BAFT / ITFA Guidance on Accommodation of LIBOR Transition in MPAS

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On May 13, 2020 BAFT and ITFA published wording guidance for Master Participation Agreements (MPAs) during the transition away from LIBOR.

BAFT and ITFA are developing updated standard wording for use in BAFT MPAs following the transition from LIBOR. As forward looking benchmark rates are not yet available, the Associations request avoiding the use of institution specific wording.

During the interim to preserve consistent standard MPA documentation wording for longer-dated transactions, a high-level disclaimer has been developed for inclusion in marketing materials and term sheets.

Please access the full guidance document in the Library of Documents page under BAFT Standard Documents.

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“We commend U.S. EXIM Bank for facilitating a timely response to the industry’s request during this crisis,” said BAFT President and CEO Tod Burwell. “This is a significant step forward enabling banks to increase support for exporting companies during a challenging time.”

WASHINGTON – As part of its continuing efforts to support relief measures for U.S. exporters affected by the COVID-19 pandemic, the Export-Import Bank of the United States (EXIM) raised its Supply Chain Finance Program (SCF) and Working Capital Guarantee Program (WCGP) guarantee coverage option to 95 percent, up from the standard 90 percent guarantee. This increase is effective through April 30, 2021.

Lenders who elect the 95 percent coverage will be charged a guarantee fee of at least 2.06 percent with a risk premium added to non-investment grade credit for EXIM’s SCF program, and lenders who elect the 95 percent coverage will be charged a guarantee fee of at least 2.13 percent for the agency’s WCGP program. Guarantees under the 95 percent programs are not to exceed one year from the effective date of the financing. The guarantee fee for SCF will be charged on a monthly basis in arrears for the prior month’s guaranteed receivables, and the guarantee fee for WCGP will be due upfront.

By increasing the SCF and WCGP guarantee coverage option to 95 percent, EXIM will make the programs more widely available to U.S. suppliers and exporters and incentivize financial institutions to make more supply chain financing available to U.S. exporters by reducing their credit risk.

“Over the past several weeks, EXIM has done extensive outreach to diverse stakeholders, including financial institutions, to ensure we are taking the necessary steps to support America’s businesses and workers and the U.S. economy during this challenging time,” said EXIM President and Chairman Kimberly A. Reed. “Today’s announcement underscores our commitment to providing U.S. exporters access to much-needed capital and supply chain financing.”

“We commend U.S. EXIM Bank for facilitating a timely response to the industry’s request during this crisis,” said Bankers Association for Finance and Trade President and Chief Executive Officer Tod R. Burwell. “This is a significant step forward enabling banks to increase support for exporting companies during a challenging time.”

More information on EXIM’s COVID-19 response can be found here, which includes fact sheets on the Supply Chain Financing Guarantee Program and Working Capital Guarantee Program.

About EXIM
EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to support sales of U.S. goods and services to international buyers. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, approximately 90 percent of the total number of the agency’s authorizations has directly supported small businesses. Since 1992, EXIM has generated more than $9 billion for the U.S. Treasury for repayment of U.S. debt.

For more information about EXIM, please visit www.exim.gov.

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BAFT would like to congratulate its board officers on their re-election to the 2020-2021 association year and also welcome new directors Maurice Iskandar, Banque Libano-Française; Robert Mancini, Finastra; Nick Smit, ING; Robert Hostler, JPMorgan; and Michael Vrontamitis, Standard Chartered Bank.

WASHINGTON — BAFT, an international financial services association, announced today Mark Garfield of Zions Bancorporation will serve a second term as the chair of its board of directors for the 2020-2021 association year.

Garfield is the head of global financial institutions at Zions and a long serving member of the BAFT board. He has over 30 years of banking experience, with more than 25 years covering trade finance, foreign exchange and correspondent banking. Garfield has served on the DEC National Advisory Board, Board of the World Trade Center (Utah), and as Chair of the Utah District Export Council.

“I look forward to continuing to serve as the board chair for BAFT,” said Garfield. “In a time of unusual crisis, BAFT continues to support its members by providing thought leadership, best practices, and serving as a global advocate for the transaction banking industry.”

BAFT board officers include:

  • Vice Chair: Raffaele Martino, Intesa Sanpaolo
  • Secretary / Treasurer: Stephanie Wolf, Bank of America

Other directors include:

  • Maram Al-Jazireh, Arab Bank
  • Tod Burwell (CEO), BAFT
  • Maurice Iskandar, Banque Libano-Française
  • Patrick Gmür, Credit Suisse
  • Miriam Ratkovicova, Deloitte
  • Ulf-Peter Noetzel, Deutsche Bank
  • Robert Mancini, Finastra
  • Amy Sahm, Fulton Financial Corporation
  • Patricia Gomes, HSBC
  • Nick Smit, ING
  • Robert Hostler, JPMorgan
  • Steve Lotito, MUFG
  • Mark Borton, National Australia Bank
  • Jonathan Elkins, National Bank of Canada
  • Kimberly Burdette, PNC
  • Bart Timmermans, Santander UK
  • Michael Vrontamitis, Standard Chartered Bank
  • Tarik Muzaffar, TD Bank
  • Christian Stolcke, UBS
  • F. H. Ahlborn, US Bank
  • Kai Fehr, Wells Fargo

About BAFT
BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.

BAFT Media Contact:
Blair Bernstein
[email protected]
+ 1 (202) 663-5468

Follow us on Twitter: @BAFT
Follow us on LinkedIn: BAFT

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In a global emergency, international trade may slow but it must not stop. Even as COVID-19 reveals the shortcomings of a paper-based trade system, financial institutions (FIs) are finding ways to keep trade circulating. How are they doing it? Read this joint paper published on April 23, 2020 from BAFT, the ICC and the ITFA entitled ‘How Banks Are Going Digital To Manage COVID-19’.

This paper, jointly published with the ICC and the ITFA, collates common practices undertaken by global banks in the COVID-19 emergency situation and shares some guidance. This is not a “best practices” document and many of the practices described are being improved already. Rather it is a practical reference document with information about measures put in place to continue the flow of trade and trade finance when paper transfer has become difficult or impossible.

The COVID-19 pandemic has disrupted shipping, in-person interactions, and travel. As such, alternative procedures are required to settle trade finance transactions. Data is sourced from 2020 data from ICC, ITFA  and BAFT members.

This brief shares the ad hoc practices being implemented by FIs under the COVID-19 pandemic. Their approaches are different from every previous global crisis in that responses target the singular problem of how to keep trade flowing when physical interactions are impracticable. The document makes clear that these quasi-digital solutions are interim only until actual e-enabled digitized solutions are fully developed.

Read the full paper from the ICC Digitalisation Working Group in the Library of Documents page under White Papers.

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On April 14, 2020 BAFT along with the ITFA, the Berne Union, the IACPM, the IUA and Lloyd’s Market Association filed a joint comment letter to policy makers in the European Union regarding the ongoing discussion about facilitating bank lending and the role of credit insurance amid the COVID-19 crisis.

The International Trade and Forfaiting Association (ITFA), the Bankers Association for Finance and Trade (BAFT), the Berne Union, the International Association of Credit Portfolio Managers (IACPM), the International Underwriting Association (IUA) and Lloyd’s Market Association (LMA) follow with great interest and appreciate the ongoing discussion of the policymakers in the European Union about facilitating bank lending amid the COVID-19 crisis. The aforementioned industry representatives believe that when it comes to credit insurance and guarantees, public and private sectors are inextricably connected through their respective complementary roles.

We welcome the initiatives to reconsider the provisioning requirements for loans covered by Export Credit Agencies and other publicly guaranteed loans. This will be a very helpful measure to enable banks to continue the flow of much needed trade finance.

We wish to highlight that the private credit insurance market also provides important support to economic activity within Europe through facilitating bank lending in the same way as public sector Export Credit Agencies. Like Export Credit Agency cover, private credit insurance support a wide range of short, medium and long-term bank lending, including trade-related, asset-backed and corporate loans, for activities across the entire European Union and worldwide.

Read the full Comment Letter in the Library of Documents page under Comment Letters.

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BAFT issued comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR.

On March 25, 2020, BAFT issued comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR. In addition to responding to the consultation, BAFT made the case that the lack of a forward looking SOFR term reference rate presents operational challenges for this business line and encouraged the ARRC to develop a working group focused on trade finance to address issues specific to this subset of the industry. The comments are posted on the Library of Documents page under Comment Letters.