tfp-issuing-banks by dandanhuanghuang


									Trade Finance Program
                          About the
                     Trade Finance Program

                     The Trade Finance Program (TFP) of the Asian Development Bank
                     (ADB) provides guarantees and loans to partner banks in support

                     of international trade.

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  %$1. ,1 75$'(      Backed by its AAA credit rating, ADB works with over 180 partner
                     banks to provide companies with the financial support they
                     need to engage in import and export activities in Asia’s most
                     challenging markets. With dedicated trade finance specialists
                     and a 24–48 hour response time, the TFP has established itself
                     as a key player in the international trade community, providing
                     fast, reliable, and responsive trade finance support during both
                     economic downturns and times of growth.

                     A substantial portion of the TFP’s portfolio supports small and
                     medium-sized enterprises (SMEs), and many transactions occur
                     either intra-regionally or between ADB’s developing member
                     countries. The program supports a wide range of transactions,
                     from commodities and capital goods to medical supplies and
                     consumer goods. State-owned banks and companies are
                     also eligible for TFP trade support, giving the program enhanced
                     flexibility in its collaboration with partner banks.

                     The TFP continues to grow exponentially, supporting billions of
                     dollars of trade throughout the region, which in turn helps create
                     sustainable jobs and prosperity in Asia’s developing countries.

Results by Numbers

Transactions supported (US$)              $2.8 billion

Co-financing                              $1.5 billion
Percentage of portfolio involving trade
between developing countries              50%

Transactions involving SMEs               270+

Number of partner banks                   200+

Maximum transaction maturities            3 years

Average duration of transactions          Less than 180 days

Five most active TFP countries            Bangladesh, Nepal,
                                          Pakistan, Sri Lanka
                                          and Viet Nam
TFP Products
The TFP has three main products:

Credit Guarantee (CG)
ADB provides guarantees of up to 100% risk protection against nonpayment by
approved Issuing Banks, responding within 24–48 hours of receiving a request.
Through this support, the CG product establishes new partnerships between banks
and companies, therefore increasing trade and access to challenging markets.

Risk Participation Agreement (RPA)
For banks with large and consistent trade finance volumes, ADB provides a
maximum 50% risk protection against the nonpayment of a financial obligation
issued by an Issuing Bank in support of a trade transaction. Unlike the CG product,
the RPA provides risk protection on a portfolio basis rather than on a transaction-by-
transaction basis. The RPA provides Confirming Banks with an innovative and highly
efficient vehicle to manage portfolios of trade assets, creating greater capacity to
support more companies in challenging markets.

Revolving Credit Facility (RCF)
ADB provides revolving loans to eligible banks for on-lending to importers and
exporters to finance trade-related transactions. This product is most frequently used
for pre-export financing.
How It Works: Credit Guarantee
ADB provides guarantees to Confirming Banks covering up to 100% of non-payment risk.

                                                                      h Requests CG
                                             ADB                      Issuance under TFP limit.
                                                                      Request can originate
                                                                      from either Issuing or
i Issues guarantee                                                    Confirming Bank
(for up to 100%) in favor
of Confirming Bank

                                g Assumes political/commercial risk

                   Confirming                                     Issuing
                     Bank                                           Bank
                                 f Issues payment obligation
                                 (such as L/C)

j Confirms/guarantees
Issuing Bank payment                                                    d Requests opening
obligation (such as L/C)                              e Assumes         of a payment obligation
                                                      importer risk     (such as L/C) in favor
                                                                        of exporter

                                  c Signs sales agreement

                     Exporter                                    Importer

                                   k Ships goods
              Sample Transactions Supported by TFP

                                                     TFP Guarantee of a Letter of Credit
                                                     The TFP provided 50% risk protection for
                                                     a $16 million Letter of Credit involving
                                                     the importation of telecommunications
                                                     infrastructure equipment for a project in
                                                     Bangladesh. The exporters were based in
                                                     Hong Kong, China, and participating banks
                                                     were based in Dhaka, Bangladesh, and
                                                     Shenzhen, People’s Republic of China

TFP Guarantee of a Counter-Guarantee
The TFP provided a 100% guarantee covering
payment risk on an Azerbaijani bank in support
of a transaction involving a $600,000 purchase
of capital equipment used for drying fruits and
vegetables. The exporter and confirming bank
were in Germany.
                                                     TFP Guarantee of a Trade Loan
                                                     The TFP provided 25% risk protection
                                                     for an $8 million Trade Loan provided
                                                     by an American bank to a Vietnamese
                                                     bank. This trade loan supported the
                                                     export/import of technical designs
TFP Loan for Pre-Export Financing                    and infrastructure equipment from
The TFP provided a $6 million Revolving Credit       Sweden for the installation of 3G cellular
Facility to a bank based in Colombo, Sri Lanka.      networks in southern Viet Nam.
From this facility, the partner bank provided
pre-export finance worth $250,000 to an
apparel manufacturer based in the town
of Mawathagama. The funds were used as
working capital to finance the export of
finished garments to Europe, India, and the
Russian Federation.
Advantages of TFP

                   FOR ISSUING BANKS

  The TFP:
  • increases a bank’s credit lines
  • expands relationships with correspondent banks
  • reduces cash collateral requirements
  • enhances ability to maintain or attract new clients
  • provides critical support during times of crisis

                FOR CONFIRMING BANKS

  The TFP:
  • provides low-risk access to new and challenging markets
  • expands geographic coverage to service export clients
  • leverages existing country lines and Issuing Bank limits
  • provides capital relief under Basel
Case Study: Viet Nam
One of the hundreds of transactions
supported by the Trade Finance
Program (TFP) involved the export
of capital equipment from France
to Viet Nam for the production
and packaging of healthy snacks.
Germany-based Commerzbank
confirmed the payment obligation
from Vietnam International Bank
(VIB), with the TFP guaranteeing
100% of the transaction against the
risk of nonpayment through the
Credit Guarantee (CG) product.

“The Trade Finance Program plays
a very important role in supporting
Vietnamese banks in general and
VIB in particular,” said An Thanh Son,
General Director of VIB. “TFP helped
VIB improve the quality of its services,
enhance our customer service, and
expand our correspondent banking
network, as well as raise VIB’s profile
in the international market.”

Through TFP, ADB has enabled Issuing Banks such as VIB to provide more financial
services to support their clients’ import activity, which in many instances provides
a competitive edge for future export activity. For Confirming Banks, TFP enables
its partners to support transactions in new and challenging markets where
relationships and credit lines do not exist or are limited.
Program Summary

Products          Credit Guarantee (CG), Risk Participation Agreement
                  (RPA), and Revolving Credit Facility (RCF)

Participants      More than 200 banks: 100+ Issuing Banks and
                  100+ Confirming Banks

Exposure Limits   Participating bank limits: Varies on credit assessment

Tenor             Maximum 3 years, but average tenor of portfolio is
                  less than 180 days

Coverage          Up to 100% per individual transaction under CG and
                  RCF; up to 50% under RPA
Types of          Letters of credit, guarantees, discounting, trade loans,
Transactions      and other instruments

State-owned       Yes, trade support covers state-owned banks
Eligible?         and companies

Currencies        US dollar, euro, and yen

Costs             No costs to join; transaction fees are market-based
Contacting the TFP Team
For inquiries, email                   Afghanistan, Azerbaijan, Cambodia,               Indonesia, the Lao People’s Democratic
                                       Republic, Nepal, Pakistan, Uzbekistan
Trade Finance Unit
Private Sector Operations Department   Biao Huang
ADB Headquarters
                                       Tel +63 2 632 6252
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines         Jamie Kho
Tel +63 2 632 4444           
Fax +63 2 636 2448                     Tel +63 2 632 5411

                                       Kazakhstan, Mongolia, Pacific,
                                       the Philippines, Sri Lanka, Turkmenistan,
                                       Viet Nam

                                       Mary Abad
                                       Tel +63 2 632 6840
                                       Donna Marie Glindro
                                       Tel +63 2 632 6940

                                       Armenia, Bangladesh, Bhutan, Georgia,
                                       the Kyrgyz Republic, Tajikistan

                                       Yuanyuan Wang
                                       Tel +63 2 632 6163
                                       Donna Marie de Lara
                                       Tel +63 2 632 5068
                                               TFP REFERENCE CARD
                                   Issuing Bank Transaction Process
           Issuing Bank                                    ADB                          Confirming Bank

          Email ADB with proposed                              Check:
                 transaction                   (1) eligibility of transaction
                                               (2) eligibility of Confirming Bank
         Consult for           (3) availability of limits
          eligible Confirming Banks            (4) compliance to covenants
            Attach copy of eligible
            instrument, if possible
             Confirm agreement                          Quote price for
             on pricing by email                        the transaction


              Send Guarantee               6      Repeat Step 2 above and
            Application via SWIFT              check correctness of Guarantee
              (Annex 2 of IBA)                           Application


                                       8       Issue guarantee in favor of the      8
               Receive copy of                                                              Receive ADB
                                               Confirming Bank in the form of
               ADB Guarantee                                                                 Guarantee
                                                  a standby letter of credit
                                                Provide copy to Issuing Bank

Quick reference contact information

For inquiries, email                           Regional contacts:
                                               Afghanistan, Azerbaijan, Cambodia, Indonesia, Lao People’s
Trade Finance Unit                             Democratic Republic, Nepal, Pakistan, Uzbekistan
Private Sector Operations Department           Biao Huang                      Jamie Kho
ADB Headquarters                               Tel +63 2 632 6252              Tel +63 2 632 5411
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines                 Kazakhstan, Mongolia, Pacific, the Philippines, Sri Lanka,
Tel +63 2 632 4444                             Turkmenistan, Viet Nam
Fax +63 2 636 2448                             Mary Abad                         Donna Marie Glindro
                                               Tel +63 2 632 6840                Tel +63 2 632 6940

                                               Armenia, Bangladesh, Bhutan, Georgia, the Kyrgyz Republic, Tajikistan
                                               Yuanyuan Wang                  Donna Marie de Lara
                                                                            Tel +63 2 632 6163             Tel +63 2 632 5068
TFP is open to qualified banks located in ADB’s developing member countries.

The criteria for eligibility include, but are not limited to
  • positive financial statements
  • strong corporate governance
  • clear and balanced shareholder structure
  • existing trade finance operations

There are no fees to joining the TFP.
About the Asian Development Bank

Established in 1966, the Asian Development Bank (ADB) is a multilateral development bank owned
by 67 member countries. Since its inception, the ADB has always maintained an AAA-credit rating.
     ADB’s mission is to help its developing member countries substantially reduce poverty and
improve the quality of life of their people. Despite the region’s many successes, it remains home
to two-thirds of the world’s poor. Nearly 1.8 billion people in the region live on two dollars or less
a day, with over 900 million struggling on less that $1.25 a day.
     ADB’s main instruments for helping its developing member countries are loans, guarantees,
trade finance, equity investments, grants, policy dialogue, and technical assistance.

Asian Development Bank
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
Publication Stock No. ARM113026                                                                      Printed in the Philippines

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