Basel II - Commodity Finance Rating Introduction First Effects Analysis Report: pdf download
My consulting firm is based in Geneva, Switzerland.
The firm is specialized in providing transactional credit facility negotiation and handling services to international merchants of commodity products such as Oil & Gas, ferrous, non ferrous metals, soft commodities/others.
The firm may also provide support to local or foreign banking group subsidiaries/branches looking to start or develop a commodity trade finance activity in Geneva.
In the past decades, Geneva has established itself as one of the primary raw materials trading and transactional banking centers of the world.
It is estimated that more than 1/3 of worldwide energy and soft commodity physical trade takes place in the greater Geneva area, and that roughly 50% of the raw commodity trade business is financed by the specialized banks based in the area (2 Billions USD of funding per day).
The overall activity is supported by the presence of over 300 active companies which are directly or indirectly involved with the trading industry, representing a workforce of 8’000-9’000 qualified professionals.
During my 15 years of professional experience in banking practices with the most reputable establishments in the trade finance sector, I have witnessed first hand the rapid expansion of this activity, as well as the increasing barriers and difficulties that the trade community is facing in securing the necessary financing of trading activities and its future development plans.
Due to ever mounting constraints in credit regulations & processes imposed on banks (Basel II / Basel III), which are in turn imposed by them on their clients; it has become more complicated to (re)negotiate and/or obtain credit facilities.
This implies for the players of any size in this field the need for a much greater commodity finance internal or external expertise assistance, in order to reach their targets in matters of banking facilities. With Basel II, It has now become crucial for the commodity trading firms to deeply understand and achieve the best credit rating notation possible with their banking partners.
With the recent credit cuts announcement/rumors of the traditional leading banks in the field (see News section), a greater diversification of the companies banking portfolio is also now of further importance. Still however keeping in mind, that the first criteria to consider in the choice of the banking partner, is its ability to understand their customers business particularities and constraints (Markets, Products, Trading & Logistics). The selection of the credit relationship manager taking care of the file inside the banking institution matters as well in this regards.
In my opinion, in the scope of the matchless Geneva commodity trade finance experience and expertise, the preference should be given to the banking institutions operating over here. In respect to their limited capacity of funding raise, this selection criteria is even more accurate for the small and the medium size commodity players segment.
For a better understanding about the implied challenges by Basel II/III for the commodity trading field, kindly have a look at my here above analysis report(s).
Philippe Steiner - Founder