The Impact of Basel III on Export Finance
New regulations are going to dramatically increase banking charges and exporters are going to be impacted more than most.
Coming on the heels of the banking crisis of 2008, Basel III is the latest attempt at creating a global set of regulations that assure the ability of banks to sustain credit losses in a financial downturn. At a fundamental level, the regulations increase the amount of capital banks are required to maintain while also requiring banks to properly evaluate customer risk and allocate capital accordingly. As a consequence, banks are pushed to charge more in general and to charge even more for high-risk transactions.
Unfortunately for exporters, the regulations do not adequately capture the low-risk nature of trade finance. The larger the bank and the more internationally active, the greater the impact. For a smaller bank, the proposed regulations may require almost 10 times as much capital to confirm a letter of credit, while, for the largest banks, the capital requirement may be a whopping 72 times as much. The costs of export financing will also increase significantly.
In this session, the presenter will explore the new regulations and explain the manner in which they are to be phased in and applied to banks of different sizes. Participants will learn what to expect in terms of increased costs and what to do in order to to minimize such costs.
Why should you Attend:
- Understand the intent of the Basel III Accord
- Recognize how the U.S. version of Basel III differs from the version adopted in other countries
- Learn how capital requirements translate into bank fees and interest rates
- Identify how Basel III applies to export finance
- Explore ways to minimize the cost impact on exporters
Areas Covered in the Session:
- Capital adequacy
- Risk-based capital requirements
- Risk weightings and credit conversion factors under Basel I and under Basel III
- How Basel III deals with trade finance
- Accessing the OECD country risk classification tables
- Large, Internationally-Active Banks and Global Systemically-Important Banks
- The controversy over the Leverage Ratio and the Asset Value Correlation
Who Will Benefit:
- Exporters
- Bankers
- Attorneys
- Accountants
- Treasury department employees
- Credit and collection managers
- Company presidents and CFOs
- Company vice presidents
- Business owners
- Sales managers
Mr. Baker is a recognized expert in trade finance and author of numerous magazine articles and the books Users’ Handbook to Documentary Credits under UCP600, Documentary Payments & Short-Term Trade Finance, and The Regulatory Environment of Letters of Credit and Trade Finance. He owns the consulting firm Global Trade Risk Management Strategies, which specializes in educational training, and makes frequent presentations for national associations of exporters, importers, bankers, and lawyers. As a member of the National Letter of Credit Committee of the International Financial Services Association, the Advisory Council of the Institute for International Banking Law and Practice, and the Council for International Standby Practices, Mr. Baker is actively involved in establishing national and worldwide standard practices for LCs.
He participated in the most recent revision of the Uniform Customs and Practice for Documentary Credits (referred to as "UCP600"), contributed to the creation of the official ICC guide for examining letter of credit documents, called the International Standard Banking Practices for the Examination of Documents under Documentary Credits, and served on the drafting committees for the International Standby Practices ("ISP98") and Article 5 of the Uniform Commercial Code.
He is also on the Board of Directors of the Association of International Credit and Trade Finance Professionals ("ICTF"), a multinational association of export credit managers.