Helping Hands in International Trade Finance
Foster, Beverly J., The RMA Journal
Three international trade finance professionals--from Wachovia Bank, SunTrust Bank, and ABN AMRO-provide insights and cautions on getting involved in this increasingly complex area of financial services and on working with the Export-Import Bank of the U.S.
A few years back, a TV ad featured a 60-something Italian woman standing outside her rustic home in a little village. Her dress suggested she was a typical contadina (peasant). You soon learned that the woman had an international wine business conducted through the Internet.
Although much of the mystique surrounding international trade has gone out the window in recent years, the complexity of deal structures and regulatory requirements has streamed right back through the same window. As more and more businesses of all sizes count on their banks to grow with them as they move into exporting outside the U.S., these same banks are counting on larger banks or organizations like Ex-Im Bank to navigate the waters and mitigate the risks of trade finance while allowing them to retain important customer relationships.
Wachovia Bank and its predecessors have been active in international trade for more than 200 years, reckons John Sapoch, director and manager of Wachovia's Structured Trade Finance team of a dozen professionals located throughout the Eastern U.S. The bank has maintained a specialized unit for more than 25 years to work on trade finance deals that are larger in dollar size, longer in tenor, or involve some of the more challenging emerging markets where the bank extends credit. The group also is responsible for managing Wachovia's use of risk mitigation programs whose acronyms alone can be intimidating. There are U.S. government programs, such as Ex-Im Bank (Export-Import Bank of the U.S.), OPIC (Overseas Private Investment Corporation), and CCC (Commodity Credit Corporation, an agency of the USDA); multi-lateral agencies, such as EBRD (European Bank for Reconstruction and Development), ADB (Asian Development Bank), and IDB (Inter-American Development Bank): and private credit insurance providers.
Buddy Baker is director of Technical Advisory/Compliance for the Global Trade Advisory unit of ABN AMRO Bank, which has been financing international trade since before ABN AMRO was chartered as a bank.
Originally chartered as a trading company by Willem I, King of the Netherlands, to succeed the Dutch East India Trading Company, ABN AMRO has been in the business for more than 180 years and in the U.S. has six professionals on its Structured Trade Finance staff. Relative newcomer SunTrust Bank still can boast 30 years of involvement in international trade finance and, like Wachovia and ABN AMRO, has its own "shop." Susanne Keough is vice president and manager of SunTrust's Trade Finance unit.
What justifies having your own shop? "It is relatively simple for a smaller bank to engage in trade finance if it partners with an 'upstream' bank that offers the appropriate services," says Baker. "The more difficult decision is whether to develop in-house capabilities. International trade finance is becoming more and more automated, and the ante to offer competitive services is now millions of dollars just for hardware and software. Of course, you must then add the expenses of recruiting and retaining employees with sufficient experience and expertise to offer clients satisfactory service and to keep the bank out of trouble. Many banks that have been in this line of business for years--some with hundreds of customers--are finding they cannot justify the overhead anymore. They simply don't have the scale to be able to recover their investment."
Wachovia and SunTrust work with clients of all sizes and in a variety of industries. Wachovia clients range from small commercial concerns to middle-market and large corporate clients. "Our export clients have differing levels of sophistication when it comes to such financing programs, and some may need more or less handholding than others," says Sapoch. …