SMBC Trade Finance Almanac.pdf

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TRADE FINANCE

SMBC

Trade Finance

Almanac

2013

Published by TRADE FINANCE


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The SMBC TRADE FINANCEAlmanac 2013 1

CONTENTS

INTRODUCTION 3

Editor's note – Oliver O’Connell, Editor,Trade Finance Magazine

Foreword – Hiroshi Minoura, Deputy President, Head of InternationalBanking Unit, SMBC 5

The Berne Union and the FinancialCrisis – Peter Jones, Secretary General of the Berne Union 7

ICC: The Future of Trade Finance –

Thierry Senechal, Senior Policy Manager, International Chamber of Commerce 12

IFC: Emerging Markets Still in Need of Support 17

Dealogic 2012 Year-End Trade LoanTables 25

SWIFT trade finance data andcommentary 2012 33

Euromoney Country Risk –Methodology and Tier Guide 45

ASIA PACIFIC 47SMBC: Regional View of Trade Finance

in the Asian Market – HiromitsuOtsu, Joint General Manager,Head of Asia, GTFD 48

JapanSeeking Growth Overseas – Kaoru

Furuya, Joint General Manager,Global Head of FinancialInstitutions Trade Finance, GTFD 50

Best Trade Bank in Japan 2012 53Country profile: Japan 54

Agency contact details 55China & North AsiaHow can ECAs help to reduce the

volatility of the cyclical shippingmarket? – Xu Guang, Sinosure 57

Country profiles 61ChinaHong KongMongoliaSouth KoreaTaiwan

Agency contact details 66

South & SE AsiaFacilitating Asian Trade in 2013 – JanetHyde, Victoria Tyo & Edward Faber, Asian Development Bank 70

The SMBC Trade Finance Almanac 2013

Country profiles 74BangladeshIndiaIndonesiaMalaysiaMyanmarPakistanPhilippinesSingaporeSri LankaThailandVietnam


AustralasiaAustralasia: An EFIC perspective –

Dougal Crawford, Senior Economist, EFIC 89

The New Zealand ExportingEnvironment – Chris Chapman,Rebecca Holleman & TimRobertson, NZECO 92

Country profiles 95AustraliaNew Zealand


EUROPE, THE MIDDLE EAST, AND AFRICA 99

SMBC: Commodity Finance EMEA –Strong demand from a buoyantmarket – John Turnbull, JointGeneral Manager, Global Head of Structured Trade & Commodity Finance, GTFD 100

Europe & the CIS

Trade Finance in Eastern Europe andthe CIS: A review of 2012 andforecast for 2013 – Rudolf Putz,Head Trade FacilitationProgramme, EBRD 103

The European Bank forReconstruction and Development:a long term capital partner in anuncertain environment – Lorenz Jorgensen, Director, Head of LoanSyndications, EBRD 106

Country profiles 111Belgium

BulgariaCroatiaCzech Republic


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2 The SMBC TRADE FINANCEAlmanac 2013

CONTENTS

DenmarkFinlandFranceGermany

Hungary Italy LatviaNetherlandsNorway PolandPortugalRomaniaRussiaSlovakiaSpainSwedenSwitzerlandUkraineUnited Kingdom


Middle East & North AfricaGrowth in SWIFT’s business in the

Middle East outperforms globalgrowth – Sibos 2013 – Dubai 147

Country profiles 150AlgeriaBahrainEgyptIsraelJordanKuwaitLibyaMoroccoOmanQatarSaudi ArabiaTunisiaTurkey United Arab Emirates


Sub-Saharan AfricaAfrican trade and trade finance in the

decade of the 2010s – A newfrontier emerges –Dr B. O. Oramah, Executive VicePresident, Business Developmentand Corporate Banking, AfricanExport-Import Bank 169

Country profiles 175AngolaGhanaKenyaMozambiqueNigeriaSouth Africa


AMERICAS 183SMBC: Export & Agency Finance Case

Study – Etileno XXI Project – Mini Roy, Director, Head of Export &

Agency Finance and AmericasStructured Trade & Commodity Finance, GTFD 184

North AmericaUSA: Exports hit record levels 187Outlook 2013: Let it rise – Peter Hall,

Vice President and Chief Economist, EDC 190

The new US-Asia trade paradigm: Theprospects and challenges of theTrans-Pacific Partnership negotia-tions in 2013 – P. Welles Orr, Senior International Trade Advisor at Miller & Chevalier Chartered. 192

Country profiles 195CanadaUnited States


Latin AmericaBrazil’s Economic Performance – a

review – Filipe Lage de Sousa,Researcher, and Luis EduardoMiranda Cruz, Economist,BNDES 200

Internationalisation as central to IDB

strategy: Promoting SME exportand investment growth in LatinAmerica and the Caribbean –Fabrizio Opertti and GemaSacristan at the Inter-AmericanDevelopment Bank 205

Country profiles 209ArgentinaBoliviaBrazilChileColombiaCosta Rica

EcuadorEl SalvadorGuatemalaMexicoPanamaParaguay PeruUruguay


REFERENCE 227SMBC Trade Finance Overview 227SMBC Global Directory 2352012 Event Gallery 250Trade Finance Calendar of

Industry Events 2013 253IMF World Economic Growth

Projections 256


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EDITOR’S NOTE

Editor’s note

Welcome to the SMBC Trade Finance Almanac 2013,sponsored by Sumitomo Mitsui Banking Corporation’sGlobal Trade Finance Department and produced by Trade Finance Magazine.

Trade finance has retained its elevated status in the world of banking, and in the policy thinking of many governmentslooking to boost economic growth.

In this year’s almanac we have partnered with EuromoneyCountry Risk (ECR), to produce a snapshot of countryrisk based on the views of over 400 expert economistsgathered from the Euromoney Country Risk Survey. Livedata can be found at www.euromoneycountryrisk.com, andan explanation of the methodology and sovereign ratingscan be found in the first section of the almanac. ECR data issupplemented here by country data from the IMF and ashort piece of commentary.

I hope you enjoy this trip around a selection of the world’skey trading economies, and the editorial contributions of anumber of the most important industry groups,

multilaterals, development banks and official agencies in thetrade finance space. Thank you to the Berne Union,SWIFT, IFC, ICC, Sinosure, ADB, EFIC, NZECO, EBRD,Afreximbank, EDC, Miller & Chevalier, BNDES, and IDBfor the time and effort spent preparing articles.

A special thank you also to the team at SMBC’s GlobalTrade Finance Department for their editorial andorganisational input – namely Hiroshi Minoura, EliHassine, Toshio Ishizuka, Mini Roy, Hiromitsu Otsu, KaoruFuruya, John Turnbull, Donar Tejada, Daniel Minzer,

Sooyeon Lee, and Noah Herman.We hope that you find the SMBC Trade Finance Almanac 2013 an interesting and useful tool, and remember that thisis just a sample of what is on offer in the pages of Trade Finance Magazine each month, and daily atwww.tradefinancemagazine.com.

Oliver O’ConnellEditor Trade Finance Magazine

Managing editor Jonathan BellTel: (+44) 20 7779 8428E-mail: [email protected]

Editor

Oliver O’ConnellTel: +1 212 224 3413E-mail: [email protected]

Staff writerKimberley LongTel: (+44) 20 7779 8310E-mail: [email protected]

ReporterOliver GordonTel: (+44) 20 7779 8438E-mail: [email protected]

Production editor John Smith

Business devlopment managerBryn HossackTel: (+44) 20 7779 8099

E-mail: [email protected]

Sales executive AmericasAlex Sheriff Tel: +1 212 224 3481Fax: +1 212 224 3488E-mail: asher [email protected]

Business group managerSean BrierleyTel: (+44) 20 7779 8207E-mail: [email protected]

Office manager/reprintsChristine JellTel: (+44) 20 7779 8743Email: [email protected]

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Tel: (+44) 20 7779 8037E-mail: [email protected]

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Customer servicesTel: (+44) 20 7779 8610E-mail: [email protected]

TRADE FINANCE™Nestor House, Playhouse Yard, LondonEC4V 5EXTel: (+44) 20 7779 8310

DirectorsPR Ensor, executive chair man,theViscount Rother mere, joint president,Sir Patrick Sergeant, joint president,CHC Fordham, managing director,B Al-Rehany, D Alfano, JC Botts, DC Cohen, JC Gonzalez, CR Jones, MWH Morgan,NF Osborn , DP Pritchard, JL Wilkinson

Subscription Rates for full website access, e-news and printed magazines £875 (UKonly), a1075, US$1425 (GBP and Europrices are subject toVAT).

TRADE FINANCE ISSN: 1464-8873

Copying without permission of the publisher is prohibited.

© Euromoney Institutional Investor plc, 2013.

HotlineFor details of all Euromoney products(+44) 20 7779 8999

E-mail: [email protected]

©Euromoney Institutional Investor plc, 2013. No part of this publication may be reproduced or transmitted in any form or by anymeans without prior written permission of the publisher. Although Euromoney Institutional Investor plc has made every effort toensure the accuracy of this publication, neither it nor the sponsors can accept any legal responsibility whatsoever for consequencesthat may arise from errors or omissions. Neither Euromoney Institutional Investor nor the sponsors can be held responsible forinvestment decisions arising from the data and opinions expressed within this publication.


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ForewordBy Hiroshi Minoura, Deputy President, Head of International Banking Unit, SMBC

Following the developments of Global Banking and Trade Financein 2012, we look to 2013 and beyond with renewed optimism, asglobal financial markets in large part continue to recover. In linewith the above, SMBC’s International Division is being driven by akey concept: “Conservatively Aggressive”. Among other things, thisphrase implies that SMBC is focusing on the quality of transactionsin order to continue our involvement in innovative and marketleading mandates across the globe.

Throughout 2012, SMBC achieved positive customer satisfaction,

built largely on our customers’ continuing demand for qualityfinancial services. This demand is what strongly encourages us tocontinue to deliver optimal financial solutions that meet our customer’s needs and exceed their expectations.

In particular, Trade Finance has been a key driver for our growth. Alongside theproducts offered by our Global Trade Finance Department – including Export andAgency Finance, Commodity Finance, Supply Chain Finance and Trade Finance for Financial Institutions, we are eager to connect exporters with importers and supplierswith buyers in order to augmen their vital trade flows.

Global Trade Finance continues its path of growth (world merchandise trade volume asof April 2012 was estimated at US$18 trillion1) as new countries, particularly those inexpanding markets, have become active participants in the global supply chain. Southand Southeast Asia is gradually becoming an important supplier of goods, while Chinais simultaneously demonstrating signs of a more technologically driven economy. Theexpansion of our supplier base has become an important driver of business growth for Supply Chain Finance. In addition, the expanding markets of Latin America and Africaare providing many interesting opportunities for key infrastructure/developmentinvestments that require long term financing with Official Export Credit Agencies.These long term investments will form the cornerstone of a very substantial amount of future economic growth and development for the world.

The 2013 issue of the SMBC Trade Finance Almanac includesupdated country risk profiles for more than 70 countries inaddition to articles regarding our product focus across theregions in which SMBC has an active presence.

We wish to thank both Trade Finance Magazine andEuromoney Country Risk, for their contribution to thecompletion of this 2013 SMBC Trade Finance Almanac.

Welcome to the 2013 SMBC Trade Finance Almanac, wewish you good business and good fortune with your global trades.

NOTE1: World Trade Organization – Press/659, April 2012


FOREWORD

Hiroshi MinouraDeputy President,Head of InternationalBanking Unit, SMBC

Eli Hassine Toshio Ishizuka

Co-Heads of Global Trade Finance, SMBC


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February 28th & March 1st 2013

15th Annual Structured Trade and ExportFinance in the Americas ConferenceThe Biltmore at Coral Gables, Miami

April 18th & 19th 2013

6th Annual Structured Trade and ExportFinance in Russia/CIS ConferenceKempinski, Moscow

June 5th & 6th 2013

10th Annual Global Commodities FinanceConferencePresident Wilson, Geneva

June 10th & 11th 2013

4th Annual Global Export FinanceWashington ConferenceSt Regis, Washington

16th & 17th September 2013

7th Annual Trade and Commodity Financein Brazil ConferenceGrand Hyatt, Sao Paulo

23rd & 24th September 2013

14th Annual Global Export FinanceConferenceHotel Arts, Barcelona

October 2013

Export Finance Germany Conference

Raddisson Blu, Berlin

March 5th & 6th 2013

7th Annual Latin American Energy &Infrastructure Finance ForumBiltmore Hotel at Coral Gables, Miami

March 27th & 28th 2013

6th Annual Turkey Energy andInfrastructure Finance ConferenceThe Mövenpick, Istanbul

April 30th & May 1st

North America Midstream InfrastructureFinance ForumThe Hyatt Regency, Houston, Texas

September 11th & 12th 2013

The 8th Annual North American Energy andInfrastructure Finance ConferenceWestin, New York

For more information please visit www.euromoneyseminars.com or call our

events team on +44(0) 20 7779 7222 or email [email protected]

Forthcoming 2013 events

The perfect mix of market insight and networking

TRADE FINANCE EVENTS PROJECT FINANCE EVENTS


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The Berne Union and the financial crisis

The global crisis has sharply increased the awareness of the value of credit insurance as a riskmitigation tool in cross-border trade, leading to increased demand for the product, highlightsPeter Jones, Secretary-General of the Berne Union.

Since its inception in 1934 by private and state export credit

insurers from France, Italy, Spain and the UK, the International

Union of Credit & Investment Insurers (Berne Union) has gone on

to support tens of trillions of dollars worth of global trade, through

the insurance of trade credit and overseas investment. Its

importance to the global economy is such its members now

support roughly 10% of world’s international trade.

Arguably the Union’s finest moments came in 2009, as the full

unfolding of the global financial crisis and economic downturn

kicked into global trade flows, reducing these by a massive 23%,

from $15.2 trillion down to $11.7 trillion, according to data provided by the UN

Statistics Division.

Yet, in an unprecedented global situation and highly volatile risk environment where

world exports collapsed by nearly a quarter in the wake of the Lehman Brothers

shock, insured credit and investment business facilitated by Union members reduced

only less than 10%, from $1.51 trillion in 2008 to $1.3 trillion, Union data reveals.

Spurred on by a G20 message in April 2009 that support behind trade finance would

be an important element in reviving the global economy, this proved to be a crucial

factor in stemming the decline of trade flows, demonstrating that trade credit

insurance was relatively stable during the worst of the crisis.

Rather than stepping back amid the uncertainty, Berne Union members found a

number of ways to launch new initiatives and to pursue and expand their mandates,

while absorbing and paying out claims related to the tune of $5.4 billion in 2009,

followed by $3.5 billion in 2010 and $4.0 billion in 2011, testifying to the robustnessof the members’ risk management models. No insurer within the Union defaulted, and

claims were paid out appropriately and promptly.


BERNE UNION AND THE FINANCIAL CRISIS

Peter JonesSecretar y-General of the B erne Union


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Unlocking liquidity was the key

While credit insurance is not a source of liquidity in itself, Berne Union member

activity in 2009 helped to unlock bank financing during the crisis and was able to

ensure that liquidity was available for both short-term (ST) and medium- and long-

term (MLT) export finance. A particularly welcome aspect of the underwriting

resilience that emerged from the crisis was the level record levels of MLT export

insurance business notched up by members. From the second quarter of 2009, while

private market players as a group continued to reduce their credit limits, official export

credit agencies (ECAs) stepped into this breach by increasing their limits, spurred by

the initiatives taken by governments in line with the call of the G20, which asked their

ECAs to fill a perceived gap in export credit insurance supply by supporting national

exports and national interests.

MLT volumes underwritten by Berne Union members grew by 25% in 2009, almost

double the compound annual growth rate of 13.7% from 2005 to 2008, to reach a full

year total of $191 billion, the highest level ever recorded. The total MLT exposure on

the books of ECAs at the end of 2009 stood at a record $511bn, 14% higher than in

2008.

ECAs also showed their crucial role in complementing the private market in the ST

arena, where the temporary ruling by the EU Commission that ECAs from European

Union (EU) countries were allowed to be active in so-called ‘marketable’ risk business

permitted another illustration of their ability to offer risk capacity during difficult

times.

During the crisis, the activity of EU ECAs in this field increased by around 50% as a

group and more for some individual agencies, according to Berne Union statistics.

Their share of the ST business nevertheless remained small, at less than 2% of the

overall volume, in line with their mandate to step into usual private market territory in

difficult times.

Paying claims and maintaining operations

The second and no less important aspect of 2009 was the jump in claims, and the

manner in which this was accommodated and dealt with alongside the increasing

exposure activity required to support cross-border trade and investment. For the

Union’s ST insurers, this pushed the loss ratio – claims paid in relation to premium

income – for the year to a very steep 88%. Although this resulted in operational losses,

these insurers were to some extent cushioned by a series of very beneficial years, with

low loss ratios, experienced before the crisis.

Meanwhile claims paid by Union member ECAs to customers in 2009 nearly tripled

compared to the previous year to reach $3.1 billion, yielding a loss ratio of 66%,




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compared to 29% and 35% in 2008 and 2007. However high loss ratios had also

prevailed in 2006 and 2005, and for more than a decade from the early 80s to the mid-

90s, providing a bedrock of valuable claims experience. ECAs have historically tended

to maintain themselves through these tougher spells by recovering the largest part of the claims they have paid, making their businesses self-sustaining in the long run.

Resurgence in global insurance activity

As the world pulled away from the very worst perils of the financial crisis, demand for

the risk mitigation products provided by the members of the Berne Union was

resurgent in tandem, rising by 10% and then 17% to $1.5 billion and a record $1.8

billion in 2010 and 2011 respectively.

Members have reported a more benign environment for their trade and investment

insurance business, via a reduced level of claims and record new business growth in

some areas – in particular from ECA insurance coverage that has become a condition

of lending without which banks have not been able to finance MLT transactions, as

their capital adequacy concerns and funding challenges have increased.

2011 marked a year of good results for most of the Union’s 49 private and state-backed

members as the industry pulled away from the global crisis of 2008/2009. Members’

ST and MLT business recorded respective growths of 19% and 10%, against a



Insured trade and investment – World exports

Source: Source world exports: United Nations Statistics Division


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background where world

international trade grew by 20%,

according to UN statistics. The ST

insurance capacity provided bymembers, as measured by the

amount of credit limits extended to

exporters at a given point in time,

stood at more than $880 billion at

the end of 2011, similar to pre-

crisis levels. Total MLT transactions

under cover in the books of Berne

Union members at the end of 2011

amounted to $583 billion, the

highest level ever.

Yet there was no let up in risk

volatility, as long-established

regimes fell in the Middle East and

North Africa and sovereign debt

concerns swelled over the US and a

number of European countries. Although both trade credit and political risk insurance

claims peaked in 2009, there was a small but unwelcome resurgence of claims in 2011,

totalling $4.0 billion, as the deteriorating macroeconomic position of many countriesgenerated a preponderance of mainly commercial risk claims.

Demand for the risk mitigation products provided by the members of the Berne

Union has continued at a strong level during 2012, driven in many cases by liquidity

shortages among banks, particularly financial institutions based in the Eurozone, and

members are confident to support at least the same volumes of export trade and

investment as last year. A major positive is that credit insurance capacity for short-term



ATI becomes 50th Union member

The Berne Union added the African Trade Insurance (ATI) agency as its 50th

member at its 2012 annual meeting in Stockholm. The ATI was officially

confirmed into observer status at the Union, as the preliminary phase to full

membership. Only two fellow African institutions that are full members: the South

African-based Credit Guarantee Insurance Corporation of Africa and the Export

Credit Insurance Corporation of South Africa. ATI is a multilateral trade and

investment insurance institution headquartered in Nairobi, Kenya, and is owned by

a number of African member countries, as well as public and private sector

organisations, including two members of the Berne Union.

Four years after the crisis, our

organisation is now looking to

further broaden its scope as the

leading international association

for the export credit and

investment insurance industry,

both by reaching out to a wider

audience and adding value for

existing members.


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insurance among the Union’s public and private sector members remains steady, at just

over $900 billion. There do not appear to be any capacity constraints, either for the

public MLT insurers or the private sector players.

New horizons for the Union

Four years after the crisis, our organisation is now looking to further broaden its scope

as the leading international association for the export credit and investment insurance

industry, both by reaching out to a wider audience and adding value for existing

members. This includes a more cohesive and in-depth communication within the

Union, improving the accessibility, quality and breadth of the information on the

Internet for members, and a greater exploration of education and training functions.

Another key intention is to make the Union relevant to a wider audience, including

international financial institutions and other official bodies, building on well

established links with other organisations that play important roles in world trade

including the ICC, IMF, OECD, World Bank, WTO and regional development banks.

We are also working to become more familiar to more exporters, governments and

media outlets.

But most importantly, with a possible return of very difficult times, and serious

concerns about the ability of banks to fund trade and investment given the proposed

regulatory changes and ongoing funding challenges, our members remain ascommitted as ever to support global trade and investment in a volatile economic

environment.

Peter Jones was appointed Berne Union Secretary General in May 2012. Previously he was Chief

Executive Officer of the African Trade Insurance Agency and held senior positions at the MultilateralInvestment Guarantee Agency and Export Development Canada, following a successful bankingcareer.

The Berne Union is the leading association for export credit and investment insurance worldwide,working for cooperation and stability in cross-border trade and investment, providing a forum for professional exchange among its members.

Berne Union27-29 Cursitor StreetLondon EC4A 1LTUnited KingdomTel: +44 (0)20 7841 1110

Fax: +44 (0)20 7430 0375E-mail [email protected]




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The future of trade finance – poised

between peril and promise

By Thierry Sénéchal Senior Policy Manager, International Chamber of Commerce (ICC)

A hallowed industry

Long considered a very respectable undertaking, trade finance has

been a core offering in a banking services portfolio to corporate

and small and medium-sized enterprises (SMEs). The LCs industry

regulated by standards dates back some 80 years, when the

International Chamber of Commerce (ICC) first started working

with letters of credit. (LCs) Intermediation provides real-time risk

mitigation, improves liquidity and cash flow of the trading parties,and gives localized SMEs much-needed access to hard currency to

finance imports.

With very profitable business lines, trade finance is the oil that

powers the engine of global economic growth. This is an invaluable

contribution to the market economy. As the Global Head of Trade Finance from a

major bank recently said, trade finance has always had a certain elevated status in the

banking world and it has not been a high-risk transaction. Trade finance is a business

built on real underlying transactions by companies that make real goods that are

moved from one place to another, so real people can consume them in the real world.

Compared with other financial markets, trade finance deals mainly in short-term

maturities; the security is held in the underlying goods moved in the transaction. The

Trade Register published by the ICC confirmed anecdotally that trade finance is a safe

business. The soon-to-be-released ICC report, Global Risks – Trade Finance 2013, will

show that out of nearly 8.1 million short-term trade finance transactions from 2008 to

2011, fewer than 1,800 defaulted. This equates to a default rate of a mere ~0.02% on a

transaction basis. What is more, the likelihood of default is consistently low across all

products, with average transaction default rate of 0.035% across the entire productsuite. The ICC report furnishes compelling evidence that trade finance is still a low

risk banking activity.


ICC – THE FUTURE OF TRADE FINANCE

Thierry SénéchalSenior P olicy Mana ge r,Inte rnational C hamber of Comme rce (ICC)


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Despite these recent encouraging signs that the trade finance industry continues to

uphold its long track record of robustness and stability, this stellar image is imperiled

going forward. For trade finance faces headwinds that may completely upend the

global landscape in which it operates in the next five years. We review the mostimportant of them here.

A welter of regulations

In the wake of the financial crisis, the number of regulations is rising seemingly

exponentially. While many regulatory changes have already been implemented or

proposed, the regulatory future remains unclear. For example, harmonization of Basel 3

principles is a major problem for policy makers and regulators, because different

countries are adopting different standards. Over the next several years, the regulatory

burden may not only worsen, regulations may become more difficult to put into action,

and thus lose their effectiveness. Some banking executives and policymakers think thenew Basel 3 framework will seriously damage the provision of trade finance services.

Concerns are growing that (i) because of the higher capital requirements for trade

finance, banks will move away from the trade finance market, into products that generate

greater returns; (ii) inconsistencies in the implementation of the regulatory regime across

countries will create competitive arbitrage opportunities for some financial institutions

and may affect the domiciling of banks; and (iii) by not treating trade finance as a low-

risk asset class, the new Basel capital framework may unduly raise trade finance costs.

Global economic shifts and a two-speed financial system.

Global market conditions amid the Great Recession have been poor, and outlooks for

the global economy are mixed. Optimists cite recent data suggesting global trade has

bottomed out and is starting to recover. The Economist Intelligence Unit recently

estimated (February 2013) that global trade expanded by 2.9% in 2012, less than half

the rate of the previous year, but will rebound to 4.2% growth in 2013. However,

pessimists abound. Figures from the Organization for Economic Cooperation and

Development (OECD) showed merchandise trade slowed in most major economies in

the second quarter of 2012, contracted in Europe, and also fell in India, Russia, and

South Africa. By contrast, economic opportunity is expanding in the Eastern and the

Southern parts of the globe, according to a recent ICC survey, Rethinking Trade andFinance 2012. Emerging markets will likely account for a far larger share of global

economic activity. This will pose challenges and opportunities for cross-border banks

traditionally based in developed countries. ICC Surveys on trade finance and on

growth markets including China, India, and Brazil, show these countries will account

for a larger share of global economic activity. According to the Economist Intelligence

Unit experts, some two-thirds of world economic growth will come from emerging

markets through 2015. A shift in economic power will probably lead the trade finance

industry to reassess its strategies for many emerging markets. As a result, competition

will intensify and banks will need to invest more in cutting-edge information

technology as they seek to reduce costs by keeping tabs on a lengthening global supply

chain amid these global economic shifts.




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Sovereign debt and deleveraging

The trade finance industry is undergoing major change amid the European sovereign

debt crisis. Ballooning government debt is a serious issue in many developed countries.

In many cases, governments have shouldered private sector liabilities, including those of the banking sector. Some European banks have been under pressure to deleverage, and

have sold assets, including trade finance assets, and raised capital, to strengthen their

balance sheets and regain investor confidence. A recent study by the International

Monetary Fund (IMF), Global Financial Stability Report 2012, showed that in a sample

of 58 EU banks, 24 banks, including some of the largest global banks in trade finance,

will sell about USD2 trillion in assets from 2011 to 2013. The IMF estimated that

European banks could shrink their balance sheets by USD2.8 trillion by the end of

2013, or in the worst case scenario by USD4.5 trillion. Meanwhile, there are indications

that banks in the United States and Asia are stepping into the void, and are expanding

their trade finance activities.

Growth hinges on available US dollar funds

Most settlements for trade transactions are made in US dollars, so easy access to dollar

funding and surplus dollar liquidity are key to gain market share in lending. While the

market share of European banks may be constrained by leverage, the market share

growth of Asian banks may be constrained by their limited access to US dollar funding.

As a result, US banks and UK Asian banks are likely to benefit the most from increasing

trade finance portfolios, due to easy access to US dollar funding by US banks, and

excess US dollar liquidity by UK Asian banks, lower leverage and stronger capital ratios.



Deleveraging in Europe in USD billions, 2010-2012

Source: World Trade Organization (WTO)


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Competition heats up

Multilateral development banks (MDBs) are new players in trade finance. Four MDBs

now have comprehensive trade facilitation programs (TFPs): the European Bank for

Reconstruction and Development (EBRD); the International Finance Corporation(IFC); Asian Development Bank (ADB); and Inter-American Development Bank

(IDB). The African Development Bank (AfDB) also recently decided to adopt a

permanent program similar to the ADB’s. These programs not only take advantage of

the extensive network of banks the MDBs have, to bridge gaps in the provision of

trade finance; they also offer a stronger commitment (HOW SO?) to emerging

markets. For instance, IFC GTFP increased the program ceiling to USD5 billion in

2013. In June 2012, IFC GTFP outstanding guarantee commitments had reached an

all-time high of USD2.9 billion. In recent years, export credit agencies (ECAs) have

also started offering short-term trade finance solutions to their clients.

The pursuit of securitization

An environment of regulatory overload and uncertainty could seriously crimp the

provision of trade finance services. Some banks may move out of high-quality trade

assets into non-banking sectors, such as hedge funds or pension funds. Now more than

ever the trade finance industry must look beyond traditional banking sources of trade

finance, and attract institutional investors and other kinds of investors. This would

broaden the investor base and inject liquidity into a capital-constrained trade finance

market. Many banks may decide to securitize their trade assets, and go into higher-

risk, unregulated markets. But first they need to develop consistent structures andinstruments, within an appropriate legal and regulatory framework, to facilitate more

participation in trade finance by institutional investors and other investors. One



Currency (% breakdown by value for lettersof credit)

Source: JPM

Currency (% breakdown by number of messages for letters of credit)

Source: JPM


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scenario assumes the securitization market will grow for trade finance assets, thus

potentially defeating the purpose of Basel 3 regulations. A second scenario assumes the

securitization market will exist but will be limited in scope, to allow global banks to

obtain greater liquidity temporarily.

We predict the future of trade finance may look something like this:

1. Regulation will become more burdensome, so profit margins will be lower than

before the financial crisis.

2. A two-speed economic and financial system, with developed markets in slow

gear and developing markets in higher gear. Emerging markets make up a much

bigger share of global economic activity.

3. Deleveraging and US dollar liquidity issues will continue to disrupt the

traditional trade finance model. The economy will continue to be more volatile

and unpredictable than before the financial crisis.

4. New entrants in the trade finance market will act as a double-edged sword. Trade

facilitation programs operated by MDBs will provide much needed liquidity.

However, growth of these programs will heighten competition for some services,

such as the provision of guarantees, that historically have been the exclusive

purview of commercial banks. Eventually, new partnerships between MDBs and

commercial banks will be forged to service some markets.

5. Securization will provide opportunities for the trade finance industry to look

beyond traditional bank sources of trade finance.

These are some of the major trends that will shape the market for trade finance. How

they evolve over time will determine the future of the industry. Despite these

challenges, the future is not necessarily bleak. Global banks may find ways to thrive in a

more complex world. But in the near future, global trade finance will be structured

and operate differently than it did just a few years ago. Industry leaders will have to bemore creative and innovative to control costs and raise profits and returns in a fast-

morphing world. To serve customers better, banks will have to understand them better.

A rosy outlook is not off the cards. A major challenge for the industry is the lack of

data timely enough and detailed enough to better understand and closely monitor

trade finance metrics. ICC is committed to bridging this information gap through its

market intelligence reporting. In the quest for greater efficiency by the industry, ICC is

the right business partner. To that end, ICC will release its next report, Rethinking

Trade & Finance 2013 when the ICC Banking Commission meets in Lisbon, 16 to18

April 2013. The report contains data on international trade flows for 2012 and takes aforward look at what trade finance markets will look like from now until 2018.




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Despite improving outlook, emerging

markets still in need of trade support

Exploring the ways that IFC assists its bank partners and their clients operating inemerging markets by addressing financing needs at all stages of the value chain.

Contributed by the Global Trade and Supply Chain Solutions team at IFC

Mauritania is one of the world’s

poorest countries. Over 30% of the

3.5 million people in this country

on the Atlantic coast of North

Africa are unemployed. One out of

every two people lives in poverty.

Yet Mauritania represents one of

Africa’s success stories in theaftermath of the global financial

crisis. It has achieved economic

growth of 5% in recent years

despite persistently higher

commodities prices and a severe

drought two years ago. A strong

recovery since 2009 has been built

on the back of policies that have

helped re-establish macroeconomicstability. Only by maintaining its

current growth course can the

Mauritanian government hope to create jobs to put its people to work and expand

opportunities to raise its citizens out of poverty.

Like many of its neighbours, Mauritania grapples with a severe trade imbalance and

relies on imports to provide much-needed food and fuel to its people. Now the

country requires massive additional agricultural resources to feed a hungry population

and energy resources to feed the machinery and vehicles that provide essential services

to the industries upon which the economic growth has been founded.

This reliance on goods from overseas leaves Mauritania at the whim of shifts in the


WORLD BANK GROUP

As a development finance

institution, IFC was in a unique

position to bring together private oil

marketing companies, state-ownedenterprises, the government, an

international trading company and a

European bank to efficiently serve

all of the country’s energy needs

under a well-organized and

transparent tender process.


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global market, with even slight changes in price levels and financing availability having

acute effects. Amid low investor appetite, high risk perceptions, and even higher

financing costs, much of the country’s recent progress stands to be lost.

These conditions led IFC to structure and finance a deal to support energy

commodity trade flows to Mauritania. As a development finance institution, IFC was

in a unique position to bring together private oil marketing companies, state-owned

enterprises, the government, an international trading company and a European bank

to efficiently serve all of the country’s energy needs under a well-organized and

transparent tender process.

The two-year, $1.5 billion facility covers the country’s entire energy needs and

protects against the risk of supply disruptions and price spikes that could hurt stability

and growth.

“IFC’s risk participation was critical to the success of the deal, without which the

successful syndication and mobilisation of partners would have been challenging,

which could have impacted the import of fuel and its distribution across Mauritania,”

says Yasmin Saadat, head of structured trade finance at IFC. “Poor market conditions in

Europe have made financing from commercial banks traditionally involved in cross-

border trade finance toward frontier markets less available.”

In frontier regions of the world, the story of Mauritania is one that is more common

than not. In the current global environment, emerging markets in all regions have

significantly less access to liquidity and have to look for funding support from entities

like IFC.

Though the outlook for emerging market lending improved in the second half of

2012 and financial markets show early signs of rebound, the recovery is fragile: credit

conditions remain tight, access to finance continues to be below pre-crisis levels, and

nonperforming loans are on the rise.

Traditionally, emerging markets have counted on European banks for the lion’s shareof their cross-border financings. But European bank lending to these regions remains

down significantly from its peak in mid-2011, with emerging Europe and Africa

seeing the most declines. As banks assess their geographically dispersed operations,

entire programs and countries, particularly emerging markets, are on the chopping

block.

Trade finance in particular remains one of the most vulnerable asset classes. While trade

finance departments at banks are competing internally for each unit’s newly scarce

capital, Basel III increases the required capital allocation for trade finance despite its

near-zero loss history. The International Monetary Fund has identified trade finance asone of the specific asset classes that banks are scaling back, with smaller trade finance

lines in non-core countries at greatest risk.


WORLD BANK GROUP


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As the crisis unfolded, IFC’s work initially strove to keep European banks involved in

trade and commodity finance. As European banks’ capacity and appetite continues to

wane, Asian, American and emerging market banks are growing their presence in the

space. IFC stands ready to help these banks develop correspondent bankingrelationships, establish counterparty limits, and implement know-your-customer

protocols in order to crowd in more investment, especially into the poorest countries

that face the largest gaps.

IFC is in a unique position to assist its bank partners and their clients operating in

emerging markets by addressing financing needs at all stages of the value chain. IFC’s

suite of programs to address gaps in the availability of working capital now includes the

Global Trade Finance Programme,

the Global Warehouse Finance

Programme, Global Trade Supplier Finance programme, distributor

finance, structured trade finance,

systemic liquidity solutions, the

Global Trade Liquidity Programme,

and the Critical Commodities

Finance Programme.

In January, IFC doubled the

capacity Critical CommoditiesFinance Programme (CCFP) and

plans to sign new facilities in the

coming months with banks in

Europe and Asia. Facilities with

Societe Generale, Rabobank and

ING have helped to drive financing for agricultural trade flows and refined energy

imports into Eastern Europe, the Middle East, and Africa.

“Through the CCFP, IFC continues to demonstrate its commitment to support global

trade with innovative programs that engage our bank partners to sustain and extendthe availability of financing for critical commodities as they move through the value

chains in emerging markets,” says Georgina Baker, director of global trade and supply

chain solutions at IFC.

“This initiative reflects IFC’s leadership role in private sector development with

proven, rapid, flexible and disciplined programs that underscore our countercyclical

role during financial crises, as well as our contributions to global food security and

poverty reduction,” she adds.

IFC also sees tremendous growth potential in the Global Trade Supplier Finance

programme and the Global Warehouse Finance Programme, two newer initiatives that


WORLD BANK GROUP

While trade finance departments

at banks are competing internally

for each unit’s newly scarce

capital, Basel III increases the

required capital allocation fortrade finance despite its near-zero

loss history.


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have expanded rapidly amid market demand. Global trade banks benefit from the

continued expansion of international supply chains, in which their large clients are key

players. This growth is driven, as it has been in the past, by the growing import content

of exports in all parts of the world.

Last year, IFC hosted its first Warehouse Receipts Conference in Addis Ababa,

Ethiopia, a country in which extensive technical assistance was provided to help

launch the first commodities

exchange in East Africa. That

exchange has been so successful

that IFC recently invested to

support the development of similar

exchanges in other markets across

the region.

The bread-and-butter Global Trade

Finance Programme, which has

provided over $21 billion in

guarantees over its eight-year

history, now includes over 500

banks. The additions of issuing

banks in Laos and Suriname have

expanded the program to over 95countries. Efforts to offer longer tenors and support more climate-change goods under

the programme are underway.

IFC couples its program with training opportunities and support to emerging market

banks, especially in markets where trade finance is not yet well-established, to expand

their knowhow and improve their operational capacity when it comes to offering

trade banking products to their clients.

Only a third of 60 poorest countries in the world benefit regularly from trade finance

activities. IFC and its multilateral partners will continue to play an important roleleveraging trade finance, especially in some of the world’s poorest countries. Whether

it’s Laos in Asia, Suriname in Latin America, Mauritania in Africa, or any emerging

market in between, IFC’s innovative risk-mitigation programs offer opportunities for

banks to expand their footprint and improve their client service – all while

contributing to global poverty reduction.


WORLD BANK GROUP

IFC and its multilateral partnerswill continue to play an important

role leveraging trade finance,

especially in some of the world’s

poorest countries.


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IFC

IFC Headquarters USA International Finance Corporation

2121 Pennsylvania Ave., N.W.

Washington, DC 20433

USA

Switchboard: 202.473.1000

www.ifc.org

Management Team

Georgina Baker, Director, Global Trade &

Supply Chain SolutionsTel: +1 202 473 3175Email: [email protected]

Bonnie Galat, Global Head, BusinessDevelopment, Global BanksTel: +33 1 4069 3173Email: [email protected]

H. Scott Stevenson, Senior Program

Manager, GTFP & Trade AdvisoryTel: +90 212 385 2573Email: [email protected]

Sabrina Borlini, Global Manager, BusinessDevelopment Tel: +1 202 458 4115Email: [email protected]

Hyung Ahn, Global Manager, Trade

ProductsTel: +1 202 458 9288Email: [email protected]

Bilge Ozisik, Global Head, Trade OperationsTel: +90 212 385 2542Email: [email protected]

Business DevelopmentGlobal Banks

Danny Ip,Principal Business Development

Officer Tel: +852 2509 8534Email: [email protected]

Zuberoa Mainz, Business Development Officer Tel: +1 202 473 5573Email: [email protected]

Michael Kurdyla, Business Development

Associate Tel: +1 202 458 0033Email: [email protected]

Sub-Saharan Africa

Gboyega Songonuga, Regional Head Tel: +27 11 731 3133Email: [email protected]

Olivier Buyoya, Senior Trade Finance

Officer Tel: +27 11 731 3025Email: [email protected]

Marcelle Ayo,Senior Trade Finance Officer Tel: +27 11 731 3000Email: [email protected]

Benie Kouakou, Trade Finance Analyst Tel: +27 83 780 6073

Email: [email protected]

Asia & the Pacific

Anurag Mishra, Regional Head Tel: +91 77 3870 7535Email: [email protected]

Lien Hoai Nguyen, Trade Finance Officer Tel: +84 4 3934 2282 x603Email: [email protected]


WORLD BANK GROUP


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Europe & Central Asia

Aleksey Nikiforovich, Regional Co-Head Tel: +7 495 411 7555 x2129


Mark Rozanski, Regional Co-Head Tel: +1 202 473 4640Email: [email protected] Timofti, Associate Trade Finance Officer Tel: +1 202 473 8963Email: [email protected]

Latin America & the CaribbeanAntonio Alves, Regional HeadTel: +1 202 458 5056Email: [email protected]

Jose Alberto Vivanco,Trade Finance Officer Tel: +52 55 3098 0232Email: [email protected]

Susanne Kavelaar, Trade Finance Officer

Tel: +54 11 4114 7211Email: [email protected]

Karla Lopez, Trade Finance Analyst Tel: +1 202 458 8683Email: [email protected]

Middle East & North Africa

Shehzad Sharjeel, Regional HeadTel: +90 212 385 2561


Ahmed Hanaa Eldin Mohamed, Trade Finance OfficerTel: +20 2 2461 4275Email: [email protected]

Product DevelopmentTrade Portfolio Solutions (GTLP &

CCFP)

Nevin Turk, Program Head Tel: +1 202 458 4786Email: [email protected]

Inho Lee, Senior Investment Officer Tel: +1 202 458 2709Email: [email protected]

Fang Chen, Investment Officer Tel: +1 202 473 0720


Global Warehouse Finance Program(GWFP)Makiko Toyoda,Program Head Tel: +1 202 458 0142Email: [email protected]

Global Trade Supplier Finance(GTSF)

Priyamvada Singh, Program Head Tel: +1 202 458 4786Email: [email protected]

Working Capital Systemic Solutions(WCSS)

Juan Andres Mosquera, Investment Officer Tel: +1 202 458 5152Email: [email protected]

Structured Trade & CommodityFinance

Yasmin Saadat,Program Head Tel: +1 202 473 6391Email: [email protected]

Benito Zapata, Senior Investment Officer Tel: +1 202 473 9070Email: [email protected]

Lili Wang, Financial Analyst



WORLD BANK GROUP


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OperationsMurat Ayik,Supervisor, Trade Operations,Istanbul


Zeynep Ersel, Supervisor, Trade Operations,WashingtonTel: +1 202 458 2502Email: [email protected]

Dharmendra Deepak, Associate Operations Officer Tel: +1 202 473 8817


Ozlem Ates, Operations Analyst Tel: +90 212 385 3072Email: [email protected]

Hande Berdan, Operations Analyst Tel: +90 212 385 2523Email: [email protected]

Fiona Chen, Operations Analyst


Mauricio Cifuentes, Operations Analyst Tel: +1 202 453 4516Email: [email protected]

Sinan Onat, Operations Analyst Tel: +90 212 385 2594Email: [email protected]

Arun Prakash, Operations Analyst Tel: +1 202 473 6095Email: [email protected]

Li Tang,Operations Analyst Tel: +1 202 473 7678Email: [email protected]

Beatrix Von Heintschel,Operations Analyst Tel: +1 202 473 0071


Advisory Services

Gimhani Talwatte Seneviratne, Global Head, Trade Advisory


Claudia Sandrine Ngassa, Technical Assistance Coordinator, AfricaTel: +27 11 731 3210Email: [email protected]

Astou Sylla, Technical Assistance Coordinator, Asia


Claudia Gutierrez, Technical Assistance Coordinator, LAC Tel: +511 611 2566Email: [email protected]


WORLD BANK GROUP


26/260For more information contact Cezar Rozmus on +44 (0) 207 779 8032 or email [email protected]

Visit WWW.TRADEFINANCEMAGAZINE.COM/ECA

Sign up and receive:

Bringing you the most

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all ECA fi nancing activity

ECA Newsletter www.tradefinancemagazine.com/ECA

FINANCIAL INTELLIGENCE FOR GLOBAL TRADE

ECA NEWSLETTER


27/260

Trade is down but ECA volumes are up

Dealogic’s full year results for 2012 trade finance show volumes down 5% on 2011,

but ECA activity is rising.

Dealogic’s 2012 results reveals that total global trade finance volume stood at $171billion in 2012, down 5% from $180.9 billion in 2011, but slightly ahead of 2010

volume of $170.5 billion.

Activity also fell in 2012 to 718 deals, down 36% on 2011 when 1,116 deals were

reported. Excluding sole-bank loans, trade finance volume increased to $139.1 billion

in 2012, up 3% on 2011 ($135.6 billion).

ECA financing volume reached $114 billion via 416 deals in 2012, up on the $69.7

billion raised 2011. ECA guarantees activity fell to 357 deals in 2012 from 414 in

2011. In contrast, volume recorded an upward trend, rising 9% year-on-year to $75.7

billion in 2012 from $69.2 billion in 2011.

Pre-export finance loan volume recorded the lowest yearly volume since 2004 ($8.5

billion) with $11.7 billion via 36 deals in 2012.

Readers are reminded that the tables on the following pages are compiled by Dealogic and not

Trade Finance Magazine. For full recognition of deal activity banks are kindly requested todeal directly with Dealogic, as well as for further information on deal and league table parameters.


DEALOGIC 2012 YEAR-END TRADE LOAN TABLES


28/260

League tables for the trade finance market by Dealogic"(): )> *


29/260

L A ECA F* ( 2012

P#. Mandaed Lead A""ange" Vale $m Deal# % Sha"e

1 M;:


30/260

L A %= C/ F* > 2012


1 C/( H>( C*( B( L;+ 719 3 14.9

2 M( I;(;( C*( B( 569 2 11.83 !(;(+ 544 3 11.34 BNP P()(: 414 3 8.65 N(;?: 332 1 6.96 BB$A 244 21 5.17 GE C(;( M(;: I* 175 1 3.68= !P(* !*


31/260

L A LAA & C ECA F* > 2012


1 M;:


32/260

ECA B* F* $ 2012 > KE'I


1 H!BC 676 2 12.1

2 DNB B( A!A 583 3 10.43 M;: !E'I


1 M;:


33/260



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34/260



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35/260

SWIFT Trade Finance traffic: Statistics 2012 Q4

Nadine Louis, market manager, Corporates and Supply Chain, SWIFT

SWIFT Business Intelligence product: Watch

SWIFT and its customers can monitor the SWIFT trade traffic with the SWIFT

Business Intelligence product: Watch (http://www.swift.com/business_intelligence).

This includes trade messages of “category 4” and “category 7”. SWIFT category 4

messages are flows for Documentary Collections – with the exception of three little-used “cash letter” messages. SWIFT category 7 messages are flows for commercial and

standby letters of credit, and guarantees. There are 32 different flows in category 7.

SWIFT statistics can be considered a good indication of the overall usage trends for

the L/C product, since we assume that around 90% of the letter of credit (L/C)

transactions goes via SWIFT. “Live traffic” refers to messages sent over the SWIFT

network.


SWIFT TRADE FINANCE TRAFFIC

SWIFT trade traffic worldwide in number of messages, 2003-2012

Source: SWIFT

Extract your own statistics with the SWIFT product: Watch. Find more on: http://www.swift.com/business_intelligence


36/260

2012 Q4 – highlights

Compared to Q4 of 2011, trade finance traffic volume in Q4 2012 shows a slight

decrease (-2.79%). The decrease in category 7 (-2.14%) is less important than in

category 4 (-4.81%). But looking at the MT700 only, it shows an increase of +1.74%.

On the import side (MT 700 sent), North America (+12.16%) and AP (+5.12%) show

the 2 strongest increases while Europe’s Eurozone (-8.3%) and the Middle East (-

11.84%) show the strongest decreases.

On the export side (MT 700 received), North America (+10.89%) and Africa

(+8.69%) show the 2 strongest increases while Europe’s Non-Eurozone (-5.29%) and

the Middle East (-9.07%) show the strongest decreases.

When comparing Q4 2012 to Q3 2012, Q4 shows a decrease (-2%) compared to

previous quarter. The decrease in category 7 (-1.51%) is less than in category 4 (-

3.53%), but looking at MT700 only, it shows an increase of +4.65%.

Category 7 represents 76% of trade finance traffic, while the category 4 is 24% (75%-

25% in 2011).




SWIFT trade traffic evolution –Cat 7+4 sent (live)

Source: SWIFT


37/260

Import L/Cs Q4 2012 vs Q4 2011

The MT 700 only represents 15% of category 7, but it is interesting as the trend of the

sent MT 700 reflects the import L/Cs trend.

North America shows the highest increase (+12.16%) and this region sends 3% of total

MT 700. The Middle East shows the highest decrease (-11.84%) and this region sends

7% of total MT 700. Some 66% of the MT 700 are sent by from the Asia Pacific

region, and this region shows an increase (+5.12%) for import L/Cs.

Export L/Cs Q4 2012 vs Q4 2011

The MT 700 also reflects the trend of export L/Cs. North America shows the highest

increase (+10.89%) and this region receives 5% of total MT 700. The Middle Eastshows the highest decrease (-9.07%) and this region receives 4% of total MT 700. 73%

of MT 700 are received by Asia Pacific, this region shows an increase (+3.14%) for

export L/Cs.




SWIFT trade traffic evolution –Cat 7 sent (live)

Source: SWIFT


38/260



SWIFT trade traffic evolution –MT 700 sent (live)

Source: SWIFT

SWIFT trade traffic evolution –Cat 4 sent (live)

Source: SWIFT



39/260




S W I F T M T 7 0 0 s e n t b y r e g i o n

S o u r c e : S W I F T


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Euromoney Country Risk – The first live

indicator of sovereign risk sentimentThe SMBC Trade Finance Almanac 2013 features a snapshot of sovereign risk sentiment

data for many of the world’s key trading economies. The data from Euromoney Country Risk

compares Q4 2012 with Q4 2011 and includes an overall rating for each country and the

relevant sub factors.

Euromoney Country Risk (ECR) is a subscription service which provides a country

credit rating for over 180 markets worldwide. Using consensus data from Euromoney’s

Country Risk Survey, ECR data is a widely used live indicator of global sovereign risk,

based on the views of over 400 expert economists. ECR data enables credit and risk

managers to make comparative judgements on the level of sovereign risk in their key

markets, on both a global and regional basis. You can find out more about the service

in an e-brochure available at www.euromoneycountryrisk.com.

The ECR database also contains data on 18 different variables of economic, financial

and political risk, which can be used on their own or in conjunction with hard data

sources as a risk measure for credit and payment risk, plus commentary and research on

key changes in ECR country ratings. The consensus data is an independent and timely

measure of sovereign risk, allowing your analysts to quantify risk free from any ‘black

box’ methodology.

ECR currently provides risk monitoring services to a range of subscribing institutions,

including the following sectors:

l Financial institutions (including private sector, public sector and multilaterals): Live

monitoring of country risk in 180 markets worldwide for risk managers (including

granular & time series data across 18 risk variables, as well as country risk news and

expert analysis)

l Global corporates: Live updates on sovereign/transfer/political risk for receivables

managers, export credit, supply chain analysts and project managers.

l Asset management: Live monitoring of sovereign risk for portfolio managers,

historical data inputs for fixed income/asset allocation models and estimates of country risk premia


EUROMONEY COUNTRY RISK (ECR)


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About the scores

The ECR scores are scaled from 0 to 100 (100= no risk, 0= maximum risk). The

scores are not designed to correspond to any other rating systems but many users do

ask for a comparative guide, particularly to credit ratings. ECR tiers its countries in 5

Tiers. Below is the description of how countries in those tiers can be characterized

with a rough guide to an equivalent credit rating band.

ECR – Tier 1 A score between 80 & 100(can be equated to a credit rating of AA and above)

Economic CharacteristicsThe economy is sound, stable and well developed. None of the major indicators of economic health

show cause for alarm, even though some of these may be moving on a downward trend. The major areas of economic infrastructure (banking sector, currency etc.) function well for the needs of thecountry. Near term factors such as economic growth and unemployment are typically not a cause for concern. Government finances are typically in a strong position and the system for financinggovernment is strong and well developed.

Political CharacteristicsThe political system is stable, although there may be impending changes in the administrativegovernment; these changes are not anticipated to change the nature of political governance in thecountry. The role of government as an owner/ employer/ regulator in relevant economic sectors istransparent and understood.

Structural CharacteristicsThe structural components of the country are strong and typically enjoying very high standards of physical infrastructure such as roads, airports and telecommunication networks. Education andhealthcare levels are high and the demographics of the country are not seen as a major impediment toeconomic and political stability.

Access to Capital & Credit RatingsThe sovereign and its related entities enjoy very strong access to capital that is available in the marketand private sector entities are not hindered in raising capital because of the country where they areheadquartered.

Debt IndicatorsThe debt indicators of these countries are typically very robust although they may be moving in a

negative direction.

ECR Tier 2- A score between 65 & 79.9(can be equated with a credit rating of A- to AA)

Typically countries exhibit characteristics that are similar to Tier 1 but one of

Economic, Political or Structural factors; will exhibit the below:

Economic CharacteristicsThe economy is sound and stable and usually well developed, although some of the major indicators of economic health show persistent negative characteristics. Major areas of economic infrastructure arerobust but may not be functioning optimally for the needs of the country. Near term factors such aseconomic growth and unemployment often show signs of weakness. Towards the lower end of this tier




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countries may also exhibit signs of being over reliant on a narrow set of economic sectors such asnatural resource extraction, financial services, public sector etc. Government finances may be in amaterially weak state.

Political CharacteristicsThe political system is stable and but in some countries changes in the administration may causesignificant changes in the nature of political governance/ direction of the country. Often in Tier 2countries the role of government as an owner/ employer/ regulator in relevant economic sectors canlack transparency and may not be easily understood with state institutions sometimes lackingindependence. Corruption can also be a drag on the political risk score.

Structural CharacteristicsThe structural components of the country can show weakness in one of its major aspects. Whilstenjoying very high standards of physical infrastructure such as roads, airports and telecommunicationnetworks its education and healthcare levels or demographics may be poor and vice versa. These willfeed into long term political risks and limit economic potential.

Access to Capital & Credit RatingsFor higher ranked Tier 2 countries the sovereign and its related entities enjoy good access to capitalthat is available in the market. Private sector entities are not overly hindered in raising capital becauseof the country where they are headquartered but they will often be limited in the amounts that theycan raise at competitive rates.

Debt IndicatorsThe debt indicators of these countries are typically robust in the long term but may require fiscaladjustment in the short to medium term.

ECR Tier 3- A score between 50 & 64.9(can be equated with a credit rating of BB+ to A-)

Typically countries exhibit characteristics that are similar to Tier 2 but one (towards

the top of the tier), two or three (towards the bottom of the tier) of Economic,

Political or Structural factors; will exhibit the below:

Economic CharacteristicsThe economy is typically stable though may be underdeveloped, major indicators of economic healthshow persistent negative characteristics. Major areas of economic infrastructure may be deficient andmay not be functioning optimally for the needs of the country. Near term factors such as economic

growth and unemployment can show signs of persistent weakness. Government finances may be in amaterially weak state. This tier also often contains countries that are experiencing sharp economiccontraction.

Political CharacteristicsThe political system is usually stable but its workings can be difficult to understand and changes in theadministrative often cause significant changes in the nature of political governance/ direction of thecountry. Usually in Tier 3 countries the role of government as an owner/ employer/ regulator inrelevant economic sectors lacks transparency with state institutions usually lacking independence fromthe administrative government. Corruption is almost certain to be a drag on political risk.

Structural CharacteristicsThe structural components of the country are often weak in one of its major aspects. Whilst enjoyingvery high standards of physical infrastructure such as roads, airports and telecommunication networksits education and healthcare levels or demographics may be poor and vice versa. These will feed intolong term political risks and limit economic potential.




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ECR Tier 5 – A score between 0 & 35.9(can be equated with a credit rating of D to B-

Data for these countries and territories is very difficult to find and collate. Manycountries in Tier 5 may be highly reliant on remittances from overseas based national

and foreign aid programs for a significant portion of their income. Countries exhibit

characteristics where at least two of Economic, Political or Structural factors; will

exhibit the below:

Economic CharacteristicsThe economy is highly underdeveloped and unstable, multiple major indicators of economic healthshow persistent negative characteristics. Major areas of economic infrastructure are deficient and willnot be functioning adequately for the needs of the country. Near term factors such as economicgrowth and unemployment will show structural weakness. Government finances are usually in a

materially weak state. Countries in this Tier have often experienced a credit event and are undergoingor have recently undergone debt rescheduling/ default programs. Tier 5 countries will often have highreliance on remittances and foreign aid programs for income.

Political CharacteristicsThe political system is usually unstable, its workings can be difficult to understand and changes in theadministrative government will often cause significant changes in the nature of political governance/direction of the country. Countries in Tier 5 will have often undergone a major political changethrough non-electoral means in the near term past. In Tier 5 countries the role of government as anowner/ employer/ regulator in relevant economic sectors is highly opaque and the role of the state inthe economy is often large. State institutions usually lack independence from the administrativegovernment and rule of law is severely impaired. Corruption is almost certain to be a significant dragon political r isk.

Structural CharacteristicsThe structural components of the country are often weak in all major aspects. The country will havepoor standards of physical infrastructure such as roads, airports and telecommunication networks. Itseducation and healthcare levels will often be very poor. However the demographics may still berelatively strong although these countries often suffer from a "Brain Drain" effect.Access to Capital & Credit RatingsFor Tier 4 countries accessing the capital markets is difficult. In most cases the country cannot accessthe capital markets.

Debt IndicatorsThe debt indicators of these countries are typically very poor if there is any data at all. Many countries

will have no track record of borrowing from overseas commercial sources.




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1 Norway 89.87 1 91.17

2 Luxembourg 87.29 4 87.84

3 Singapore 86.84 2 88.51

4 Sweden 86.81 7 85.08

5 Switzerland 86.78 3 88.40

6 Finland 84.54 6 85.107 Denmark 82.64 5 85.36

8 Hong Kong 82.43 10 83.68

9 Netherlands 81.82 8 84.71

10 Canada 81.82 9 84.70

11 Australia 81.1 12 82.14

12 Germany 80.88 13 82.12

13 New Zealand 80.63 11 82.33

14 Austria 78.29 14 81.59

15 United States 74.65 15 76.28

16 Chile 74.37 18 75.24

17 Taiwan 73.75 16 76.19

18 Qatar 73.48 20 73.2019 United Kingdom 72.89 19 75.20

20 France 72.6 17 76.10

21 Belgium 71.99 21 72.27

22 Kuwait 71.63 29 68.44

23 Estonia 70.4 27 69.42

24 Czech Republic 69.67 24 71.07

25 Slovak Republic 69.05 25 70.37

26 Malta 69 23 71.60

27 Oman 67.79 32 66.23

28 Saudi Arabia 67.27 36 63.58

29 Israel 66.56 35 64.67

30 Korea South 66.31 28 69.27

31 United Arab Emirates 66.21 33 66.13

32 Japan 65.54 26 69.83

33 Poland 64.84 30 67.19

34 Malaysia 63.79 38 63.18

35 Macau 63.43 34 65.44

36 Bahamas 62.4 51 56.22

37 Slovenia 60.54 22 71.66

38 Brazil 60.17 39 62.93

39 China 59.88 41 61.77

40 Mexico 58.9 44 58.69

41 Colombia 58.76 42 59.71

42 Cyprus 58.36 31 66.56

43 Iceland 57.96 47 57.6944 Barbados 57.58 69 49.28

45 Bermuda 57.43 43 58.72

46 Ireland 57.26 46 58.18

47 Trinidad & Tobago 57.12 75 46.48

48 Turkey 57.01 49 56.73

49 Peru 56.95 52 55.79

50 South Africa 56.95 45 58.26

51 Italy 56.88 37 63.2852 Lithuania 56.79 54 55.19

53 Panama 56.74 48 57.59

54 Thailand 56.22 53 55.38

55 Botswana 55.69 50 56.61

56 Brunei 55.47 63 50.77

57 Bahrain 55.01 60 52.69

58 Spain 54.07 40 62.27

59 Croatia 53.43 55 54.60

60 Russia 52.68 59 53.07

61 India 52.3 56 54.47

62 Uruguay 51.92 65 50.26

63 Bulgaria 51.23 64 50.6764 Indonesia 50.67 58 53.53

65 Portugal 50.62 61 52.61

66 Mauritius 50.39 67 49.63

67 Costa Rica 50.08 62 52.27

68 Hungary 49.47 57 54.27

69 Philippines 49.31 66 49.88

70 Latvia 48.99 73 47.49

71 Romania 46.95 71 47.83

72 Namibia 46.78 68 49.44

73 Tunisia 45.95 79 45.17

74 Morocco 45.78 72 47.62

75 Kazakhstan 45.78 74 46.72

76 Sri Lanka 45.69 70 48.90

77 Ghana 44.8 77 45.99

78 Jordan 44.02 76 46.36

79 Armenia 43.61 90 40.96

80 El Salvador 43.55 85 42.62

81 Azerbaijan 43.33 86 42.60

82 Georgia 42.48 78 45.71

83 Mongolia 41.07 80 44.43

84 Paraguay 40.63 81 43.50

85 Algeria 40.2 92 39.44

86 Bolivia 39.23 106 35.85

87 Gabon 39.21 101 37.45

88 Macedonia (FYR) 39.16 87 42.4489 Serbia 38.92 82 42.89

90 Vietnam 38.89 83 42.74


EUROMONEY COUNTRY RISK DATA

Euromoney Country Risk Data Q4 2012 vs Q4 2011 (all coun tr ies)

2012 Dec 12 2011 Dec 11Rank- ECR Rank- ECR ing Country Score ing Score

2012 Dec 12 2011 Dec 11Rank- ECR Rank- ECR ing Country Score ing Score


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91 Angola 38.71 100 37.45

92 Nigeria 38.29 89 41.70

93 Honduras 38.01 98 37.95

94 Seychelles 37.97 88 42.29

95 Albania 37.58 102 37.06

96 Burkina Faso 37.53 124 31.77

97 Guatemala 37.41 108 35.69

98 Tanzania 37.08 91 40.11

99 Zambia 36.96 97 37.99100 Lebanon 36.75 84 42.67

101 Suriname 36.41 116 33.47

102 Mozambique 36.22 107 35.76

103 Papua New Guinea 35.9 113 34.21

104 Dominican Republic 35.73 109 35.38

105 Ecuador 35.53 111 34.91

106 Kenya 35.16 94 39.01

107 Uganda 34.88 96 38.67

108 Liberia 34.65 110 35.24

109 Ukraine 34.1 103 36.72

110 Greece 34.03 115 33.91

111 Madagascar 33.95 104 36.54112 Argentina 33.72 95

SMBC Trade Finance Almanac.pdf

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Transcript of SMBC Trade Finance Almanac.pdf