Cash And Trade Magazine For Cash and Trade professionals in the Middle East
Dear Reader,
In the world of finance, Sibos is the epicentre. It’s the place to take the global temperature, particularly now at such a testing time for so many economies and the banking community as a whole.
This year’s venue was Toronto, Canada’s banking capital, where the consensus was that the renminbi will eventually become a major global reserve currency, alongside the dollar and the euro. This was the view of both the bankers and economists attending a seminar on the future of China’s currency – and “the fact that almost no one disagreed is a striking illustration of how far the financial world is changing”, says the author of our Sibos article in this issue.
The debate also highlighted the sheer breadth of this annual get-together for the financial industry. Topics ranged from Basel III to economic and market issues and highly specific technical developments, with some futuristic star-gazing thrown in for good measure.
The future status of the Chinese currency is an issue that Middle Eastern bankers, governments and sovereign wealth funds cannot afford to ignore – just as, with an affluent and well-travelled domestic public, they must stay abreast of the latest developments in electronic banking. Also, the implications for trade finance of the new Basel III international banking standards will really matter in trading cities such as Jeddah, Dubai and Manama.
While at Sibos, Cash&Trade interviewed Kah Chye Tan, global head of trade and working capital at Barclays Corporate. As one of the leading lights of banking as a whole, he was appointed chairman of the ICC Banking Commission in September 2010. He is also a founding member of the BAFT-IFSA Global Trade Industry Council as well as being a member of the WTO Trade Expert Committee.
On the subject of Basel III, Tan said that large trade finance banks could be faced with huge increases in capital requirements if it was implemented in its current form.
He added that Basel in its various numerical guises had been around for 20 years, yet it took the financial crisis to galvanise financial institutions into providing the empirical data necessary to demonstrate to regulators the issues around the 100 per cent credit conversion factor proposal.
“We are still hearing banks don’t have enough data,” he said. “Why has it taken 20 years to get the data together to prove to regulators that trade finance is a low-risk business? We have not been pooling the right data and now is the time to do it. We cannot keep blaming Basel itself.”
In another article, we report that, while the Arab Spring has had major implications for Middle Eastern companies trading across the MENA region, the future now looks more positive and growth is expected to rise. In fact, on the subject of trade, a number of new initiatives have given Islamic trade finance and export credit insurance a major boost. As we explain in this issue, one result of this is likely to be a move towards more business between MENA and East Asia.
Our Tajara Monitor continues in the process of broadening its geographic coverage within the GCC. In this edition, we look at Kuwait.
The Monitor revealed that in 2010 National Bank of Kuwait (NBK) maintained its lead position in trade finance, which it recovered in 2009 from Gulf Bank. However, its still very strong leadership position, in relative market-share, was eroded slightly by several other banks in the league table.
Kuwait Finance House made the most progress of all banks featured in 2010. It swapped third for second position with Gulf Bank and gained in market-share terms.
Overall, trade finance closed 2010 on a much more positive note than 2009. The market grew to KD7.8bn up from KD7.2bn in 2009, with the value of trade related instruments growing by eight per cent and more than KD600m over the prior year. This illustrated increased liquidity for trade and capital committed by Kuwaiti banks, which is critical in these volatile times.
In all, the Kuwaiti market has yet to recover to the 2007 and 2008 peaks of recent years. The value of total trade instruments, as one would expect, matched the trend in trade flows themselves and declined compared with 2007 and 2008 but improved compared with 2009.