Supply Chain Finance Summit 2016files.icc.academy/SCF/Highlights report.pdf · · 2016-07-20Supply chain finance has been growing ... Academy’s Summit in Singapore and the concurrent

Supply Chain Finance Summit 2016

Post-Event Report

https://www.linkedin.com/company/icc-academy

https://twitter.com/TheICCAcademy

https://www.facebook.com/TheICCAcademy/?ref=hl

ICC ACADEMY SUPPLY CHAIN FINANCE SUMMIT 2016

2

Event Summary ............................................................................................................................................................... 3

Day 1, March 9 ...................................................................................................................................................................6

Keynote Addresses .........................................................................................................................................................6

Supply Chain Finance: A Global Evolving Landscape ....................................................................... 7

Supply Chain and Financing in Asia ..................................................................................................................8

Corporate & SME Panel ............................................................................................................................................. 10

Release of the Global Industry SCF Terminology ................................................................................ 11

FinTech & Innovation in the Global Supply Chain ............................................................................... 12

The Digitisation of Trade and the Supply Chain: Seeking Critical Mass with the BPO .................................................................................................................................................................................................... 14

Trading Cross-Border: The Role and Contribution of ECAs and Private Risk Insurers ............................................................................................................................................................................................ 15

Day 2, March 10 .............................................................................................................................................................. 17

Welcoming Remarks ..................................................................................................................................................... 17

Training, Capacity Building and Education in Trade Finance & SCF: The Role of the ICC Academy ................................................................................................................................................................... 17

China, Supply Chains and the Internationalisation of the RMB ............................................... 18

Supply Chain Finance Innovations and the Global Regulatory Environment ............ 19

Standard Definitions for Techniques of Supply Chain Finance ................................................. 21

Acknowledgment ........................................................................................................................................................ 22


3

The 4th Supply Chain Finance Summit was held in Singapore on March 9-10, 2016. It gathered 170 participants from 14 countries around the world to explore a range of topical themes, including developments in SCF on a global basis, as well as specifically in Asia, touching on the impact of FinTech and the notable recent progress around digitization of trade and trade financing. The Event was hosted by the ICC Academy and supported by the ICC Banking Commission along with other notable partners. Organizers of the event are especially grateful for the support of the Government of Singapore, IE Singapore and the Singapore Business Federation for a warm reception of the first local edition of the Summit.

The Summit featured the official launch of the “Standard Definitions for Techniques of Supply Chain Finance”, a global, multi-association initiative facilitated by the ICC, aimed at fostering clarity and a common understanding of Supply Chain Finance (SCF) techniques across industry groups, markets and stakeholder groups with the express intent of advocating for the adoption of the Definitions. Moreover, the Summit addressed regulatory and compliance issues and included practical “case study” observations on the implementation of Supply Chain Finance Programs and the SWIFT/ICC Bank Payment Obligation.

Over 2 days and including 10 panel discussions, guests of the Summit discussed some of the most challenging developments and promising opportunities in the international trade environment and in supply chain management and finance. The Summit was opened by Ms Low Yen Ling, Parliamentary Secretary, Ministry of Education & Ministry of Trade and Industry; Mayor, South West CDC, who highlighted the importance of trade financing to the successful conduct of trade, noted the need and opportunity represented by the global trade finance gap and uniquely brought together her two portfolios to highlight the importance of training, education and professional certification to the business of trade finance.

It was noted that Asia is expected to drive the growth of supply chain finance in the years to come and commodity trading is set to become more Asia-centric. Moreover, two thirds of all the commodities that are produced, consumed and traded globally have a direct link to the Asia Pacific Region. With the world’s major supply chains increasingly anchored in Asia, these trends have a very strong hand in shaping the development of regional supply chain finance.

Teo Siong Seng, Chairman of ICC Singapore, Chairman of the Singapore Business Federation and Managing Director of Pacific International Lines stressed the importance of the key themes of the Summit to all local and foreign-owned businesses in Singapore. International trading has long been recognised as an


4

important contributor to the growth and evolution of Singapore and the significant multiplier effect back to the rest of the economy. The significance of trade to the Singaporean economy is undeniable, with the value of annual trade in goods and services reaching about 3,5 times the country’s GDP.

Supply chain finance, it was observed, connects financial transactions to value and as it moves through the supply chain it also potentially encourages collaboration between the buyers and the sellers to optimise working capital for both parties. Supply chain finance has been growing rapidly, although without common understanding and standardised definitions that can promote consistency in industry practice as well as in risk and capital treatment of the same product in different countries. Therefore, the release of the “Standard Definitions for Techniques of Supply Chain Finance” was a matter of some urgency and a welcome development in the industry. Definitions set out in this document build upon several excellent initiatives which aimed to develop a terminology related to this fast-growing, high-value but still fairly nascent form of financing, which applies equally in support of domestic and international supply chains.

Release of the document in Singapore was very symbolic due to the fact that Asia is one of the youngest supply chain finance markets and is expected to see the largest and fastest growth. The Asian market is also very likely to have unique needs, when it comes to supply chain finance. Coupled together with existing strength as a business, trade and financial hub, there is clear scope for Singapore to develop into a hub for supply chain finance activities.

Senior executives and practitioners, academics, regulatory authorities, consultants, technology providers and others debated candidly and energetically the important dynamics shaping global markets today. Fintech panel members agreed that opportunity can be seen in two ways – through collaboration or competition. However, the majority agreed that significant and transformational results can best be achieved through cooperation. It was noted that the BPO is at or close to a tipping point in terms of its potential and in terms of moving towards a critical mass of market adoption, with positive impact anticipated for SMEs. However, more needs to be done to advance commercialization initiatives and to drive market adoption.

Guests also discussed the role of ECAs and private credit insurers in facilitating supply chain and international trade finance. The role of the private credit insurers is growing rapidly, especially in Asia. Therefore, speakers not only discussed the state of ECAs and private risk mitigation, but also shared their experience on risk mitigation models and the evolution of market partnerships between various players.

Among the second day’s highlights were panel discussions on the internationalisation of the RMB, SCF innovations and the global regulatory


5

environment along with a demonstration of the ICC Academy’s online courses and the newly deployed Learning Management System, or LMS.

RMB internationalisation has been a sensational story since 2009 when China first allowed the use of the RMB as a settlement currency for cross-border trade. Seven years later, much has changed and evolved, therefore speakers gave their observations of the market adoption of the RMB and considered whether the growth of RMB as a trade settlement currency has been a reflection of market demand for trade settlement between offshore RMB hubs in China and other factors.

During one of the last panel discussions on the global regulatory environment speakers were challenged with the question of whether we regulate innovation or is innovation what we create to manage the dynamic regulatory changes facing the banking and financial sector today. It was stressed that there are significant geographical differences in the way supply chain finance is implemented. This constitutes one of the main market challenges. Therefore, regulation and strategies for assuring uniform (or at least, consistent) application, interpretation and compliance are crucial to the evolution of SCF and the trade it enables. Nevertheless, just like with other topics discussed during the Summit, regulation also offers a lot of opportunities even as it presents significant challenges to the industry.

Delegates and speakers explored the challenge related to next-generation staffing and the development of trade finance-related competencies. Given the expected long-term growth in demand for trade and supply chain finance capacity, the need to quickly address this reality was highlighted. As a global shortage of expertise in trade and supply chain finance expertise takes shape, the ICC Academy will be at the forefront of efforts to attract, train and retain the next generation of experts supporting global trade through traditional trade finance and SCF.

Leveraging on strengths as one of Asia’s leading trade and financial hubs, Singapore has the ability to shape the development of regional supply chain financing. During both days, it was highlighted that having an annual Supply Chain Finance Summit is crucial to serve as a forum for the exchange of ideas, the enablement of innovation and the creation of new solutions to enable SCF across the globe. It was observed that the ICC Academy can play a central role in this area.


6

The first day of the event was opened by Thierry Senechal, Senior Director and Co-Founder of the ICC Academy. Mr Senechal emphasized: “Hosting the very first ICC Academy’s Summit in Singapore and the concurrent release of the supply chain finance terminology – a project that was made in collaboration with several business associations including BAFT, EBA, FCI, ITFA and IFG – is a landmark in the history of supply chain finance.”

Co-chair of the first day Alexander R. Malaket, President, OPUS Advisory Services International Inc./Co-Chair of the Academic Committee, Trade Finance Faculty, ICC Academy, highlighted that the massive growth of supply chain finance globally has intensified the need for a common terminology and for professional competency and development, which is the core mission of the ICC Academy.

Low Yen Ling, Parliamentary Secretary, Ministry of Education and Ministry of Trade and Industry

Asia is at the heart of increasing opportunities for supply chain finance, with commodity trading set to become more Asia-centric. Supply chain finance will continue to increase business and trade volumes in Asia. In this regard, the standard definition of techniques in supply chain finance will allow diverse market participants to better communicate and understand their international counter-parties, as well as streamline business operations.

Singapore is home to the majority of the world's largest commodities companies and is well-linked to an extensive network of buyers and suppliers around the world. Singapore has a very strong business environment and excellent legal and physical infrastructure as well as a position as a global financial hub. These factors are important, because it gives buyers and sellers the ability to diversify their currency portfolios and manage foreign exchange exposures.

Teo Siong Seng, Chairman of ICC Singapore, Chairman of the Singapore Business Federation & Managing Director of Pacific International Lines

International trading has long been recognized as Singapore's lifeline. Therefore, financing the growth of global trade is particularly relevant to businesses in Singapore because of its small domestic market.

As the youngest supply chain finance market, Asia is expected to see the largest and fastest growth, but the region may have its unique needs. With Singapore's existing strength as a business, trade and financial hub, there is also scope for Singapore to develop into a supply chain management and finance hub.

The ICC Academy's specialized programmes will help develop talent with the necessary skillsets for executives aspiring to be experts in this field.


7

MODERATOR:

Thierry Sénéchal, Senior Director and Co-Founder of the ICC Academy

SPEAKERS:

Sabine Oudart, Relationship Manager, Supply Chain Finance Program, Asian Development Bank

Vijay Vashist, Global Head of Trade and Supply Chain Finance and Trade Asset Management, DBS

Vincent O’Brien, Chair of the International Chamber of Commerce’s Education and Market Intelligence Group

Doina Buruiana, Project Coordinator, Banking Commission, International Chamber of Commerce

Jose Lopez-Mateos, Regional Head of Solutions Structuring, Asia Pacific, Global Trade and Receivables Finance, HSBC

Panelists started with the big picture, providing a background to supply chain finance and discussing the importance of definition and clarity. With an increasingly complex regulatory environment, the definition of key terms in supply chain finance takes on greater significance. Therefore, the need of the hour is education and standardised practice. Main points from the session:

The Financial Crisis of 2008 revealed the real lack of information on trade finance, which in turn gave rise to the ICC Global Trade Finance Survey, currently being overseen by the Market Intelligence working group at the ICC Banking Commission. Delivered in partnership with major stakeholders, the 2015 report shows that, although the value of global trade is down, in volume terms it is up. Demand for confirmations of letters of credit and guarantees are up, whereas SWIFT message volumes have decreased.

Alternative solutions are required that automate and provide transparency.

Supply chain finance is moving from North America and Europe to Asia. Companies are looking to lower the cost of borrowing and are investing in a different proposition that is led by both buyer and seller. Going the extra mile and putting together an importer/exporter solution will be key from a banking perspective. At the same time, third party players are growing and challenging the traditional incumbents; it is becoming increasingly critical to have, or to be part of, a large network with a presence wherever the supply chains are anchored and where they extend.

Trade finance gaps still exist particularly for SMEs in emerging Asian markets who are under-served. And there is still a lack of knowledge in non-traditional trade finance. Increasing regulatory and compliance constraints translate into de-risking policies among banks, which particularly affect SMEs. Ongoing analysis of the trade finance gap – unmet demand for trade finance – by the Asian Development Bank has also extended to consider the impact of


8

availability of (or increase in) trade finance, with linkages established directly between access to trade financing and the creation of jobs and economic value.

Factoring is a financing activity which caters to the open account trade between a seller and a buyer. It fluctuates with overall trade finance. Growth rates in Asia are more pronounced than the rest of the world. 80% of global trade is on open account terms, but only 15% gets financed through banking channels. There is a huge growth opportunity with factoring expected to show double digit growth over the next five years, with China driving growth. It is a good proposition and solution for SMEs and large corporates. Electronic marketplaces will contribute to future growth and further efficiency.

Forfaiting is traditionally longer-term and more transactional and oriented towards equipment and capital goods. But the lines are blurring between the two.

The ICC Banking Commission produces, disseminates and enables the use of rules, tools, best practices and guidelines in traditional trade finance instruments, but has been actively extending its proposition, expertise and activities into the SCF space.

Vertical and horizontal integration of commercial activity across all regions and processes have made supply chains truly global. A common understanding of what supply chain finance is will result in increased efficiency, a more consistent dialogue with regulators, and an increased ability to assess real opportunities, issues or technology enablers.

The ICC's most recent role has been as a facilitator enabling the articulation of standard definitions of supply chain finance techniques. This will follow with a global effort at promoting adoption with the ultimate objective of ensuring they reach businesses of all sizes.

MODERATOR:

Alexander R. Malaket, President, OPUS Advisory Services International Inc., Co-Chair, Academic Committee, Trade Finance Faculty, ICC Academy

SPEAKERS:

Rakshith Kundha, Managing Director, Trade and Supply Chain Finance, South & Southeast Asia, Bank of America Merrill Lynch

Nicole Wong, Executive Director, Head of Supply Chain Finance, DBS

Shivkumar Seerapu, Regional Head, Trade & Supply Chain, Asia Pacific, Deutsche Bank

Chetan Talwar, Head of Trade Advisory, Trade Solutions Delivery, Credit Product Delivery and Vendor Sales, Asia, Global Trade & Loan Products, J.P. Morgan

Greg Trotter, Head of Cash Management, OCBC

The panel took a deep dive into the unique needs of the Asian market, discussing the key issues, challenges and opportunities in the supply chain space. Main points from the session:


9

Supply chain finance in Asia has come a long way in the last few years. Asia-focused SCF is the fourth wave of evolution; the emerging challenge now for banks is of truly multi-bank syndicated programmes. Asian corporates are really driving the demand from the receivables side. Another challenge for the industry, including the ICC Banking Commission and the ICC Academy, is how to play this advocacy role to spread the benefits of these programmes to a broader segment of customers.

Supplier-centric SCF, referred to in the new definitions as Payables Finance is very complex, and the ability to navigate individual country laws is extremely critical. Another important trend is the fact that now this is an integral part of a working capital discussion. Many supply chain programmes fail because stakeholders do not really buy in. Ability to actually work with clients, not only from a structuring perspective, but helping them to sell such programs internally and externally, is probably now one of the most important decision-driving factors among large corporates.

Dynamic discounting or self-funding are also relatively new trends.

Clients are asking for a financing solution that embraces the whole ecosystem of the supply chain, with the anchor in the middle, so there is a need for solid credit standards that are consistent and predictable. Credit programmes should be easy to administer, with one programme for one anchor, one pricing and workflow, and on the distributor finance side, one credit standard as well.

SMEs may be familiar with traditional trade finance, but their access is often restricted by the limitations of their local banks. Customers are now having more working capital discussions and discussing alternatives in order to enhance liquidity and decrease risk. SMEs are more receptive to originating their own transactions and using supply chain structures not just for risk mitigation but to secure new business.

Supply chain finance is not a product; it is a solution. Therefore, bankers have a crucial role to listen to their clients and by understanding their needs, to assist in their growth. Historically, trade and trade financing were driven primarily by multinational corporations (MNCs), but today Asian corporates are going global and need a multi-country, multi-currency solution. Technology and the ability to go deeper into the supply chain is where we are headed.


10

MODERATOR:

Dr John Vong, Professor, LKY School of Public Policy, National University of Singapore and Senior Consultant at UNDP

SPEAKERS:

Joost van den Hondel, Initiator and Program Manager, Betaalme.nu

Anand Pande, Founder of The Growth Paradigm Partnership

Damien Dugauquier, Commercial Director, Corporates, Asia Pacific, SWIFT

Brian Edmondson, Global Head, Trade and Working Capital Finance, MISYS

Taking a client-centric view of supply chain finance, the panel discussed the needs and expectations of large corporates and SMEs, with a particular focus on Asia. The topics included the current and evolving needs of large corporates, the importance of SMEs, what clients think about SCF providers, bank and non-bank, and the adoption and usage levels of SCF programmes across Asia. Main points from the session:

SWIFT has a strong connection to trade finance and supply chain through payments and letters of credit. The ICC and SWIFT have together developed the Bank Payment Obligation framework, which is a set of rules, standards and technology to enable banks to interoperate. Today, 50 countries and 200 banks have adopted BPO, potentially enabling SMEs to receive financing from many more buyers and many more geographies and more broadly, enabling the digitization of trade and trade financing, to the extent that market adoption translates into increasing volumes of BPO transactions. That has been developed in the traditional trade space as well as in the context of open account transactions with numerous features potentially integrated into the BPO structures based on client needs.

Betallme.nu is a Dutch initiative to help SMEs get additional finance and liquidity. It encourages corporates to pay the smallest suppliers first, which is the best solution for these suppliers. It also educates SME suppliers on e-invoicing, and various financing and SCF techniques. Using its neutral, non-commercial position and the power of the media, the initiative helps to open discussions between government, corporates and SMEs and build an ecosystem.

Supply chain finance is not just to extend payment terms, but also a way of enriching relationships with suppliers. MISYS Systems provide solutions to banks to help them be more efficient in the flow of information. Adding more people into the overall supply chain finance solutions, not just buyers, sellers and banks is an interesting new development that needs new technology.


11

Both corporates and SMEs are struggling to stay afloat in this environment of low oil prices and an uncertain macro environment. The ecosystem needs ring-fencing upstream and downstream. Collaborations with non-bank providers will make for a win-win situation.

MODERATOR:


SPEAKERS:

Charles Bryant, Senior Adviser to the Euro Banking Association

Angela Koll, Vice President, Specialist Trade & Supply Chain Finance, Commerzbank AG Frankfurt

Vivek Gupta, Global Head of Supply Chain Finance, Australia and New Zealand Banking Group

Vinod Madhavan, Head, Transactional Products and Services, South Africa, Standard Bank

Christian Hausherr, Global Transaction Banking, Product Management Trade Finance, Supply Chain Finance EMEA, Deutsche Bank

The release of this multi-association document represents the culmination of a cross industry initiative together with partners from around the world to develop a set of terminology and nomenclature around supply chain finance. The panellists shared insights on the project Terms of Reference and structure as well as the drafting, feedback and editing process and what happens next. Main points from the session:

Panelists discussed what confirmed payables/reverse factoring/supplier finance means. There are multiple interpretations of what supply chain finance actually is, and with SCF becoming more globalised, further differences and discrepancies – sometimes even outright contradictions – appears. The ICC Banking Commission was asked by partner associations to act as a facilitator for the initiative, and to lend the strong brand of the ICC as a complement to those of the partner associations.

The Global Supply Chain Forum was established to help develop and promote market standard supply chain finance techniques and their definitions, including a “master” definition of SCF as a holistic and programmatic set of techniques, underpinned by definitions for eight specific techniques plus the BPO, positioned as an “enabling framework”. It was a consultative and inclusive process with senior practitioners from around the world pulling together and ensuring consistency, rigorous debate and


12

analysis and shared ownership of the ultimate outcome, as an excellent foundation for eventual global adoption.

The individuals involved in creating the supply chain terminology represent a variety of institutions from many geographic regions. Achieving consensus was an important requirement, as was making sure that the language used would make sense to non-practitioners, such as corporates, tax and legal practitioners and regulatory authorities.

Banks have realised the importance of supply chain finance, which has necessitated arriving at a headline definition of supply chain finance. SCF is no longer to be understood as referring to a single technique (previously the case with “buyer-led supply finance”), but is rather to be understood as a master or umbrella term covering a set of techniques and structures, which can incorporate the techniques defined in the document, and could combine one or more of them with traditional trade finance instruments and solutions, to meet financing and risk mitigation needs across the supply chain ecosystem.

This is the first edition of the document, and it will evolve with market practice and market requirements.

It is now time for a common language for SCF, which is crucial for its development, evolution and growth, and the ICC Academy will incorporate the Standard Definitions in all its trade finance-related programs and courses, as a first ICC contribution to global adoption.

MODERATOR:

Foo Boon Ping, Managing Editor, The Asian Banker

SPEAKERS:

Billy Quinn, Managing Director, Codix

Bevan Davies, Vice President for the Asia Pacific Region, essDOCS

Roberto Capodieci, Founder and CEO, Open Trade Docs

Vincent O’Brien, Chair of the International Chamber of Commerce’s Education and Market Intelligence Group

FinTech increasingly includes a range of technology-enabled propositions that will bring to market new, perhaps disruptive solutions to as yet untapped or underserved needs of corporates and SMEs, with a view to achieving greater operational efficiencies as well as fundamentally new solutions or modes of delivery. Main points from the session:

One view suggests that, as with all emerging technologies and technology-based solutions, there will be prolonged periods of development, piloting and testing, while another perspective highlights the speed with which such new propositions are being conceived, tested and deployed. In either case, it seems clear that there will be winners and losers. With the global SCF market estimated to grow by 30%, annually it has become a focus for banks, the importance of which is also reinforced by increasingly stringent regulatory and capital requirements imposed on traditional trade finance products and solutions. A key takeaway is smart evolution, keeping up-to-date in terms of what FinTech and the latest technology can bring, especially in the area of blockchain and its potential application to trade, documentation and financing as a robust, global digital ledger.


13

FinTech and supply chain financing have evolved in parallel, with the development of technology to automate credit decision algorithms, provide transparency and visibility in transactions, and provide total automation and efficiency. Banks ultimately want to come up with solutions for all of their clients, and technology service providers are now sitting at the table with entities who earlier viewed each other as competitive. Codix advises its clients to keep to standards as much as possible, and banks have been more amenable than four or five years ago when they wanted their own specific product.

Simply put, FinTech is using technology for financial purposes – essentially, noted one panel member, enhanced plumbing for trade finance. Depending on the structure, it could be collaborative or competitive. It is more important to take a holistic approach: banks are looking for new solutions, innovative solutions that will give them the reach to maintain or actually capture extra market share.

FinTech, for some, is about filling gaps and enabling collaboration and interoperability; it is not about trying to take over what banks are doing. FinTech companies can make processes more efficient and provide straight-through processing. Therefore, essDOCS aims to provide a platform that is interoperable between different service providers. Banks are now coming on board and collaborating with FinTech companies in trying to find solutions that work best for their clients. For that reason, essDOCS advises banks to get standard and stay standard, so when the next great FinTech or technology pops up, they are ready to adapt to it.

Blockchain is an innovation in communication technology that will create a huge difference in how we use the Internet, similar to how email impacted the way we work; the obstacle lies in understanding what it is. Education is needed, but adoption will ultimately follow when people realise the ease of using it.


14

MODERATOR:

Boon-Hiong Chan, Director, Head of Market Advocacy APAC, MENA at Deutsche Bank AG Singapore

SPEAKERS:

John Bugeja, Co-Founder and Managing Director, Trade Advisory Network

Angela Koll, Vice President, Specialist Trade and Supply Chain Finance, Commerzbank AG Frankfurt

Hari Janakiraman, Global Head of Core Trade Products, Transaction Banking, ANZ

Anna Jones, Head of Supply Chain Finance, Transaction Banking, Standard Chartered Bank

Daisuke Kamai, Head of e-Trade Product, Product & Solution Department, Transaction Banking Division, Bank of Tokyo-Mitsubishi UFJ

This session continued on the theme of FinTech, with a particular focus on BPO. Participants emphasised the need for creating awareness among players, as well as the advantages of early adoption for clients and providers alike. Main points from the session:

The challenge with the BPO is explaining it in terms of what it does for corporates. It is a technology-enabled solution that is positioned, in terms of its features and characteristics, precisely between an LC and the open account world, enabling corporates to raise finance while mitigating risk.

Selling something new like BPO is difficult, because the demand is difficult to collate when the corporates do not know what it is. Banks have to commit to it and explain the concept to customers. In the short-term, we need to reposition the way we communicate and educate people about the BPO.

One of the main challenges, suggested a panel member, is that the rules of the BPO cover only the bank-to-bank space, making it harder for corporates to understand their rights and responsibilities. In the immediate short-term, we have to get the message out that it is very close to something you already “know and love.”

If the LC today is the Land Rover that gets you over difficult terrain, the BPO today is the Ford Focus. But the end game is the Tesla: fully automated, incredibly green, a very, very efficient flow-based solution.

There is enormous potential for the BPO. We see many clients switching from LC to BPO, as it is only a change of document to data. Mora than 50 corporates have already signed up with the Bank of Tokyo-Mitsubishi UFJ, but if more


15

banks do not join the network, the value of BPO will not rise. Education is key, and as more banks come in, BPO value will increase.

There is a really strong demand for digitisation in trade finance, and banks have an obligation to participate in this. BPO offers a finance solution for suppliers. At Commerzbank, the first live BPO customer was a German SME; indeed, it is a good solution for SMEs, as no investment is required. The BPO is only the first step, but long-term we anticipate an end-to-end digitization flow.

We need to reach critical mass which will inspire other banks and corporates to move to the BPO.

In Australia, where trade is fairly traditional, BPO is catching on fast. Companies are driving it as they see a need to improve operational efficiencies. BPO is a solution to remove the operational burden of documentation. It does have a cost, but in terms of technology investment, it is not much. The benefits to the buyer need to be explained. There is a false perception that it may create more opportunities for money laundering or fraud, but technology itself does not give you the opportunity – it is the people who use it.

Customers who are on LC and have established relationships between buyers and suppliers have found it easiest to move to the BPO. BPOs make the process speedier, and if there are discrepancies, they can be changed easily. The appetite within certain banks is different, and it does take a bit of money to get SWIFT TSU.

The challenge for banks is how to pitch and sell the benefit proposition to the client, and how to get salespeople to understand the product. On the corporate side it is all about education, and the need to demonstrate the financial benefits. With so many different industry players, banks need to work with partners to ensure processes are both easy and fast.

Simplicity, education and the value proposition are important and all players have to work together towards this goal to remain relevant.

MODERATOR:

Anand Pande, Founder, The Growth Paradigm Partnership

SPEAKERS:

Fabien Conderanne, CEO at Coface Singapore and Head of Structured Trade Credit and Political Risk Insurance for Asia Pacific

Stephen Capon, Regional Manager, Asia-Pacific, Political Risks & Credit, Chubb

Serene Soo, Divisional Director of Credit, Political & Security Risks – Asia, Jardine Lloyd Thompson

Sarah Gulston, Divisional Director at Arthur J. Gallagher

This panel provided a look at the role and contribution of ECAs and private risk insurance to facilitate trade, including by supporting suppliers and underpinning a range of financing solutions. Banks have long used ECA and private insurance cover in mitigating risk that relates to traditional trade, and are now increasingly looking to include effective risk mitigation as part of the SCF solutions and propositions. This creates additional capacity for banks to support trade through financing. Main points from the session:


16

Corporates are looking at both risk mitigation and boosting sales in emerging markets. The challenge has been getting the message across to some banks that forming partnerships along the chain is key. Going forward, there are likely to be increasing partnerships between insurance, large banks in the trade and supply chain and alternative financiers bringing liquidity into the piece. Disintermediation is here to stay, observed one panelist.

Short-term credit insurance has tended to be stronger on the receivables side, with products designed to cover buyer risk. Today, there is a strong development of products linked to the payables side of the business.

One of the challenges has been to increase resources to assess risk in emerging markets. Attractive pricing will make for more success.

With the sheer volume of infrastructure projects to be financed in Asia, there is a role for private insurers to play as well.

Capacity and support for receivables finance programmes has been growing. The key question is whether insurers are able to price insurance within the bank's net margin. Local policies and jurisdictions can limit capacity.

The limitation on the ECA side is they tend to be a little less flexible when it comes to policy wording.

The reinsurance side has also been growing.

The challenges are that each transaction, whatever its nature, is bespoke, so creating a holistic structure is difficult. Regulatory policies also play an important role, as capital requirements differ geographically.


17

Day 2, March 10

Doina Buruiana, Project Coordinator, Banking Commission, International Chamber of Commerce

Main points from the session:

The ICC Banking Commission is best known for its rules and guidelines publications. The UCP 600 are the most-adopted rules for trade finance practitioners and bankers.

The DOCDEX rules were updated as of 1 May 2015 to provide cost-effective, confidential and fast dispute resolution services.

The ICC Banking Commission Meeting in April 2015 was hosted in Singapore, and was a record-breaking event in terms of attendance, as the first “strategic”, broader-focused Commission meeting to be complemented annually by the more technical, traditionally formatted Fall event.

ICC Global Survey on Trade Finance showed compliance is perceived as probably the most important impairment to trade finance.

MODERATOR:


SPEAKERS:

Dr S. Viswanathan, Professor of Operations Management, Nanyang Business School, Nanyang Technological University, Singapore

Kah Chye Tan, CEO and Founder of Tin Hill Capital and Member of the Board, ICC Academy

Vijey Ananda, Commercial Director, ICC Academy

The mandate of the ICC Academy supports all the key pillars needed for global trade (and the major areas of activity of the ICC), including banking, arbitration, legal, environment and maritime fraud. The choice of Singapore as a location reflects globalisation, and Singapore’s increasingly influential role as a centre of world trade, banking and education. The ICC Academy works in collaboration with IE Singapore and Nanyang Technological University to offer certification courses, including a new programme in International Trading, which covers the supply chain end-to-end. Education and internships are further promoted through the Centre of Excellence in International Trading.

Early adopters of the ICC Academy’s certification include five international banks that have been attracted by both the ICC certification in trade finance, and the ability of the ICC Academy through its online medium to reach a large community and create a consistent level of competency and thoughtful deliberation about international trade, financing and risk among numerous other topics. The online


18

delivery model allows cost-effective reach to geographically dispersed populations including participants based in developing markets where trade plays an increasingly critical role in economic growth. The initial delivery model also enables a diverse range of interested parties to easily access Academy programs, including relationship managers, product specialists, operations experts, credit and risk professionals and numerous other groups and support units.


The Financial Crisis and the introduction of Basel II and III saw an injection of new talent, who see the industry as an opportunity to build global connections.

Institutions are increasingly looking to outsource training functions.

Students are often drawn to the glamour of ‘front office’ finance positions, so there is a need to promote the importance of analyst and logistics career opportunities.

It is important for the Academy to move beyond banking into areas such as international trade, taxation, environmental protection and arbitration.

E-learning could be complemented by face-to-face learning in ‘bricks and mortar’ institutions.

MODERATOR:

Swee Siong Lee, Cash Management Product Head, Global Transaction Banking, OCBC

SPEAKERS:

George Nast, Global Head of Sales and Client Management, Transaction Banking, Standard Chartered

Carmen Chan, Regional Head, Financial Supply Chain, Asia Pacific, Deutsche Bank

Ben Chan, Head of RMB Solutions, UOB

The RMB has grown as a trade settlement currency and is now fully usable. It has developed into a SDR currency and is one of the G4 currencies. The amount of RMB trade settlements for 2015 amounted to 6.4 trillion RMB. Take homes from the session:

The next five years will see expansion of the RMB into the rest of the world, especially Southeast Asia. Another trend will be in the movement from deposits to loans.

The RMB is likely to continue its pace of growth in a clear direction, to be fully convertible by the year 2020.


19

It is important to look at China’s economy and the growth of the RMB as separate issues. While China is experiencing cyclical declines and structural changes, the RMB can continue to internationalise.

When deciding whether to adopt RMB, corporates consider their accounting and ERP systems, and net impact on the COGS. Many take a ‘wait and see’ approach, while others have been more aggressive in establishing RMB-based supply chain financing programmes.

While there is volatility around the RMB, there are also instances of suppliers responding calmly to this in recognition of the RMB as a valuable source of liquidity.

Chinese regulators have begun to recognise the impact of their recent regulatory measures as negative, and are taking a corrective course.

Southeast Asian countries have begun to see the increased use of RMB as a risk management strategy that will reduce reliance on US dollars.

There is an opportunity for banks and corporates to deploy domestic supply chain financing programmes through buyer credit arbitrage.

Banks need to consider how the growth of P2P-type lenders, who are moving into supplier finance type structures, will impact on the market.

MODERATOR:

Kah Chye Tan, CEO and Founder of Tin Hill Capital and Member of the Board, ICC Academy

SPEAKERS:

Holger Frank, Head of Financial Institutions Group (FIG) and Global Transaction Banking (GTB) in Asia Pacific Region, UniCredit

Christina Li, Senior Vice President Head of Trade - Hong Kong, Head of Strategic Trade Solutions - Asia Pacific, International Trade Services, Wells Fargo & Company

Ojas Doshi, The Chief Operating Officer of the Rhodium Group

Bernard Wee, Executive Director, Financial Markets Development Department, Monetary Authority of Singapore


20

Fears of money laundering and

terrorism financing have resulted in an increase in regulation, putting the burden of proof on traders and placing banks at the forefront of policing. As levels of distrust rise, trade and relationships are affected. The credit cycle is getting longer as compliance inquiries spread through banks, customers and suppliers.

There is a need to streamline regulations to overcome differences in language and business support needs. Regulations need to be aligned across borders to ensure reliability. This offers opportunities for banks to differentiate by building partner networks, thereby offering clients solutions to the differing regulatory requirements.


The need to standardise opens opportunities for innovative solutions.

There is a lot of new capital coming into alternative sectors.

Banks tend to have very strong compliance programmes and sanction screening in comparison to new capital.

Emerging markets are slowing and banks are responding by reducing available credit.

As more financial services start to be provided by non-traditional entities, there is a growing need to move from entity-based regulation to activity-based regulation.

The increased availability of credit insurance has helped trade multiply across the world, especially in difficult jurisdictions.

Non-bank providers are likely to shift from the retail environment to the corporate space.

The increase in non-bank participation offers opportunities for banks to enter partnerships that provide advantages to the buyer as well as the seller. This requires harmonisation of regulatory standards.

Retail-based non-bank capital and institutional non-bank capital each offer different opportunities and risks.

Individual investor behaviour in retail crowdfunding has not yet been seen in a reversal of credit cycle, so it is unclear how these platforms will support businesses through all market conditions.

A one-fit-for-all regulatory solution is unlikely, as banks have differing needs; however, a registry model similar to SWIFT RYC Registry could cover most needs.


21

Unveiled during a dedicated panel discussion at an ICC Academy hosted Supply Chain Finance Summit in Singapore, the Standard Definitions for Techniques of Supply Chain Finance are the result of a collaborative, inclusive and consensus-based joint initiative of the International Chamber of Commerce (ICC) Banking Commission as project facilitator, BAFT, the Euro Banking Association (EBA), Factors Chain International (FCI) and the International Trade and Forfaiting Association (ITFA).The International Factors Group (IFG), one of the original sponsoring associations is now integrated with FCI.

Elaborated by members of the Drafting Group, under the guidance of the Global Supply Chain Finance Forum Steering Committee, the Definitions were compiled based upon views and feedback provided by a large representation of industry specialists and other interested parties. Including definitions and descriptions of eight identified core techniques and the Bank Payment Obligation as an enabling framework for Supply Chain Finance, they provide clarity for users, including finance providers, corporates, commercial and SME clients, investors, regulators, legal practitioners, information technology and infrastructure providers, as well as other trade finance related communities.

Download a copy of document

by using the QR code or

please visit: bit.do/DefinitionsSCF

bit.do/DefinitionsSCF


22

This report was made in collaboration with the Global Lingo. Global Lingo has developed into one of the world’s fastest-growing language service providers, and specialises in fluent communications, assisting companies across multiple industries and sectors. We are a private company with a ‘can do’ attitude and a strong sense of responsibility to both our customers and our employees. We provide confidential transcription, minute-taking, translation and interpreting services to many of the world’s leading companies and institutions.

Global Lingo has offices in Chicago, London, Cluj-Napoca in Romania and Singapore, where we have earned a reputation for ease of engagement and exceptional service delivery.

Supply Chain Finance Summit 2016files.icc.academy/SCF/Highlights report.pdf · · 2016-07-20Supply chain finance has been growing ... Academy’s Summit in Singapore and the concurrent

Documents