Presentation at Trade Finance 2011 organised by Global Leaders Institute

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This is the presentation that I gave on November 18th in Shanghai when speaking at the Trade Finance 2011 event organised by Global Leaders Institute.

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Presentation at Trade Finance 2011 organised by Global Leaders Institute

  1. 1. Opening RemarksIntroducing SWIFTAndré CastermanHead of Trade and Supply Chain, SWIFTCo-Chair "Bank Payment Obligation" Project, ICC Banking CommissionShanghai, Global Leaders Institute, Trade Finance 201117-18 November 2011
  2. 2. What is SWIFT?Community Platform Standards A Aco-operative provider of Theorganisation highly secure financial serving the financial standardisation financial messaging body industry services
  3. 3. SWIFT - secure financial messaging • Established in 1973 by 239 banks in 15 countries Heritage • Developed shared messaging platform for financial transactions • Emphasis on security, reliability and availability • Serving over 9,700 financial institutions across 209 countriesReach • Payments, Securities, Foreign Exchange, Treasury and Trade • Reducing costs, improving automation, managing risk • Store and forward, file transfer, interactive query & responseTechnology • SWIFT strives for 99.999% availability • Industry-owned communityNeutrality • Overseen by regulatory authorities
  4. 4. SWIFT Community Banks Corporates Payment Systems Insurance Clearing & Settlement Companies Systems Government Broker-Dealers Institutions Stock ExchangesSecurities MIs Depositories Payments MIs IMIs Trustees
  5. 5. • 4.0 billion messages/year • Over 9700 customers • 209 countriesCountry Coverage • Latest Peak day: 19.1 million messages (July 2011)
  6. 6. SWIFT in Trade & Supply ChainTrends, Priorities, Portfolio and Bank innovationsAndré CastermanHead of Trade and Supply Chain, SWIFTCo-Chair "Bank Payment Obligation" Project, ICC Banking CommissionShanghai, Global Leaders Institute, Trade Finance 201117-18 November 2011
  7. 7. Trends Digitization Regulation Innovation CollaborationSWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 7
  8. 8. Priorities for SWIFTin Trade and Supply Chain• To help banks respond to the new needs of Corporates in international trade further to the move to open account• To help corporates optimise working capital management thanks to automated processing of trade transactions, whether handled on documentary or open account basis• To help e-invoicing service providers interoperate at global level and partner with banks to extend from e- invoicing to payments and supply chain finance services.SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 8
  9. 9. Industry standards… are those developed by international standardisation bodies • Trade Finance instruments (UCP, URDG, …) • Supply Chain Finance instrument (BPO) • MT standards • ISO 20022 registration authority • ISO 9362 BIC registration authority, … • ISO 20022 Financial Industry standards • ISO 9362 Business Identifier Code (BIC), … Industry standards are technology-neutral and industry-ownedSWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 9
  10. 10. 1 Trade Finance in a multi-bank environment FIN MT798 FileAct FIN MT7xx MT798s Documents MT798s Documents 1 2 3Buyer Seller Buyer’s FIN MT7xx Seller’s bank(s) bank(s) 1 Buyer sends Application for a Letter of Credit to its bank either via FIN (MT798) or via FileAct (eg, documents) 2 Buyer’s bank extracts the appropriate data from the incoming Application flows (eg, MT798), putting them into an Issue of Letter of Credit and sends them to the seller’s bank over FIN (eg, MT700) 3 Seller’s bank forwards the MT700 to the Seller as an Advice of Letter of Credit using FIN (MT798) or FileAct. SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 10
  11. 11. 23 banks adopting SWIFTs MT79812 from the top20 Trade banksSWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 11
  12. 12. 2 Public Domain Industry Standards for supply chain finance Bank Payment Obligation 1 2 3Buyer Seller Any channel / Trade Txn Any channel / Commercial any format / Matching any format / any solution Scheme any solution • Bank portal • SWIFTs Trade Services • Bank portal • SWIFTs SCORE Utility (TSU) • SWIFTs SCORE • Paper • Any inter-bank scheme • Paper based on ISO 20022 messages & rules SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 12
  13. 13. 18 banks adopting BPO in 20117 from the top20 Trade banksSWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 13
  14. 14. SWIFT and ICC Cooperation Both the ICC Banking Commission and SWIFT believe that by working together and leveraging their respective positions across the trade finance community, the BPO will have an important role to play in supporting the development of international trade in the 21st century in addressing cost pressures in the face of increased automation and changes in the regulatory environment.SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 14
  15. 15. ICC BPO Working Group Corporates BanksSWIFT in Trade and Supply Chain - 18 November 2011 - GlobalBPO Working-Group: Dan Co-chairs ICC Leaders Institute Shanghai Taylor, Vice-Chair ICC Banking 15 Commission & Executive Director J.P. Morgan and André Casterman, SWIFT
  16. 16. The Bank Payment Obligation (BPO)A BPO is an irrevocable undertakinggiven by a bank to another bank thatpayment will be made on a specifieddate after successful electronic matchingof data according to an industry-wide setof rules.Therefore, a BPO offers: • An assurance of payment • Risk mitigation for all parties • Possible use as collateral for finance An alternative instrument for trade settlementSWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 16
  17. 17. BPO combines the best of both worlds Contract Contract Contract Documents Documents Buyer Seller Buyer Seller Buyer Seller Documents Application Documents Letter of Bank Open Advice Data Data Credit Payment Account Obligation Documents Data Issuance BPO BPOLC Issuing LC Advising Obligor Recipient Buyer’s Seller’s Bank Bank Bank Bank Bank Bank Payment Payment Payment Bank services based on Bank services based on Bank services limited to paper document processing electronic trade data exchange payment processing Array of risk, financing and processing services to address both cash and trade related needs SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 17
  18. 18. Case 1: Seller wants to get paid on time via its own bank Buyer commits to pay the seller on time via the banks I need to offer payment2 assurance to my supplier 1 I want to be certain that I will be paid on and confirm the PO time BPO TSU Buyer Seller BPO Obligor BPO Recipient Bank Bank I can offer the I will substitute for the assurance of payment 3 creditworthiness of my 4 to my customer based customer and guarantee the on the BPO issued by payment to the seller’s bank the buyer’s bank (BPO) for a fee Payment assurance SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 18
  19. 19. Case 2: Buyer mitigates the supplier default risk Supplier gets pre-shipment finance or advanced payment I want my supplier to I want to increase my increase its financial2 resilience and will help 1 liquidity either though cost-effective him get financing financing BPO TSU Buyer Seller BPO Obligor BPO Recipient Bank Bank I will offer pre-shipment I will guarantee the finance to the seller 3 payment (BPO) to the 4 with a (lower) risk on seller’s bank upon the the buyers bank confirmed PO Payment assurance SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai Financing services 19
  20. 20. The leading Trade Finance vendors are accredited by SWIFT SWIFTReady for SWIFTReady SWIFTReady Corporates – Trade Finance Trade Services Utility Trade Finance• Bank-to-bank • Corporate-to-bank • ISO 20022 TSMT• Corporate-to-bank • LCs and Guarantees messages• LCs and • Bank Payment Guarantees Obligation rules Bank Corp • Open Account Bank Vendor Trade Finance Vendor Trade Finance Vendor Trade Finance Solution Solution SolutionChina Eximbills GTC GlobalTrade ACI Open AccountSystems Corporate ManagerCSI BankTrade Misys Misys Trade China Eximbills Portal Systems EnterpriseMisys Trade Innovation Plus Pinnacle Synergy Trade CSI OpenTrade Solutions Services (TS)MIT CREDOC Misys Misys Trade Incorporated Multi-bank PortalSopra Evolan IB (PSI) Corporate SiteSurecomp DOKA 5, IMEX (Conformance SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai Statement) 20
  21. 21. Conclusion• Multi-bank in Trade Finance. Large corporates want multi-banking trade finance solutions to be based on technology-independent and industry-owned standards for both documentary and open account trade• Focus on supply chain finance / open account. Corporates are looking for more effective ways to conduct international trade, in an automated and paperless way. The Bank Payment Obligation (BPO) is a new instrument enabling banks to offer risk mitigation and financing services to buyers and sellers using electronic data flows• New rules and tools to address new needs. In view of supporting the development of international trade in the 21st century, SWIFT and the ICC Banking Commission are collaborating to establish the BPO as an accepted market practice using ISO 20022• e-invoicing is booming. Large buyers want it, regulators mandate it; 4- corner model is inevitable as corporates select their preferred e-invoicing provider – ISO20022 is a strong interoperability enabler between service providers.SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 21

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