Standard Chartered and IFC Enter US$1bn Risk Participation Arrangement
Standard Chartered and IFC, a member of the World Bank Group, have signed an agreement for a US$1bn unfunded risk participation arrangement that will help increase the availability of trade finance in emerging markets.
Standard Chartered will originate a portfolio of up to US$1bn in trade finance transactions from banks in emerging markets, with a special focus on the world’s poorest countries. These local banks will in turn extend trade financing to their importer and exporter clients. IFC will guarantee a mezzanine tranche of this portfolio providing credit protection and capital relief on the portfolio over three and a half years. This innovative structure applies synthetic securitisation techniques to financing in many of these countries for the first time. The global financial crisis has sharply curtailed the availability of trade finance in emerging markets, and both IFC and Standard Chartered have been working to promote trade finance arrangements that maintain and expand financing lines for developing economies.
“This arrangement will help boost trade finance in Asia, Africa and the Middle East, which has been sharply curtailed by the global financial crisis, and will support domestic businesses, job creation and private sector development. Standard Chartered is delighted that the IFC agreed to participate in our proposal and we are proud to partner with them, and the World Bank, in supporting cross border trade,” said Peter Sands, chief executive officer (CEO) of Standard Chartered. “Our deep understanding of our markets, and our history of supporting capital markets and trade flows, strongly positions us to provide vital funding to growing economies.”
Lars Thunell, IFC executive vice president and CEO, said: “This innovative structure will significantly increase the supply of trade finance in emerging markets, and in particular the world’s poorest countries where it is needed most and will have the greatest impact. We are expanding our trade finance solutions and Standard Chartered has been a valuable partner in our initiatives.”