Banking Associations Pool Resources on Supply Chain Finance
Five leading business associations are joining forces with the International Chamber of Commerce (ICC) Banking Commission on a major project that aims to harmonise market terminology for global supply chain finance (SCF) products and services.
The newly-formed Global Supply Chain Finance (SCF) Forum aims to clarify existing definitions and SCF terminology. The ICC Banking Commission will be joined by the Euro Banking Association (EBA), the Washington, DC-based Bankers Association for Finance and Trade (BAFT), Factors Chain International (FCI), which is based in the Netherlands, International Factors Group (IFG), operating from Belgium and the Switzerland-based International Forfaiting Association (IFA).
Kah Chye Tan, chair of the ICC Banking Commission said: “Given increased collaboration among the wide range of bank and non-bank representatives facilitating domestic and cross border trade, and the advent of Internet and new communication technologies, it is more important than ever before for all market participants to adopt universally-accepted terminology that corresponds to the rich array of processing, financing and risk management techniques currently being developed by the industry to support increasingly globalised supply chains.”
The Global SCF Forum’s initial aims include efforts to explicitly define the typology of SCF products and services developed by stakeholder associations. Other objectives are to harmonise SCF existing market terminology – rendering it operational and usable in daily practice by banks and non-banks when processing, financing and risk mitigating trade transactions – and to future-proof it in response to ever-changing market needs.
“Today, the term ‘supply chain finance’ covers a wide range of products, programmes and solutions in the financing of international trade, to the extent that it can be used to refer to a single product, or a comprehensive programme of solutions aimed at addressing the full range of needs of importers and exporters,” said SCF Global Forum drafting group chair Alexander Malaket.
“SCF is at times positioned as a complement, a subset or even a superset of global trade finance, and the inconsistency in definitions, nomenclature and general language around the financing of trade linked to open account terms and to the support of global supply chains, is proving to be challenging for importers, exporters, bankers, financiers and other service providers.”
The six associations are launching the project with a series of non-binding, open consultations – including corporates and end-clients where appropriate – that will aim to compile a set of recommended definitions over the next 12 months.