The Doha Banking consultation is part of a larger initiative. ICC's G20 Advisory Group is hosting a series of regional policy consultations, designed to provide local businesses with an opportunity to help shape ICC's policy recommendations for input into the G20 process.
Agenda
Participants were invited to share views and to provide
feedback with regard to the global economic outlook, providing an accurate
snapshot of trends prevailing in the markets and future expectations for global
trade. Particular focus was given to the new financial regulations known as
Basel III, along with other regulatory issues impacting the industry.
Participants
The meeting was co-hosted by Sheikh Khalifa Al Thani,
Chairman of ICC Qatar and Qatar Chamber of Commerce and Industry; Jean-Guy
Carrier, ICC Secretary General and Tan Kah Chye, Chairman of the ICC Banking
Commission.
Key participants included: Henri d'Ambrieres, Global Head Origination,
Export & Trade Finance, Crédit Agricole Corporate and Investment Bank; Steven Beck, Head, Trade Finance, Asian Development Bank; Rakesh Bhatia, Global
Head of Trade and Supply Chain, HSBC; André Casterman, Head of Cash, Trade and
Supply Chain, SWIFT; Ashutosh Kumar, Managing Director, Transaction
Banking,Global Head of Corporate Cash & Trade, Product Management, Standard
Chartered Bank; Christof Gabriel Maetze, Member of the Executive Management
Board, Financial Institutions, Commerzbank AG; Craig Polkinghorne, Global Head
and Director, Structured Trade and Commodity Finance, Corporate and Investment
Banking; Vincent O’Brien, ICC Chair, Market Intelligence Group; Michael Quinn, Managing
Director, Global Trade Product Management Executive, JP Morgan Chase; Jean-Paul
Riolacci, Head of Capital and Credit Management,Global Transaction Banking,
C.I.B Structured Finance; Daniel Schmand, Head of Trade Finance and Cash
Management Corporates EMEA, Global Transaction Banking (GTB), Deutsche Bank; Dan
Taylor, Vice-Chair, ICC Banking Commission, Executive Director, TSS Global
Market Infrastructures, JPMorgan; John Turnbull, General Manager, Global Head
of Structured Trade & Commodity, SMBC Group; Hugo Verschoren, Senior
Product Manager, ING Commercial Banking, Trade Finance Services; Yanling Zhang,
Chairman, Bank of China Aviation Private Limited; Shozo Wakabayashi, General
Manager, Doha Office, The Bank of Tokyo-Mitsubishi UFJ, Ltd.; Guosheng Wang,
Chief Product Specialist, Corporate Banking, Bank of China Head Office.
Outcomes
Participants were invited to
provide their perspectives on the state of the market and its volatility, resulting in several conclusions.
- Financial markets will be again
an important agenda topic for the G20 summit in Mexico. In particular, topics
such as financial inclusion and how the financial market can be made more
stable. Experts called on the G20 to address Trade Finance, which remains a critical omission on their agenda. The
experts noted that there is still a clear lack of understanding of the trade
finance industry and its role in underwriting global trade flows, not only
among regulators, but also politicians. Trade finance and
its rules should be better explained, especially since the biggest part of
trade finance is done without letters of credit, i.e. factoring, forfaiting and
open accounts.
- With respect to the current
market situation, the concerns regarding European banks’ deleveraging are still
high, though perhaps lessening slightly. This continuing European deleveraging
created a lot of space taken up by some US and regional banks. However the
experts wondered if these banks are really able to fill the gap after EU banks’
deleveraging. In the second half of 2011 trade finance was definitely slowing
and prices went up, today things are more stable and even prices for trade
finance products are coming down. Demand is now more an issue than supply. Experts
believe that there is an ever increasing need of trade financing.
- With Basel III, banks need twice
or three times more capital. As a consequence, prices will increase. Trade
finance is treated like a risky product category, yet it should be a separate
risk category, since it is not comparable to other products. The waiver of the
one year maturity floor is certainly a first step in the right direction, even
though it has already been waived in most countries. The leverage ratio remains
one of the experts’ main concerns (CCF of 100%). When it comes to the
implementation of Basel III, they fear an uneven implementation of Basel III
which could create an uneven playing field for the banks. Regulators should
focus that the new rules will be applied equally in the various regions,
instead of individual jurisdictions to apply their own changes (i.e. CRD4 in
the EU). The experts think that we will see many smaller financial players
leaving the market due to the increasing cost of doing business related to the
new rules. The consequence will be that the availability of trade finance will
go down. The banking experts recommended that regulation of trade finance be
based on facts and an objective assessment of trade finance’s low risk. The ICC’s
Trade Register is therefore a crucial tool for both policy makers and senior
executives in financial institutions around the world to analyse trade finance
risks and to provide much needed empirical evidence to support the view that
trade finance is a low risk asset class.
- Experts noted that US Dollar
liquidity is missing and stated that the dependency on the Dollar will become
an ever increasing challenge. They noted that the Chinese government is keen to
promote the RMB as a fully convertible trade currency. Experts are convinced
that the RMB internationalization will start through trade finance, which will
bring new business opportunities.
- Experts agreed that trade
sanctions is a topic which should be addressed more precisely and be engaged
with regulators (i.e. how to deal with differing sanctions).
Media coverage
Following the consultation, a press conference was held, which was attended by 20 journalists from different media outlets, including: Bloomberg, Al Jazzera, QF Radio, Gulf Times, The Peninsula, Al Watan, Al Sharq, Qatar News Agency, Qatar TV and Al Raya.
Selected quotes
“It is crucial
that, during this economic crisis, trade finance be freed up to promote
economic growth, especially in the developing world. This would stimulate a
well-functioning and effective private sector, thereby improving the conditions
for investment and trade.”
Sheikh Khalifa Al Thani, Chairman of ICC Qatar
and
the Qatar Chamber of Commerce and Industry
“SMEs could be
the engine of economic growth if given better access to investment through new
regulatory frameworks for trade finance.”
Kah Chye Tan, ICC Banking Commission
Chair
“The
consultations we’ve held in Europe, North America, Asia and here in the Middle
East ensure that businesses large and small have an opportunity to contribute
their views and help shape ICC’s policy recommendations for input into the G20
process.”
Jean-Guy Carrier, ICC Secretary General
“Classifying trade finance as a high-risk
financial instrument, subject to higher capital adequacy requirements, could
have a severe and adverse impact on the pricing and supply of trade finance.
Such a development would negate the positive impacts of our trade-supportive
policy efforts, with knock on impacts in terms of lost jobs and higher costs
for all parts of the global supply chain.”
Jean-Guy Carrier, ICC Secretary General
“By working directly with the global
business community, governments could find effective solutions to help tackle
the economic crisis. Removing barriers to trade and
investment would not only provide a necessary stimulus to the global economy,
but would also give business the clear sign that governments will not resort to
protectionism.”
Jean-Guy Carrier, ICC Secretary General