cally. With banks being more selective and reluctant to use their balance sheet, some niche players are stepping up their game to fill this gap. The factoring/commercial finance industry can play a very critical role to support economies as SMEs are driving the growth and development of all economies and therefore form a most vital part globally – both in developed
countries as well as emerging markets.
The lack of clear regulations and harmonization, however, can also be a huge
opportunity for an association like CFA,
namely working towards good, sensible
and workable regulations. A very important role, which can only be achieved if
the many associations work together and
eventually create the One Voice for the
industry, a voice which can be heard by
regulators, law makers and governments
because this voice represents the majority of our vital industry.
As many of you might know, Factors
Chain International (FCI) and International Factors Group (IFG) have signed a
Memorandum of Understanding to create
a Union and FCI’s council has approved
the merger at their Annual Meeting in
Singapore in June.
Creating One Voice can help the
industry more efficiently work towards
harmonization. It seems we have taken a
first and important step: standardization
to support capacity…but there remains
much more work to do. TSL
Margrith Lütschg-Emmenegger has worked
in trade finance with a special focus on
Forfaiting and Factoring for most of her professional life both in Europe and in the USA.
After serving more than a decade as Presi-dent/CEO of FIMBank Group, she retired
at the end of 2014 to become an Advisor
to the FIMBank Group and other industry
members. In October 2013, Margrith was
elected as Chairman of International Factors Group (IFG) where she has served as
a Board Member since 2011.
the GTR Conference in Dubai in February
2015 agreed that they had begun investigating “alternative” financiers. In addition, 61% of banks and corporates agreed
that increasing regulatory compliance is
lowering the banks’ appetite to lend!
Smaller banks often are at the mercy of
larger correspondence banks that take a
blanket approach when it comes to sanctions – while the large upstream banks
have started to build up, costing and calibrating their financial-risk appetites – and
during these exercises business is turned
away and/or missed.
To a large extent, this is due to the fact
that there is no clear minimum requirement and no clear rules nor harmonization. The rules for K YC documentation
requirements, in particular, are constantly
changing and increasingly onerous due to
the lack of clear guidelines and standardization, which also causes different interpretations and, therefore, a deficiency of
preparation for the rules.
Financial institutions, even within the
same jurisdiction, have some freedom
to create their own risk-based approach
according to their specific risk appetite.
These huge inconsistencies will end in the
application, or lack thereof, of enhanced
due diligence applied by certain jurisdictions, which we might perceive as high-risk regions.
For standardization to happen, we
need a single regulator for banks and regulated financial institutions – something
we are moving towards, but extremely
slowly. However, the “alternative” finance
providers would also have to be pulled
into the same regime. In my opinion, this
will not easily happen through regulations or at least not through regulations
alone – standardization will most likely
rather happen on a global level for similar
businesses and institutions attempting to
offer similar/same services.
Clearly, there is a “window of opportunity” for the “alternative” finance industry
– there is a huge gap in SME funding glob-
hairman of international
Factors Group, Margrith
explains why compliance and
regulations present both a
challenge and an opportunity.
The demand in commercial finance is
huge and, therefore, opportunities are
significant. A joint approach to documentation standardization and regulation for
compliance is critical and imperative if we
want to live both the challenges and the
Supply chain finance includes receivable finance and pre-shipment finance. It
also includes products such as factoring,
asset-based lending, forfaiting and many
other specialist products. For those assets
to become more marketable, and develop
their full growth potential, there clearly
needs to be better precision/clarity on
market terms, rules, regulations and its
The impact of regulations/compliance
on corporates is notable as an increasing
number consider alternative sources of
financing, due to the increased burden
of regulations and compliance across
the world – although some differences
At least for some time in the future
“alternative” financing may be a strong
competitor to bank finance as KYC
requirements continue to pose challenges
for corporates. In a recent survey in the
Mena region, 57% of corporates attending
revolver TsL opInIon CoLumn