sides of ‘trust:’
Post-crisis conditions demand dependable partners
to satisfy your clients’ global needs
It’s a challenge facing many bankers: following the global economic crisis, financial institutions are focusing on domestic markets in response to regulator and shareholder demands. At the same time, as global commerce recovers,
these bankers must find dependable correspondents to satisfy
their clients’ overseas trade finance needs.
But who can you trust as a correspondent these days? This
question has many dimensions. First, with the retreat of global
banks – as they reduce their risk and exit emerging markets –
there are fewer partners with the right network. Second, do
they have the capacity, knowledge and service focus to deliver?
Finally, can this partner complement your network, without
poaching your clients?
Despite continued economic uncertainty, global trade carries
on, and is recovering day by day. We see this as the world’s
central banks race to fill the trade finance gap, caused by the
withdrawal of financial institutions and capital market players.
Clearly, while overall trade is down, there is still inadequate
credit to quench demand by importers and exporters.
The reality is that clients are seeking their banker’s support to
pursue foreign expansion, but their bank is hesitant to assume
the risk. This in itself is a reversal of circumstances for bankers
who, until recently, saw clients turn to Open Accounts with
trade partners, rather than bank intermediaries. It seems traders
also now see the value of trusted partners.
Tough questions for correspondents
The end result is that bank executives must ask probing
questions of their prospective correspondents. First, do they
have the right network, and are they committed to international
growth? At Scotiabank for example, we continue to grow our
operations in more than 50 countries. In fact, while many well-known banks have shuttered overseas offices, we’ve expanded
our strong presence in Latin America, the Caribbean, Asia and
Europe, with recent investments ranging from Mexico and Peru
to Thailand and Turkey.
As noted above, an impressive global network is only an
advantage if the correspondent is also ‘open for business’ with
an appetite to lend. It is critical to validate their promises, by
asking if they continue to offer LCs in your clients’ markets and
how they have supported their customers in the past year. This
will paint a clear picture of their institution’s flexibility and ability
to serve your needs.
This often ties to a correspondent bank’s country of origin,
and the health of its regulatory system. For example, as an
international bank based in Canada, Scotiabank operates in one
of the world’s best regulated banking systems, according to the
International Monetary Fund and the World Economic Forum.
This means we can deliver on promises – with a cost of funding
that reflects a solid underlying risk profile – and we remain
business focused, while competitors regroup and restructure.
On-the-ground experience makes
Since people are the true enablers of trade, you should ask a
potential correspondent about their on-the-ground experience
and knowledge, including the tenure of local representatives
and trade specialists, and the number of in-house regional
processing centres. Working together, these teams can deliver
time-sensitive, integrated trade solutions, in days not weeks.
While best-in-class correspondent banks have a history of
industry awards to prove client satisfaction, they should
also have testimonials of effective solutions. For example,
Scotiabank’s rapid response and innovative thinking recently
earned kudos from a global precious metals producer who
needed urgent trade instruments on opposite ends of the world.
With our end-to-end support, we delivered guarantee letters to
help the client finalize a multimillion-dollar project on a small
South Pacific island, followed by a rush standby LC, allowing
them to launch a massive mining development on the isolated
North Atlantic coast. Our speed and expertise enabled the client
to win lucrative new deals and overcome extreme financial,
regulatory and geographic hurdles.
The essence of the issue: today’s ‘flight to quality’ has created
challenges for bankers, and reinforced the need to source
trustworthy partners, with the network, commitment and
expertise to support your clients in conditions foul and fair.
Author bio: As Executive Vice-President & Head, Global
Transaction Banking at Scotiabank, Alberta Cefis leads the Bank’s
correspondent banking, trade finance and cash management
group. With a 28-year career in financial services, Ms. Cefis was
named among The 25 Most Powerful Women in Banking in
2008 by U.S. Banker.