Policy News

BAFT releases much anticipated Guidance Paper for Auto Extension thanks to the effort of the BAFT North America Standby LC Committee – Auto Extension working group.

Convened in November of 2015, by the members of the North America Standby LC Committee who put together a working group to study the use of auto-extension clauses in standby letters of credit and demand guarantees in the United States as applicable. The objective was to produce a white aper to be used as guidance for banks within the United States reflecting Auto Extension Best Practices as it relates to language suggestions, accounting practices and identification of “problem language.” This paper outlines the good, the bad and the ugly as it relates to auto-extension clauses and the challenges faced by banks in managing the associated risks.

BAFT’s Guidance Paper for Auto Extension is available for free to the global transaction banking community and can be found here.

The Global Supply Chain Finance Forum announced today the release of its new guidance document, Market Practices in Supply Chain Finance: Receivables Discounting Technique.

The Global Supply Chain Finance Forum announced today the release of its new guidance document, Market Practices in Supply Chain Finance: Receivables Discounting Technique. The paper is the first in a series of industry guidance documents intended to provide clarity and consistency to the world of supply chain finance.

Supply chain finance is one of the fastest growing trade products, however, financial institutions often don’t use similar terminology or accounting techniques. The Forum, comprised of BAFT (Bankers Association for Finance & Trade), Euro Banking Association (EBA), Factors Chain International (FCI), International Chamber of Commerce (ICC), and International Trade and Forfaiting Association (ITFA), is issuing a series of guidance documents based on its 2016 Standard Definitions for Techniques of Supply Chain Finance to get all industry stakeholders on the same page.

The paper released today focuses on receivables discounting – a technique and form of receivables purchase, flexibly applied, in which sellers of goods and services sell individual or multiple receivables (represented by outstanding invoices) to a finance provider at a discount.

“Our hope is that this guidance will lead to an industry-wide, uniform adoption of the receivable discounting technique,” said Christian Hausherr, European product head of supply chain finance at Deutsche Bank and chair of the Global Supply Chain Finance Forum. “When all parties use similar techniques and terminology, it makes for a more streamlined and efficient process.”

The Forum will continue to issue guidance on individual techniques within supply chain finance including payables finance and plans to study the market evolution and develop relevant statistics.

To view Market Practices in Supply Chain Finance: Receivables Discounting Technique, please visit supplychainfinanceforum.org.

About the Global Supply Chain Finance Forum
The Global Supply Chain Finance Forum was established in January 2014, as an initiative of industry associations to address what has been recognized as a need to develop, publish and champion a set of commonly agreed standard market definitions for Supply Chain Finance and for SCF-related techniques.

BAFT joined with others in the Industry to file a letter supporting the Corporate Transparency Act.

You can read the letter here.

The BAFT Europe Council Intraday Liquidity Working Group today released an Industry Briefing on Intraday Liquidity Management in Europe.

The BAFT Europe Council Intraday Liquidity Working Group today released an Industry Briefing on Intraday Liquidity Management in Europe. The working group, led by Sandra Laielli van Scherpenzeel at UBS Switzerland AG, formed in September 2017 to examine the increasing importance of intraday liquidity in the daily routine of transaction bankers.

Working Group members, in conjunction with FImetrix, surveyed banks in Europe in order to assess how they had reacted to the market and regulatory pressure of monitoring and reporting on intraday liquidity positions. The survey focused on five key areas:

• Management of intraday liquidity lines and facilities
• Charging for intraday liquidity usage and related services
• Current and future usage of liquidity monitoring tools
• Investments in liquidity monitoring and forecasting
• Deposit management

Working Group members reviewed the survey findings in detail and added the expertise of their financial institutions to the analysis to provide a more granular interpretation of the survey findings in a meaningful market context. The survey results, subsequent dialogue among Working Group members and the broader BAFT Europe Council are captured in the Industry Briefing.

The Industry Briefing is available for all BAFT members and can be found in the Library of Documents under White Papers.

BAFT today announced the release of an updated New York law Master Participation Agreement (MPA). The original was drafted more than 10 years ago, and serves as the industry standard for secondary market transactions to facilitate the buying and selling of trade finance-related assets globally.

BAFT, together with ITFA (International Trade and Forfaiting Association), put together a working group of experts to review the existing forms and identify necessary changes based on current market practice. International law firm, Sullivan & Worcester, drafted the modernized New York law MPA form and associated usage guidelines.

The agreement continues to help standardize documentation for trade finance transactions and facilitates the communication around trade finance assets between financial institutions, investors of all types and government bodies globally.

“The revisions to the BAFT MPA continue our efforts to standardize industry documentation, facilitate better transaction efficiency and provide greater consistency,” said Tod Burwell, president and CEO of BAFT.

The updated MPA covers secondary market activities  related to  various types of  trade assets. The document is free for BAFT members and available for purchase for nonmembers. Read More.

BAFT joined with others in the industry to file a letter supporting BSA reform. Read the letter here.