January 2019

Cross-border trade finance growth is increasingly dependent on strong partnerships between banks and fintechs, seamless cross-border payments – and nurturing tomorrow’s experts, agreed delegates and speakers at the BAFT 2019 Bank to bank Forum

At the 2019 BAFT Europe Bank to Bank Forum that took place 14−16 January 2019 in London with almost 300 delegates, trade finance bankers grappled with legacy systems, the cost of investment for the long term, and the new partnership arena of bank liquidity and fintech agility. In addition, in sessions and networking breaks, transaction banking talent development received heightened focus, with the announcement of those joining the ‘Class of 2019’ BAFT Future Leaders Program.

With a bemused chameleon gracing the signage, this year’s theme was “thriving through change”, delegates agreed that transaction banking was experiencing fast-moving changes to respond to evolving end user expectations, with PSD2, instant payments and GDPR being just some examples of what had driven change in Europe. In an environment of negative interest rates and increasing prudential regulation, banking is no longer what it used to be, and BAFT expanded its focus to be global transaction banking from trade finance more than ten years ago, and is inclusive of liquidity, cash management, financial crime and innovation.

Now that Amazon ships more than a billion items a year, cross-border payment systems are still catching up, and more, agreed delegates (responses to polls), needs to be done to modernise global payments infrastructures and digitalise trade, neither of which noted some speakers, had seen their “Netflix moment”. In a dedicated “showcase” session on the first day, delegates did have an opportunity to learn more about four trade consortia that are gaining traction: Marco Polo/TradeIX, Trade Information Network (The Network); Voltron and we.trade.

The conference clearly showed how technology makes an inroad in both cash and trade which is clearly supported if not even required by the next generation of transaction bankers and customers alike given the digital environment which they used to grow up in. There is no doubt, agreed most attendees that the transaction banking industry needs to adopt to this.

At a crossroads

BAFT
Left to right: Sir Roger Gifford (moderator); Marc Auboin (WTO); Derek Halpenny (MUFG); Rebecca Hardng (Coriolis Technologies)

The world economy has had a “nice run” for the past ten years, observed the WTO’s Counsellor, Research and Statistics Marc Auboin, one of the panellists on the opening session looking at trade’s overall macroeconomic health. In the 100 months since the recovery from the 2009 crisis, it had grown by almost 40%. He added that the economy was running at full speed at real GDP growth rate of 3.7% with output gaps closed (all possible capacities of labour, production and capital being deployed). “The question is what is going to happen next?” he said. 

While the days of trade growing twice as fast as world GDP are over, the outlook is not negative, but rather one of a gentle slow-down “with energy in the system”. Jobs and income are still be created, and spending will continue while people are still confident. Auboin pointed out that the geographical nature of demand is very different from what it was, and that 11 years ago there was no sign of South-East Asia becoming a major consumption powerhouse.

Now intra south-south trade has grown to 35% of world trade – with the Belt and Road initiative helping a number of countries in the region.

Rebecca Harding added that the biggest risk to trade at present was the dominance of politics rather than economics. The threat of trade war between China and the US was holding back investment and creating real uncertainty in the global economy, not just in trade. And while the UK does not account for a large enough proportion of global trade for it to have a big impact over the long term on the world’s trade, it will disrupt supply chains in the short term. The biggest danger for the global system is the regulation gap affecting trade finance transactions through London. “There is a huge amount of resource moving to Amsterdam and Frankfurt meaning that London’s role as a trade finance hub will change.”

Balance sheet shrinkage at the Federal Reserve is “the elephant in the room”, according to MUFG’s Europe Head of Global Markets Research, Derek Halpenny. In his view, 2019 is “going to be a story of the market focussing more and more on the potential liquidity implication of the of the Fed’s balance sheet”. With US$600bn coming off it, alongside the government shutdown and the debt ceiling, there was some cause for market nervousness – the Fed having raised interest rate nine times and now going into a period of downward revisions to US corporate earnings growth and a contraction of growth in Germany in Q3 2018.

Generation game

One of the familiar faces at these annual events has been that of former BAFT Chair Jeremy Wilson (Barclays), who has announced his intention to retire after 47 years with Barclays.  Wilson was instrumental in establishing the Regional Councils outside USA as part of the Association’s globalisation strategy.  He was also the founding Chair of the BAFT Transaction Banking Global Leaders Group and served on a number of BAFT committees and working groups, particularly those on innovation in transaction banking arising from the new technologies.  Paying tribute to his legacy as an ambassador for the industry, BAFT CEO Tod Burwell thanked him for all he had done. Wilson was also founding Chair of the Banking Environment Initiative (BEI) Working Group for the industry on behalf of the CEOs of its members to encourage the direction of capital towards environmentally and socially sustainable economic development.  Green fintech is part of its remit.

BAFT
Left to right: Chris Jameson (BofAML); Mónica Couret (BBVA); Adam Hanke (NatWest); Charlotte Kissmeyer (SEB)

At the other end of the career spectrum was the announcement of the 2019 BAFT Future Leaders Program. Nominated by their respective institutions, the class of 2019 includes 32 individuals from 14 countries and a variety of disciplines within transaction banking. This year’s group will be divided into four project teams to address current industry issues such as the future correspondent banking, the role of humans in transaction banking, trade dynamics, and building collaboration between global transaction banking. Commenting on the programme, BAFT’s Burwell said, “Over the last four years, they’ve taken on leadership roles and advanced important industry issues both within their own organisations and BAFT, and I’m confident the class of 2019 will continue that tradition.”

Kerim Yebari from Deutsche Bank’s Dubai Trade Finance Financial Institutions team graduated from the 2018 “class” in May 2018. “Not only did the programme provide valuable insights into what keeps leaders awake at night and how they strategise to address challenges; the programme also showcased the active cooperation within the transaction banking industry.” Guus Huijgen from the bank’s Nordics trade finance flow team steps up for 2019 and agreed his main takeaways include meeting peers at other banks, understanding their positions, challenges and skills. He also appreciates the opportunity to “deep dive into a topic that is otherwise solely left to senior management”.

Former “future leaders” took to the platform in an engaging panel session with Monica Couret (BBVA), Adam Hanke (NatWest) and Charlotte Kissmeyer (SEB) explaining why, “transaction banking may be the best opportunity you have never heard of”, that “keeps the cogs turning”. As an effort to address the unsung hero reputation, the class of 2018 had made a video, what is a transaction banker that had a number of delegates pinging the URL over to their HR departments.

Glittering prizes

Deutsche Bank’s Ulf-Peter Noetzel collects Global Finance’s Best Trade Finance Provider In Germany award
Deutsche Bank’s Ulf-Peter Noetzel collects Global Finance’s Best Trade Finance Provider In Germany award from the publication’s Editorial Director Joseph Giarraputo

On the last day over a networking lunch, Global Finance named the 19th annual World’s Best Trade Finance Providers in 96 countries and nine regions around the world with Deutsche Bank winning Best Trade Finance Provider in Germany for 2019. Ulf-Peter Noetzel, Global Head of Trade Finance Financial Institutions for Deutsche Bank collected the award.

The 2019 BAFT Europe Bank to Bank Forum was held 14−16 January 2019 in London UK, and the BAFT Annual Review 2018 can be viewed here

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