Trade Finance products and solutions for exporters Birgit Hint Head - - PowerPoint PPT Presentation
Trade Finance products and solutions for exporters Birgit Hint Head of TF Baltics / Nordea Bank November 19th, 2014 TF solutions and products .BEAR THE PURPOSE TO MANAGE AND MITIGATE THE RISKS RELATED TO INTERNATIONAL TRADING l
products and solutions for exporters
Birgit Hint Head of TF Baltics / Nordea Bank November 19th, 2014
TF solutions and products… ….BEAR THE PURPOSE TO MANAGE AND
MITIGATE THE RISKS RELATED TO INTERNATIONAL TRADING
l Payment terms:
DOCUMENTARY CREDIT and COLLECTION
l Type of collateral: BANK GUARANTEE l Financing:
Discounting under D/C’s, Forfaiting (avalized drafts)
Payment terms in international trade
Prepayment Confirmed D/C Unconfirmed D/C Guarantee (standby) Credit insurance Collection Open account
EXPORTER IMPORTER
Low risk High risk Low risk High risk
Documentary Credit as a payment term
What is a Documentary Credit (D/C)?
Who is obliged to pay under a D/C?
are presented
to pay
When will payment be effected? A D/C by its nature is a separate transaction from the sale or other contract on which it may be based. D/C’s deals only with documents and not with goods, services or performance to which the documents may relate.
Discounting of confirmed and deferred payment D/C
Seller Requires deferred payment at 90 days from the date of shipment Would like to get paid right after shipping the goods SELLER BUYER SELLER’S BANK BUYER’S BANK
DEFERRED PAYMENT D/C 15.11.14 18.11.14 17.11.14 CONFIRMING* *Pre-condition: readiness for risk taking on the Buyer’s bank 20.12.14 15.02.15 15.02.15
Nordea Country risk review
Country Rating 6+ 6 / 6- 5+ / 5 / 5- 4+ / 4 / 4- 3+/3/3- 2+/2/2- 1+/1/1-/0/ No rating Aruba Bermuda Quatar Singapore Hongkong Bahrain Bahamas Malta Mauritius Maldives Trinidad and Tobago Cayman Islands Faroe Islands Guernsey Liechen stein Brunei Taiwan The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient. Macau Bank guarantees
bank on behalf of the client (the applicant) in order to secure the client's contractual obligations towards its business partner (the beneficiary) up to the amount fixed in the bank guarantee, provided a complying demand is presented.
managing various kinds of risk. Guarantees are classified by the kind of risk they cover:
A commitment by a bank For issuing a bank guarantee credit decision is needed.
Example of advance payment and DC discounting
First you and your trading partner agree on the terms of the contract (1). In this example the agreement stipulates payment of 25% before delivery (2) against an advance payment guarantee issued by the exporter’s bank (3). The remaining 75% is agreed to be paid under a documentary credit (4) payable 180 days after shipment. When the documentary credit is issued the exporter can make the shipment (5) and thereafter present the documents under the documentary credit to the bank and receive payment (6). The exporter’s bank is now financing/discounting the 180-day credit period under the documentary credit (7) until the importer pays at maturity (8).
Birgit Hint birgit.hint@nordea.com