Introductionits particular treatment of trade finance.
This subject is covered elsewhere in
the book (page 79) but, in the context of
EMEA, it is worth noting that the Basel III
conditions may not be imposed uniformly
throughout the world. While in Europe
some countries are even considering
implementing measures that go further
than Basel III, in the Middle East not only
is the implementation timetable likely to
be later, but the conditions may be less
strict. The same will apply to Asia and
Latin America. In the US, the introduction
of Basel III has formally been postponed.
In the meantime there are also ongoing
discussions between the regulators on
softening certain measures or slowing their
implementation, in order not to affect the
slowly improving economic environment,
especially in Europe.
Of more immediate and specific impact is
the EU Directive 2011/7/EU on supplier
credit terms in commercial transactions,
which will come into force in Europe in
March 2013. This aims to limit supplier
credit terms to a maximum of 30 to 60
days, unless a longer period can be
agreed on terms that are ‘not grossly
unfair to the creditor’. In EU countries,
based on this directive, this approach will
form part of general trade law. While this
offers welcome support, particularly to
SMEs who find it hardest to access bank
funding, it is important to note that these
new rules still allow sufficient scope for
flexibility in trading procedures. Indeed,
especially also in relation to these rules,
the possibilities of support that banks
can offer to improve the management of
trade payables and receivables, and also
support for the management of costs and
risks in trading operations, are often not
fully appreciated and thus are underutilised
by corporates. Banks are able to provide
effective routes to liquidity, cost and risk
management, This also is where trade and
cash management tools can be combined
to increase efficiency and optimise working
capital management.
Also in 2013 the uniform rules for the Bank
Payment Obligation (BPO) are expected to
be issued. This instrument will function as
security for and mitigator of the payment
risk to buyers in trade transactions. Not
only will the BPO be complementary to
Letters of Credit, it also has the potential to
replace them. Although the trade operation
departments of banks will be ready and
able to implement the necessary policies as
soon as the final rules are published, there
is still little clarity about how the BPO will be
treated under capital adequacy regulations- meaning that an important element in
determining costs is not yet defined. All
roads, it seems, lead back to Basel.
With the RMB internationalisation story
progressing at such a rate that it merits
its own section in Chapter 4 of this book
(see page 53), it is clearly a key issue for
treasurers in EMEA. Whether RMB are
required for purchasing Chinese goods,
earned from commodity-related sales to
China or, increasingly, used in trades where
both parties are based outside China, the
ability to raise funds, manage risk and invest
RMB is becoming essential. While the rules
have been liberalised, they remain complex,
and the ability to choose the option that best
suits the individual corporate’s objective
requires deep understanding and support
from the right banking partner.While Europe can be seen as the centre
of regulation, with its numerous and
wide-reaching EU directives, it is worth
mentioning that unique regulatory measures
have also been introduced, in the form
of the increased sanctions on certain
countries like Iran and North Korea. Not
only has this impacted trade flows, but also
banks have had to develop and implement
policies, processes and systems to avoid
involvement in transactions that could
breach these regulations and incur hefty
fines. Looking ahead, the cost and risks
involved may drive banks to be more
selective about where they offer services,
what they offer, and who they offer them to.