.”   Blockchain’s perfect use case? A number of KYC applications are already live on Corda, including Tradle and Gemalto Trust ID Network, with other firms, such as Norbloc, currently in the process of implementing similar solutions on the platform. What they all have in common is that they see blockchain as a route to making KYC– a task that is mired by time-consuming and labour-intensive manual processes and the duplication of efforts – more efficient. The figures speak for themselves: some major financial institutions spend up to US$500mn annually on KYC and customer due diligence, according to Thomson Reuters. And the amount of time dedicated to KYC efforts is growing: Thomson Reuters’ 2017 survey found that the average corporation spends 26 days a year providing KYC regulatory information, up from 23 days in 2016. In contrast to centralised solutions that currently exist in the market, such as Swift’s KYC Registry and IHS Markit’s KYC.com, blockchain technology eliminates third-party data aggregators and centralised repositories of data. Instead, it utilises the power of the distributed, immutable ledger to drive greater operational efficiency through a digital process flow and a streamlined way to access real-time up-to-date customer data. Founded in 2014 in New York, Tradle’s solution caters to a broad range of sectors, including trade finance. Speaking to GTR for its recent Fintech Issue, Gene Vayngrib, CEO and co-founder of Tradle, said he is convinced that a decentralised model can make the trade finance sector more agile and significantly speed up the time it takes to set up a deal. The main goal, he added, is to help banks turn compliance pain into a commercial advantage for the banks, which can then serve their customers better. “The majority of the conversation in trade finance is that KYC is such a pain and that it’s stopping business,” he explained. “The way we approach it is: it’s a commercial advantage. The information is sitting in a silo and we are taking it out of the silo and making it available for commercial business. Now two companies that are KYC’d by different banks can engage in trade much faster.” Meanwhile, the idea of a blockchain-based KYC solution has been met with cautious interest from established players. For one, Bart Claeys, Swift’s head of the KYC registry, recently told GTR that KYC “seems like the perfect use case for distributed ledger technology”, but argued that it doesn’t yet solve the real issues faced by banks today. Swift itself has helped banks tackle the burden of KYC since it launched its KYC Registry in 2015. Of Swift’s 11,000 members, 7,000 have correspondent banking activities and are therefore the target of the registry. Around 5,000 have joined the centralised, non-blockchain-based solution thus far. The challenge, Claeys said, is that blockchain initiatives have thus far been driven mainly by technology rather than compliance. “For us, at this stage, I haven’t yet seen the value addition of the distributed ledger technology related initiatives compared to what we have in our centralised solution,” he says, bringing up a widely expressed scepticism in the industry: can technology alone get banks onboard and make them want to work together towards better KYC? “In my view, a lot of these initiatives have been initiated from a technology perspective, yet today little has been said around the level of acceptance from a compliance perspective within the banks. Ultimately, be it a distributed ledger technology-based or centralised utility, you will be required to have the backing and support from the compliance side within each of the banks,” he said. The post R3’s KYC blockchain app completes fourth trial, but will remain a prototype appeared first on Global Trade Review (GTR).

EBRD’s growing focus on SEMED: “Economic reform enables us to invest more”

From Global Trade Review (GTR) | By Sanne Wass

The Southern and Eastern Mediterranean (SEMED) region is now the biggest region of operation for the European Bank for Reconstruction and Development (EBRD). Founded in 1991 after the collapse of the Soviet Union, the development bank initially focused on the nations of the former Eastern bloc, but has since expanded to support development in 39 countries, from central Europe to central Asia. Since entering SEMED – initially being Egypt, Jordan, Morocco and Tunisia – in 2012 in the aftermath of the Arab Spring, the bank has invested over €7.8bn in 179 projects in the region – ranging from wind farm developments in Morocco to supporting dairy producers in Egypt. 2018 has seen the EBRD expand to Lebanon and the West Bank, under the leadership of Janet Heckman, who took on the role of managing director for the SEMED region in February 2017. GTR met with Heckman in Cairo recently to speak to her about her focus areas and further expansion plans for 2019.   GTR: SEMED is now the largest region of operation for the EBRD. Why has it received such a big focus? Heckman: That’s correct. Last year SEMED was the largest; we did roughly €2.2bn of investments in what was then four countries we invested in: Egypt, Jordan, Morocco and Tunisia. Egypt was the biggest at €1.4bn. As a country, this investment from the EBRD was second only to Turkey last year, so very significant. This year it’s also looking like a very strong year, so we expect numbers to be in the same range. I think it’s because there has been a lot of economic reform taking place in the region. Particularly here in Egypt, for the last two and a half years you’ve seen a very strong reform programme, removal of subsidies in key areas, key investment acts being passed, bankruptcy and company laws, etc. When you have that type of reform, it enables us to invest more in a country because we believe the future of that country is strong. Another example is Tunisia, where in July we spearheaded a mission with the EU, the IFC and the African Development Bank to encourage Tunisians to continue on the reform path, and take the steps needed to ensure that the country is economically viable. One of the things I am proudest of this year has been that we were able to begin work in Lebanon and the West Bank. These are two areas where you really need trade facilitation lines, because of the perceived political risk in the region. It doesn’t just benefit the local banks; it really helps to open up the economy as a whole. It’s quite gratifying to see this.   GTR: Are there any specific programmes or projects you are particularly focused on at the moment? Heckman: We have a very strong programme in value chain development. Let me give you the example of Morocco – the country has really geared up for export and is now amongst one of the major centres globally for automotive components production as well as for aerospace components. The country put in the place the necessary infrastructure: the roads, the high-speed train, the Tangier-Med port and introduced proper incentives to attract multinationals to produce. Where we became active is in helping to finance local supply chain development. We’re working with the major multinational companies as well as the local companies who are investing, to help identify what type of supplies they can source locally. We then work with the local companies in the market to train them and bring them up the value chain. This is something we’re replicating throughout SEMED. We call it value chain financing, which is absolutely critical, because if a company can produce to the standard of global major companies like Ikea or Renault, then they are capable of producing under their own names in the local market. We also have a really great programme called advice for small business. It is funded by the EU throughout all of the SEMED countries, and we launched it in Lebanon in October. So far, we’ve advised more than 2,200 SMEs in the region. It includes advice on how to target export markets and tender for projects, as well as technical advice on how to gear your product for export markets. In that way we help small and medium-sized businesses with either local or international advisory services. This is absolutely critical. As part of this, we also have specific programmes geared towards women-owned SMEs. We work through the banks – it’s a combined programme – to provide financing to SMEs owned and operated by women. We help to train the banks, the credit departments, etc, on what the key factors for lending to women-owned businesses are, and then provide the technical advisory and mentoring to female entrepreneurs. We recently launched the programme in Morocco, in conjunction with the ministry of women and family.   GTR: What are the EBRD’s SEMED expansion plans? Heckman: Right now, our main plan is to expand within the countries where we are already operating, to do more in those countries. For example, in Egypt, we hope to open a third office this year. We’d like to do more in the regions of Egypt, namely outside of just Alexandria or Cairo, because those are the areas that need the most development. The same goes for Morocco: we opened our second office in Tangier, which covers the northern part of the country, and we hope to get approval to open later this year in the southern part of Morocco too, out of Agadir, where there’s a lot of agribusiness and a need for regional connectivity. When the time is right, we’ll also take into consideration other countries. Libya and Syria are both within our domain. I would personally love to be in Algeria – I worked there for four years with Citi, but we have to see after the elections what the political will is. Libya is another country that I could see the EBRD working in.   GTR: You mentioned earlier the EBRD’s expansion this year to Lebanon – what opportunities do you see in the country? Heckman: The Lebanese are extremely entrepreneurial, so naturally there are a lot of private sector opportunities. Initially, as we often do when we enter countries, we started with financial institutions, and we took an equity stake in Bank Audi. But then we’ve also signed trade facilitation lines and SME lending lines with other banks in the country. But the real opportunity is with private sector entrepreneurs and family groups in Lebanon.   GTR: Sub-Saharan Africa doesn’t fall under your domain, but with a growing focus on intra-African trade, does your work go beyond SEMED? Heckman: What we’ve noticed is that quite a lot of the companies we work with in North Africa, but also even in Lebanon and Jordan, are investing in Sub-Saharan Africa. Morocco is a key example of this. Attijariwafa Bank is present across Africa, and the corporates and companies have followed the Moroccan banking system, predominantly into the Ivory Coast, Senegal and Francophone Africa, because they see huge opportunities for growth. The EBRD has been involved in two events this year, working with our companies who are active in Sub-Sahara. One was the Africa Investment Forum in Johannesburg, and the other the Africa 2018 Forum in Sharm El-Sheikh. So we’re looking at how we can invest in companies which want to invest further in Sub-Sahara. The post EBRD’s growing focus on SEMED: “Economic reform enables us to invest more” appeared first on Global Trade Review (GTR).

essDocs to launch blockchain solution in early 2019

From Global Trade Review (GTR) | By Sanne Wass

Paperless trade platform provider essDocs will launch a series of blockchain-based trade solutions, having entered a strategic partnership with Swisscom Blockchain. Founded in 2015, essDocs already offers a range of non-blockchain solutions to digitise trade finance and logistics documents, including the bill of lading. Swisscom Blockchain, meanwhile, is a blockchain advisory that helps companies design, build and implement distributed ledger applications. It was established last year. In a statement, essDocs says the two companies will “leverage their respective resources and expertise to enable companies to digitise their trade and trade finance processes swiftly, efficiently and with minimal friction”. The parties have already started testing their first collaborative product, which will officially launch in Q1 2019. essDocs CEO Alexander Goulandris says the firms will offer “value-adding blockchain solutions” such as traceability, cross-platform connectivity and solution-data distribution. “Our joint solutions will first and foremost focus on transition technology, bridging data ‘gaps’, paper-based processes and technological silos with the end goal of secure, automated digital trade,” he says. Also commenting on the partnership, Daniel Haudenschild, CEO of Swisscom Blockchain, hints that blockchain technology will enable them to tackle the challenge of mass adoption that digitalisation efforts in the trade industry have historically faced. “Along the journey, both our companies will support a use-focused approach in order to unleash the true potential blockchain and digitalisation has to offer to the trade, trade finance and logistics community,” he adds. The partnership marks essDocs’ official foray into blockchain, a technology widely explored by other trade finance tech firms and banking consortia. Bolero, its much older competitor founded in 1998, has been working with blockchain firm R3 for more than a year to give its electronic bill of lading service a blockchain upgrade. This has evolved into Bolero taking part in a number of pilots of the Voltron platform, a blockchain project run by R3 and eight global banks to ease the exchange of trade finance documentation. In November, for example, Bolero’s electronic bills of lading solution was used in a Voltron-based trade transaction involving HSBC, ING, Reliance Industries and Tricon Energy. The integration enabled the digital transfer of title of goods on the blockchain. At the time, essDocs was mentioned as another electronic document provider that could be incorporated with the Voltron platform. Chris Sunderman, blockchain initiative lead for trade finance services at ING, told GTR: “When you look at the trade ecosystem, the world is large, and companies do not per se work with one provider of e-documents; there are also companies like essDocs and eTitle. So within project Voltron, the banks agreed to investigate and analyse the application of other solutions as well. We need to incorporate other solutions to make the lives of our clients as easy as possible.” He also confirmed that the consortium is currently in discussions with essDocs, which is interested in working with them. The moves by Bolero and essDocs to build blockchain solutions come as the competition in this space is heating up, with a range of other tech firms and consortia seeing trade documentation as an obvious home for the new technology. The nature of blockchain, being a decentralised technology, makes it ideal for the trade industry, as it allows multiple parties to exchange information in real time, while securely being able to track and transfer assets. One of the first firms to make headlines for its blockchain-based trade documentation solution is Israeli startup Wave. In 2016, it completed what became known as the world’s first live blockchain trade transaction with Barclays and is now working towards releasing a commercial bill of lading solution. This was followed by the foundation of Slovenia-based blockchain firm CargoX, which raised over US$7mn in an ICO in late January. Last month, the firm announced that its blockchain-based bill of lading platform is now commercially available, having spent the second half of 2018 conducting pilots with a number of logistics providers. Meanwhile, Maersk is working with IBM to build and expand TradeLens, a blockchain platform that enables users in the shipping ecosystem to interact efficiently, access real-time shipping data and digitalise and exchange trade documentation. Already, more than 92 organisations are participating in the platform’s early adopter programme. And more recently, some of the world’s top container lines and terminal operators formed a consortium, Global Shipping Business Network (GSBN), again with the same goal: to develop a new blockchain-based platform for the global trade ecosystem. The post essDocs to launch blockchain solution in early 2019 appeared first on Global Trade Review (GTR).

Barclays opens major UK trade centre

From Global Trade Review (GTR) | By Sanne Wass

Barclays_logo_on-the-move Barclays has launched a new trade centre in Birmingham, which will be dedicated to helping UK businesses export more. Staffed by 30 export and trade product specialists, the centre will provide export support to more than 1,000 firms across the Midlands. Its goal is to “make it easier for UK businesses to find their way in overseas markets, by providing the right finance and all-important advice and guidance”, according to Jes Staley, Barclays’ group CEO. Supporting firms in all sectors, the centre will focus particularly on export activity into India, Pakistan, Bangladesh, across Europe, the Middle East, Africa, as well as Far Eastern markets such as China, South Korea, Thailand and Vietnam. The announcement follows the launch of the UK government’s new export strategy, which sets out its ambition to raise exports as a proportion of GDP from 30 to 35%. It aims to reach this goal through a range of initiatives, such as promoting more peer-to-peer learning and creating an online tool for UK businesses to easily connect to overseas buyers, markets and other exporters. Many of the projects will be business-led, with the government intending to work closely with private sector players to drive exports. In a statement, Barclays says the launch of its new trade centre is “a great example of the private sector support that the department of international trade (DIT) is promoting as part of its new export strategy”. Staley adds that Barclays “is determined to play its part” in helping firms to become “superstar exporters”. “New research we have commissioned on this important subject, published with the Policy Institute at King’s College London, shows that one important way to boost UK exports is to create more ‘superstar exporters’, or UK firms who export 10 or more products to 10 or more overseas markets. Helping these businesses to export more in turn helps smaller firms in their supply chain to grow, and to create jobs,” he says. The post Barclays opens major UK trade centre appeared first on Global Trade Review (GTR).

UKEF backs country’s largest export deal with Israel

From Global Trade Review (GTR) | By Shannon Manders

Boeing 787 Dreamliner Take-off UK Export Finance (UKEF), the country’s export credit agency, is providing a guarantee for a US$125mn loan from Citi to El Al Israel Airlines to finance their purchase of one Rolls-Royce-powered Boeing 787 aircraft. The deal is part of Rolls-Royce’s contract to supply engines for 16 such aircraft for the Israeli airline. According to UK international trade secretary Liam Fox, this contract is “the largest single export deal the UK has had with Israel, and a marker of the strength of the trade relationship between the two countries”. “British goods remain in global demand – this is the first time that UKEF has supported an aircraft delivery to El Al and clearly shows the value of support from the UK’s export credit agency to the UK’s aerospace engineering sector,” says Fox. This is the sixth aircraft to be delivered as part of the contract. UKEF is considering extending its support to cover future deliveries of Rolls-Royce-powered Boeing aircraft to El Al. The announcement comes days after the UK government launched its new export strategy, which lays the foundation for how the government plans to support exporters in the years ahead. The strategy sets out the government’s ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. The response from the UK trade community has been mixed, with one source telling GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The plan comes into play immediately and with no fixed deadline. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” a spokesperson from the DIT told GTR this week.   The post UKEF backs country’s largest export deal with Israel appeared first on Global Trade Review (GTR).

UK’s new export strategy draws mixed response from trade community

From Global Trade Review (GTR) | By Shannon Manders

The UK government’s new and much-anticipated export strategy sets out its ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. Response to the new strategy – which was launched today by international trade secretary Liam Fox – has been mixed. The British Exporters Association (BExA) says it is “extremely encouraged” by the new plan and welcomes the “challenging growth targets” that have been set. BExA co-chair Marcus Dolman calls the government’s export target of 35% of GDP “ambitious but achievable”. In 2017, this number was 30%, amounting to £620bn-worth of goods and services exported by British companies. It’s the first time the government has used this measure to quantify its exports. “It’s preferable to a nominal value target as it more accurately reflects changes in the UK’s underlying export performance,” a DIT spokesperson tells GTR. No time frame on the target was provided. According to DIT estimates, as many as 400,000 businesses believe they could export but don’t – and these form the focus of the new strategy. Demand for British expertise and goods overseas, meanwhile, is growing. The strategy’s business-led approach –in which the government intends to work closely with the private sector to drive exports – has been hailed by some market players as crucial. Speaking at the launch, Adam Marshall, director general of the British Chambers of Commerce, said that the right day-to-day support for exporters is “as important as efforts to negotiate new trade deals”. “Trusted, face-to-face support is key to export success. When firms get the information and connections they need to develop new markets and find new customers – that is when we see confidence, investment and results,” he explained. Others are less encouraged by this approach. One source tells GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The new strategy stipulates that there will be an “increased focus on amplifying the voice of existing exporters to inspire other businesses and facilitating peer-to-peer learning”. It does not outline how the government will incentivise companies to support their peers in this regard. “It’s not going to work,” says GTR’s source, a former UK banker with close ties to the government, who prefers to remain unnamed. “Most UK companies are lethargic. Those that are proactive and have this knowledge know exactly how much energy, cost and time it’s taken to get hold of that information and keep it up to date. Often this knowledge is gleaned from having in-country capability. They’re not going to give that away for nothing.” The DIT tells GTR that it will be creating a “community of new UK Export Champions” as one way of overcoming this hurdle. “Our consultations with businesses have concluded peer-to-peer is a more sensible way of engaging with business rather than dictation from government,” the spokesperson says. The new strategy – which comes into play immediately and with no fixed deadline – lays the foundation for how the government plans to support businesses in the years ahead. The next phase will see the DIT work across government to review what further measures could help improve its export performance and meet the 35% goal. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” the spokesperson explains. “It’s a long-term aspiration.” The post UK’s new export strategy draws mixed response from trade community appeared first on Global Trade Review (GTR).

Danish government freezes new guarantees to Turkey over lira crisis

From Global Trade Review (GTR) | By Finbarr Bermingham

Danish export credit agency (ECA) EKF has frozen all new guarantees to Turkey, as concerns about the country’s economic health continue to mount. The Turkish lira has lost more than 45% of its value this year and continued its plunge this week amid a growing geopolitical storm between Turkey and the US. There are widespread fears that other emerging markets will get dragged into the crisis, including South and Southeast Asian nations and parts of Latin America. Commercial lenders across Europe are watching the situation closely, especially those with high levels of exposure to the Turkish economy. “There are some European banks that are exposed to Turkey – BBVA, UniCredit, BNP Paribas – but these are strong, very large banks that may see a negative impact on their profits from their Turkish operating areas, but won’t face fundamental problems,”  IHS Markit’s principal economist Andrew Birch tells GTR. Despite this, BBVA shares plunged 5.7% last Friday, BNP Paribas fell 4.4%, with UniCredit stock losing 6.4%. Turkey accounted for 14% of BBVA’s total profit in the first half of the year, Reuters reports. Development banks such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) are also lenders who have large exposure to Turkey, and both of these could face problems with their outstanding loans in the country, Birch says. Turkey is one of EKF’s largest markets and the ECA regularly funds projects there that use Danish exports. It has financed more than 15 wind projects in Turkey over the past 10 years, including the US$100mn Balabanli windfarm last year, co-funded with UniCredit. Lynge Gørtz Smestad, senior analyst at EKF, tells GTR that the agency is “not that concerned” about that existing debt because “we mainly have bank risk on our books”. “Our assessment is that in the long run, the Turkish financial sector is pretty healthy. It’s well-capitalised and regulated. So I think our counterparties in Turkey are among the best, but of course we’re aware of the situation because it is a big market for EKF,” he says. Should there be a rate hike or other government intervention to stabilise the lira, EKF may reassess the freeze, but Smestad says that EKF and “all the banks around the world” will be watching the situation carefully. There are huge concerns about Turkey’s domestic banking sector too. The likely loss of foreign investment inflows is likely to undermine its banks’ trade, project and export finance businesses. “In the first quarter of 2018, Turkish banks had outstanding foreign liabilities equivalent to 23% of total funding, or 230% of official foreign exchange reserves,” Birch says. Turkish banks regularly tap international debt markets as a means of funding their trade lending. Indeed, annual refinancings of Turkish bank debt are viewed as calendar events and attract lenders from around the world. In March, for instance, Akbank refinanced US$1.2bn-worth of debt with 39 banks from around the world. “Despite the domestic volatility, the facilities achieved a strong global response with the participation of 38 international banks across North America, Western Europe, Asia and the Middle East which is a testament to Akbank’s strong fundamentals and successes through volatile markets, as well as the resilience of the Turkish financial sector,” reads a bank statement accompanying the refinancing announcement. In May, meanwhile, Yapi Kredi refinanced US$1.5bn-worth of debt, with 48 banks from 19 countries joining the syndicate, and eight new lenders this year. It’s been reported that some domestic banks are selling their project finance loans to lenders from the US and China in a bid to free up their balance sheet for domestic lending, on the request of the Turkish government. For now, the unrest in the Turkish economy shows no sign of abating. Today (August 15) the Turkish government announced that it was raising tariffs on US imports including cars (120%), alcohol (140%) and tobacco (60%). Turkish President Recep Tayyip Erdogan has encouraged Turkish people to boycott US electrical goods, including iPhones, and to replace them with Turkish-made products. He has accused US President Donald Trump of “economic warfare” over the US’ punitive tariffs on Turkish metals. Trump doubled tariffs on Turkish aluminium and steel last week after Turkey refused to release US citizen Andrew Brunson, a pastor who has been held in Turkey since 2016. The US has also sanctioned Turkish government officials in a bid to force the release of Brunson, who was arrested on charges of high espionage. The post Danish government freezes new guarantees to Turkey over lira crisis appeared first on Global Trade Review (GTR).

UK could move towards US-style sanctions regime after Brexit

From Global Trade Review (GTR) | By Shannon Manders

The UK government will have the power to impose sanctions independently of the international community after Brexit. That’s as a result of a new law, the Sanctions and Anti-Money Laundering Act 2018, which received royal assent in May, and will come into force when the UK officially leaves the EU next year. In the short term there may be little substantive divergence from the existing regime – under which the UK has to follow the EU. But the act “sets the stage for possible variance once the UK starts to establish a clearer political path in the world as it sets out on its own”, says Charles Enderby Smith, associate at law firm Carter-Ruck. The UK government could decide to replicate sanctions coming out of the EU or it could choose to mirror the US’ approach towards sanctions, which would not be an unsurprising move, he tells GTR. This may result in a widening of the application of sanctions to include whole geographical areas, groups of people and may even bring about the implementation of so-called secondary (extraterritorial) sanctions – the likes of which the US has just reimposed on Iran. Regardless of the direction the government takes when moulding its newly-autonomous sanctions programme, institutions “must be alive to a new layer of compliance”, Enderby Smith says. In an interview with GTR, he explains the most important features behind the new legislation, and what that tells us about the powers that the UK seeks as it prepares for its new independence.   GTR: Why is the Sanctions and Anti-Money Laundering Act required? Enderby Smith: With Brexit set for March 2019, the UK is preparing the framework for its future independent sanctions programme, which may in time evolve in a direction at variance from the European Union’s existing sanctions regime. The act will come into force on March 29, 2019, the day the UK formally leaves the EU. The UK currently implements sanctions in accordance with its international obligations. These include:
  • European Union sanctions, which are given direct effect in the UK by virtue of the European Communities Act 1972; and
  • UN sanctions (to the extent these are not already reflected through EU sanctions), which are effected through domestic legislation.
There are also narrowly defined circumstances in which the UK implements its own sanctions, including combatting international terrorism. While the UK will continue to be required to implement UN sanctions through domestic legislation, Brexit will put paid to the automatic implementation of EU sanctions, leaving a potential gap in the UK’s sanctions programme. It is this lacuna that the act seeks to address, while also opening the door for the UK to develop its own autonomous programme once it is no longer subject to the EU’s common foreign and security policy.   GTR: To what extent does the act extend the government’s powers, and what does this tell us about the powers the UK government seeks in preparation for a more autonomous role in the world? Enderby Smith: While not surprising given the purpose of the act, arguably the most striking feature of the new legislation is the substantial increase in powers it provides to the UK government. In its preamble, the act is said to “make provision enabling sanctions to be imposed where appropriate for the purposes of compliance with United Nations obligations or other international obligations or for the purposes of furthering the prevention of terrorism or for the purposes of national security or international peace and security or for the purposes of furthering foreign policy objectives”. A further amendment to the act also allows the UK to use sanctions to promote human rights. This is a wide-ranging mandate. Moreover, the act allows the UK government to designate persons by reference to a description rather than a specific name. While the government claims this power will only be exercised where it is unable to identify the relevant persons by name, this provision has raised concerns over potential uncertainty and the burden it will place on businesses and their compliance teams. The government says it will provide as much information as possible to help identify the appropriate individuals. However, the question remains how useful this will be in practice where the government itself has been unable to achieve effective identification. One could be forgiven for interpreting this simply as a means to give practical effect to foreign policy decisions about broad categories of persons the government wishes to be sanctioned.  Also of note is that under the act the current EU requirement for sanctions to be reviewed annually is extended to every three years. Designated persons will still be able to challenge their designations, and the act also provides for a designation to be revoked if the government considers that the required conditions are not met in respect of the relevant designation “at any time”. However, this considerable extension of time between default reviews will no doubt shift the burden away from government and on to designated persons. Its inclusion is perhaps suggestive of a more heavy-handed sanctions programme post-Brexit.   GTR: You mention the possible burden placed on businesses by the government’s increased powers. Are there any other ways the act may make life more difficult for third parties dealing with potentially sanctioned persons? Enderby Smith: Under the act, third-party institutions wishing to deal with potentially designated persons may find themselves facing increased reporting requirements. Currently only certain businesses are subject to reporting requirements in the UK, such as legal and financial services professionals. However, the government may use the act, through secondary legislation, to broaden such requirements to all natural and legal persons. They would be required to report to the government where they become aware, or have reasonable grounds to suspect, that they are dealing with a designated person or that an offence has been committed by a designated person. There would likely be criminal penalties for those who fail to comply. This development, coupled with the potential new problems interpreting the scope of sanctions that I mentioned previously, suggests that it may become more difficult for third parties to navigate the sanctions landscape.   GTR: Given the act allows the UK government to forge its own path when it comes to its sanctions programme, which direction do you think it will choose to take? Enderby Smith: This is a political and diplomatic question. Sanctions are after all a stark expression of a country’s foreign policy objectives, and the UK’s approach will be heavily contingent on how it sees itself on the global stage post-Brexit. The UK government has strongly signalled its desire to continue to work closely with the EU post Brexit. In this respect, we may see the UK government simply using the act to replicate sanctions coming out of the EU. However, this may be unacceptable on a political level amongst those in favour of a cleaner break, and also on a practical level, with the difficulties implicit in seeking to align foreign policy objectives with those of 28 other countries without membership of a central administration. Another possibility is gravitation towards the US, in line with the two countries’ “special relationship”. This would be an interesting and not altogether unsurprising move, given the two countries often agree on matters of foreign policy, and the likely increased dependency the UK will have on the US once its ties with Europe are lessened.   GTR: How might a move towards the US result in a different approach by the UK government to its sanctions regime? Enderby Smith: Such a move may result in a significant widening of the UK government’s application of sanctions, with broad-scope sanctions applying to whole geographical areas or whole groups of people – in contrast to the EU’s approach which has generally been to target individual sectors or persons. The wider powers granted under the act, and in particular the government’s ability to designate by description rather than by name, would certainly seem to allow for such expansion should the UK government see fit, and are perhaps telling of the government’s intended approach. Should the UK incline towards the US’ methods, it will be interesting to see whether it will also move towards the adoption of so-called secondary sanctions. Secondary sanctions “bite” on a sanctioning state’s citizens as with primary sanctions. However, persons are designated on the basis of who they do business with, essentially forcing them to make a choice between trading with the true target of the sanctions – for example an Iranian company – or the US. Thus a form of extraterritorial reach is achieved. It is unlikely that secondary sanctions applied by the UK would be as effective as the US’, given the disparity in economic clout between the two nations. However, such a move would not be inconsequential and would herald a much more aggressive approach by the UK to matters of foreign policy. The post UK could move towards US-style sanctions regime after Brexit appeared first on Global Trade Review (GTR).

HSBC chief shrugs off trade war headwinds as half-year profits rise

From Global Trade Review (GTR) | By Finbarr Bermingham

john flint HSBC’s chief executive John Flint says the trade war between the US and China is yet to affect the bank’s trade business in Asia. Speaking on an earnings call after the bank announced a 4.6% rise in net profit for the first half of 2018, Flint said that the forceful rhetoric could do more harm that the trade spat itself. China and the US have been engaged in a tit-for-tat tariff battle for months. In the latest escalation on Tuesday, the US announced that it will collect tariffs on a further US$16bn of Chinese goods from August 23. This follows existing tariffs on US$34bn, introduced in July, taking the cumulative total to US$50bn-worth of Chinese goods. While US President Donald Trump says the “tariffs are working big time”, Flint shrugged off their material impact to date. “We haven’t yet seen any meaningful impact on our customer base either through activity or risk profile. It’s too early to know if that will make an impact. When we think about the trade wars, I think from my perspective I am more concerned with the trade rhetoric damaging investor sentiment, investor confidence and sending markets lower. I think that could have more impact on our wealth business,” he said. Trade finance revenues were up for the first half of the year, while the vast majority of the bank’s profitability is coming in Asia. Of the US$10.7bn total profit before tax, US$9.4bn came from Asia. Despite that, higher than expected costs meant that the profit missed consensus predictions. Chief among the expenditure hikes were technological investments, with the bank singling out its recent blockchain experiments in Hong Kong as one area of progress. Other banks in the region have voiced their concerns about the potential of the trade war to eat into profitability. Speaking this week as OCBC announced a 16% hike in net profitability for the second quarter, chief executive Samuel Tsien said that “the concern is not only trade itself, it is actually a shrinkage of the economies that we would see in the event that it is carried out to the extent of the rhetoric”. DBS CEO, Piyush Gupta, upon announcing 20% rise in profits, described the trade war as a “psychological challenge”. He told CNBC: “The fact that people are more uncertain about where this is going creates a degree of lower confidence and that results, whether it’s the credit spreads or the stock market, in animal spirits in the region coming off.” Meanwhile, China’s export data for the month of July beat analysts’ forecasts, posting 12.2% growth. “Shipments to the US did weaken slightly, which hints at some impact from the tariffs. Equally though, this may reflect a broader softening in economic momentum among developed economies given that exports to the EU edged down too,” says Julian Evans-Pritchard, China economist at Capital Economics, in a note. The post HSBC chief shrugs off trade war headwinds as half-year profits rise appeared first on Global Trade Review (GTR).

German bank provides loan for new US cruise ship

From Global Trade Review (GTR) | By Finbarr Bermingham

German finance and shipbuilders are to deliver a new cruise ship to the world’s largest leisure travel company, Carnival Corporation. The Miami, Florida-based company has borrowed €786mn, with KfW-Ipex Bank, a German development finance institution, structuring and financing the entire package. However, KfW-Ipex plans to syndicate up to 80% of the total to the commercial banking sector, it says in a statement. The 12-year loan (from date of delivery) is backed by export credit insurance (also known as “Hermes cover”) by the German government. The ship will be built by Meyer Werft, a leading cruise ship manufacturer, in Papenburg, Germany. It will have a low-emission dual-fuel engine, using LNG and marine diesel, however it will be primarily fueled by LNG. Delivery date is May 2022 and the ship will be able to accommodate 5,200 guests. This is the latest in a long line of financings KfW-Ipex has arranged for the cruise ship sector, following a huge €3.2bn package it organised last year for another Florida-based liner, Royal Caribbean Cruises. This previous deal saw two reduced-emission cruise ships delivered, in the development bank’s largest ever structuring. It contributed €686mn from its own book, with the rest syndicated to Bayern LB, BBVA, BNP Paribas, Commerzbank, DZ Bank, HSBC, JP Morgan and SMBC. The latest deal will support a large SME manufacturing base in Germany, which has long provided parts in the shipbuilding supply chain. “We are enabling our long-standing customer Carnival Corporation, which placed the order with Meyer Werft Papenburg, one of the world’s leading cruise ship builders, to build a new flagship,” says KfW-Ipex board member, Andreas Ufer. The post German bank provides loan for new US cruise ship appeared first on Global Trade Review (GTR).

Barclays to offer digital invoice finance after taking “significant” stake in fintech firm

From Global Trade Review (GTR) | By Sanne Wass

Barclays is to expand its invoice finance offering for SME clients, having partnered with MarketInvoice, a fintech firm and Europe’s largest online invoice financing platform. In doing so, Barclays has committed to acquiring a “significant minority stake” in the firm, the bank says in a statement. The bank also plans to fund invoices via the platform, growing its asset base in the small business segment. The aim, Barclays adds, is to give SME clients “seamless access to innovative forms of finance”. As a result of the partnership, customers will get access to MarketInvoice’s single invoice finance product as well as broader digital invoice finance facilities. MarketInvoice’s platform allows SMEs to upload their invoices and sell them to investors, thus unlocking cash during the invoice’s payment period, which can often be up to 120 days. Since it was founded in 2011, MarketInvoice has funded more than 90,000 invoices worth over £2.7bn. The new product will be introduced to Barclays customers “over the coming months” in East Midlands, West Midlands, Herts and North West London, with a full roll-out across the UK set to commence in 2019. MarketInvoice is among a sea of fintech firms seeking to tap into a booming invoice financing market. As reported by GTR in its recent fintech feature, these firms differentiate themselves through technology, utilising emerging tech to shore up security and speed up transaction times. Most recently, MatchPlace, a platform that has been offering foreign exchange and payment services for SMEs since 2016, launched a peer-to-peer invoice financing service in the UK. Seeing a “huge potential” for invoice finance across Europe, the firm expects to soon expand its service to Portugal, France and Spain, and aims to build a book of £30mn within the next three years. There seems to be plenty of space for growth within this market, as more companies (SMEs in particular) move away from traditional banking products to more innovative ways of optimising their working capital. MarketInvoice recently announced that in one year it almost doubled the average amount advanced to UK businesses – from £606,000 in 2016 to £1.14mn in 2017. The partnership with MarketInvoice is undoubtedly an effort by Barclays to capitalise on this trend and stop the flight of SME customers toward alternative financiers. “Invoice financing gives small businesses the power to obtain funding in a fast and innovative way. It is a product that has come of age in the digital era, it’s efficient, effective and controllable for small businesses,” says Ian Rand, CEO of Barclays Business Bank, commenting on the new partnership. Barclays is the first UK high street bank that MarketInvoice has partnered with. Anil Stocker, MarketInvoice’s CEO, says: “It’s exciting to be combining the knowledge and footprint of a 325-year old British banking institution with MarketInvoice’s tech-led online finance solutions. Bringing this together in a strategic partnership can only mean good news for UK businesses, with the segment we’re targeting responsible for upwards of 60% of UK employment.” The post Barclays to offer digital invoice finance after taking “significant” stake in fintech firm appeared first on Global Trade Review (GTR).

Ukraine’s Metinvest returns to ECA market

From Global Trade Review (GTR) | By Shannon Manders

Steel Pipeline Factory Metal Metinvest has secured a €43.2mn buyer credit facility for its subsidiary Ilyich Steel which is being guaranteed by Austrian export credit agency Oesterreichische Kontrollbank Aktiengesellschaft (OeKB). It is the first loan covered by an export guarantee to be provided to the Ukrainian steelmaker since 2012, and the company’s first-ever from OeKB. Raiffeisen Bank is the sole lender on the facility, which matures in September 2025. The interest rate has been set at 6-month Euribor plus margin. The funds will be used to finance the construction of a continuous casting machine (CCM) for Ilyich Steel, a steelmaking plant in Mariupol, Ukraine. The CCM is being supplied by metallurgical plant solutions company Primetals Technologies Austria. “It is yet further proof that European financial institutions believe in Ukraine in general and the Metinvest story in particular,” says Metinvest CEO Yuriy Ryzhenkov. “This project is one of the key investments in the group’s steel business envisaged by the ‘Technological Strategy 2030’, which aims to increase overall steel production capacity. It is also difficult to overstate the positive effect of this project in reducing our environmental footprint in Mariupol.” Following the commissioning of the new CCM, expected by the end of 2018, the existing ingot casting line will be taken out of operation and the blooming mill will be shut down. The launch of the CCM will enable Ilyich Steel to cut costs by reducing metal losses and energy consumption, while boosting output of crude steel and finished products. When implemented, the CCM will also help to improve the environmental situation in the city of Mariupol by reducing the dust content in flue gases following gas cleaning, the company says. The news follows Metinvest’s announcement in April that is had refinanced US$2.3mn of its existing debt through two new bond issuances and a US$765mn pre-export finance (PXF) facility. The transaction was the largest-ever refinancing by a Ukrainian corporate. Deutsche Bank and ING served as global co-ordinators and, together with Natixis and UniCredit, acted as joint bookrunners of the bond refinancing and co-ordinating mandated lead arrangers (MLAs) of the PXF deal. On the legal side, Allen & Overy and Avellum advised Metinvest, Linklaters and Sayenko Kharenko supported the bookrunners, and Clifford Chance and Redcliffe Partners advised the co-ordinating MLAs. The transaction also generated an additional US$205mn in liquidity, which the group used to settle the first PXF repayment before it was due. It then announced last week that amid “decent cashflow” it had voluntarily paid another part of the PXF facility. The remainder due is now US$528mn. Metinvest secured its first ever ECA-backed facility in 2012. The €25mn 10-year buyer credit facility was backed by Euler Hermes and paid an interest of 1.95% a year, with Deutsche Bank taking on the role of sole arranger and sole lender. The post Ukraine’s Metinvest returns to ECA market appeared first on Global Trade Review (GTR).
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