Transcript Document
Bank Payment Obligation Business Briefing ICC Banking Commission Meeting Mexico City ICC BPO Education Group Presenters: Paul A Johnson, Director Global Product and Strategy, Bank of America Jana Kies, Senior Product Manager, Deutsch Bank Robert Marchal, Principal Standards Specialist, SWIFT Michael Quinn, Co-Chair ICC BPO Education group; Managing Director, J.P. Morgan Hugo Verschoren, Senior Product Manager, Trade Finance Services, ING Agenda • Introduction to BPO Mike Quinn • BPO - How Does it Work? Jana Kies • Capital and Accounting for the BPO Hugo Verschoren • ISO Standards to Support BPO Robert Marchal • Business Opportunities Using BPO Paul Johnson • Panel Discussion Audience Agenda • Introduction to BPO • BPO – How Does it Work? • Capital and Accounting for the BPO • ISO Standards to Support BPO • Business Opportunities Using BPO • Panel Discussion Trade business evolution • • • • • • Cross-border trade has more than tripled since the 1980’s Trade is expected to grow by on average 7% a year until 2020 Trade Flows have changed: intraregion and South-to-South corridors (Asia to Latam, Africa) Trade volumes have remained low or flat over the years +80% trade are on Open Account transactions The fastest growing Trade Finance Product is Supply Chain Finance 4 Market trends and challenges for Corporates Win-win financing models Working Capital Management Technology evolution Centralised treasury Liquidity forecasting Increased cost of borrowing Credit exposure visibility Globalisation Payment guarantee Receivables factoring Vendor Inventory financing Payables discounting Bank Payment Obligation (BPO) Documents dematerialisation Complex trade and cash reconciliation Emergence of closed 3-corner platforms Integrated supply chain networks Multiple trade partners New partners with various risk profiles Multi-bank relationships New emerging trade corridors Transaction Matching Application (TMA) ISO20022 Standards 5 ICC Uniform Rules for Bank Payment Obligation (BPO) • A BPO is an irrevocable undertaking given by a bank to another bank that payment will be made on a specified date after successful electronic matching of data according to an industry-wide set of rules. • Therefore, a BPO offers: Bank Payment Obligations » An assurance of payment » Risk mitigation for all parties » Possible use as collateral for finance An alternative instrument for trade settlement New ICC Uniformed Rules for BPO - Target availability 2Q 2013 6 BPO combines elements of both worlds Contract Buyer Data Letter of Credit Advice Seller Documents Application Documents Buyer Documents Bank Payment Obligation Contract Seller Buyer Documents Seller Open Account Data Contract Documents Data LC Issuing Bank Issuance LC Advising Bank Payment Obligor Bank Recipient Bank Buyer’s Bank Payment Bank services based on paper document processing Bank services based on electronic trade data exchange Seller’s Bank Payment Bank services limited to payment processing Array of risk, financing and processing services to address both cash management and trade finance needs 7 45 Banks Adopting BPO (update as at 24 October 2012) Including 15 from the top 20 Trade banks 8 Agenda • Introduction to BPO • BPO – How Does it Work? • Capital and Accounting for the BPO • ISO Standards to Support BPO • Business Opportunities Using BPO • Panel Discussion Open Account messages Payment is due on agreed date Buyer 2 5 Accept Order Transport data Invoice data Payment at maturity Obligor bank TSU engine Trade Matching Application (TMA) Recipient bank 1 Proposed Sales Order 3 Accepted Purchase Order Shipment Transport data 4 Invoice data Supplier 10 BPO data flows for the Trade Matching Application IMPORTER (PURCHASING UNIT) Purchase Order 1 Data SUPPLIER 5 6 4 Match results Select the BPO option 7 Accept or Reject Mismatches Invoices and shipping data 2 Recipient bank PO Advice Obligor bank 2 PO Advice (Accept) PO data 3 TSU engine 4 4 Match results 6 Match results 8 Trade Matching Application (TMA) 6 Match results Invoices and shipping data Payment at maturity 11 BPO flows for data, documents and goods Carriers Delivery of goods 4 1 8 Documents sent directly to the client Purchase order Invoice and shipping documents Seller Buyer 2 Request BPO based on PO Transport and invoice data (match report) Shipment 6 3 Inform BPO Trade Matching Application (TMA) Established BPO is due baseline TSU engine TSU engine BPO Obligor Bank 9 Transfer funds at maturity BPO Recipient Bank 5 7 Transport and invoice data Confirm payment is due on agreed date 12 Baseline establishment BPO undertaking steps 1 Buyer sends a purchase order to the seller 2 Buyer provides the minimum data from the PO and the BPO conditions to the Obligor bank 3 Seller confirms the data from the PO and the BPO conditions to the Recipient bank If the submitted data matches on the Trade Service Utility (TSU), the “baseline” is established. Buyer and Seller receive the matching report from their banks Matching BPO is irrevocable but conditional (subject to the electronic matching of agreed datasets) 4 Seller ships the goods to the port of destination 5 Seller provides the shipment and invoice data to its bank, which submits it to TMA for matching 6 Buyer receives a match report from its bank and is invited to accept mismatches if any 7 Seller’s bank confirm the successful dataset match to the Seller Settlement BPO becomes operative and due according to the agreed payment terms 8 Seller sends the paper documents directly to the buyer and the buyer can receive the goods 9 On the due date, the Obligor bank debits the proceeds from Buyer’s account and remits the funds to the Recipient bank. The Recipient bank credits the seller’s account 13 Agenda • Introduction to BPO • BPO – How Does it Work? • Capital and Accounting for the BPO • ISO Standards to Support BPO • Business Opportunities Using BPO • Panel Discussion Disclaimer Although ING and ICC believe that the sources of information upon which the presentation is based are reliable it makes no representation or warranty or assumes any responsibility for the accuracy, reliability or completeness of the information or the assumptions on which it is based. Neither ING, nor ICC, nor the author of this presentation nor any contributor can accept any legal responsibility whatsoever for the consequences that may arise from errors or omissions or any opinion or any advice given. 15 On the menu • Introduction • Accounting Treatment • Capital Treatment – BPO and Basel II and III 16 Introduction • The BPO is brand new – Is it a kind of guarantee? Is it like a Letter of Credit? Lending? Another engagement? • Banks and regulators need guidance – Avoid wrong capital treatment from the start • Unreasonable treatment and exorbitant RWA and ECAP will hamper development of BPO • The BPO Education Group drafted a Discussion Paper – Suggested approaches for banks and regulators – Characteristics mirror Letters of Credit • Accounting and Capital Treatment proposed accordingly – Distributed through ICC National Committees 17 ACCOUNTING TREATMENT Introduction • Main issues to address: – Nature of the instrument – Shift from one type of obligation to another during the progress of the transaction – Nature or shift in obligation type based on the parties involved – Offset at close or maturity of the BPO • The issuance of a BPO should be regarded as similar to the issuance of a Letter of Credit – Instruments behave quite similarly 19 Accounting Treatment: Obligor Bank • • From the moment the Obligor Bank is confirmed in its role in an Established Baseline: – Conditional obligation – Contingent liability = off balance sheet If data about shipment of underlying goods are introduced in the TMA and result in a positive Dataset Match Report (or mismatch acceptance), there are 3 possibilities: – Payment at sight: end of obligation – Deferred payment undertaking or acceptance: • Direct liability • On balance • Unfunded – Deferred payment undertaking or acceptance with discount: • Direct liability • On balance • Cash item (loan/advance without recourse) = Funded 20 Accounting Treatment: Recipient Bank • Letter of Credit: – “Recipient Bank” = Advising/Confirming Bank – Seller = Beneficiary – LC can be confirmed • BPO: – Recipient Bank = Beneficiary – Seller is not a party in a BPO • “Confirmation” of the BPO to the seller: – Outside the scope of the BPO – Part of separate agreement between Recipient Bank and seller – In case Recipient Bank issues a new undertaking, in the frame of this agreement, based on a BPO received from Obligor Bank: • To be considered as a kind of “silent confirmation” • Accounting treatment similar to that of the Obligor Bank 21 Accounting Treatment: Recipient Bank • Obligor Bank is confirmed in its role and Recipient bank receives advise, and agreement with seller provides for “silent confirmation”: – Conditional obligation – Contingent liability = off balance sheet • Positive Dataset Match Report (or mismatch acceptance) and BPO is due: 3 possibilities: – Payment at sight: end of obligation – Deferred payment undertaking or acceptance: • Direct liability • On balance • Unfunded – Deferred payment undertaking or acceptance with discount: • Direct liability • On balance • Cash item (loan/advance without recourse) = Funded 22 Summary Party (All) Obligor Bank(s) Recipient Bank • Obligor Bank • Recipient Bank Transaction flow Liability Accounting Confirming obligor role Contingent • Off Balance sheet • Unfunded In case of “silent confirmation” Contingent • Off Balance Sheet • Unfunded Payment at sight after Dataset Match Report End of liability Deferred Payment Undertaking after Dataset Match Report Direct • On Balance Sheet • Unfunded Discount of Deferred Payment Undertaking Direct • On Balance Sheet • Funded End of liability (in case of “silent confirmation”) • Obligor Bank • Recipient Bank (in case of “silent confirmation”) • Obligor Bank • Recipient Bank (in case of “silent confirmation”) 23 CAPITAL TREATMENT Introduction • Capital treatment for Trade Finance instruments is in the picture – Requirements of Basel II and III unfavourable – Lack of knowledge and understanding – Although minor adjustments have improved the situation, major concerns still exist about elements like LGD, Leverage Ratio, etc. • The BPO is the “new kid on the block” – It is of utmost importance that the nature of the instrument is clearly understood from the beginning and that capital treatment is “first time right” – Very negative impact on risk appetite and pricing if RWA are overestimated • Many arguments in favour of similar treatment as Letters of Credit – Contingent, self-liquidating – Low losses (cfr. ICC Trade Finance Default Register) 25 Introduction • A BPO should not be treated as a (performance related) Guarantee or Stand-By Letter of Credit. – Guarantee: • Not a payment instrument • No self-liquidating character, not part of the trade cycle • Execution triggered by default, non-payment, nonperformance in a (trade) transaction – BPO: • Payment instrument • Self-liquidating character, part of the trade cycle (one party delivers, the other pays) • Execution triggered by shipment of underlying goods, evidenced by (succesful) data matching process 26 Introduction • A BPO should not be treated as a lending instrument – BPO is contingent and (initially) unfunded • Capital treatment similar for the Obligor Bank(s) and the Recipient Bank (in case of “silent confirmation”) 27 Basel II and the BPO • Since the BPO is a new instrument, IRB Foundation will have to be applied for the for calculating of Risk Weighted Assets and regulatory capital • PD: – Dependent from the rating the bank has assigned to the obligor. In principle counterparty-driven, not product-driven • Maturity: – CP3: Minimum of 1 year – October 2011: Effective maturity to be used with a minimum of 1 day, for Letters of Credit. Should be applied for BPO as well • LGD: Loss Given Default – For IRB Advanced: a bank has to fix its own LGD according to “track record” or (approved) expert model (= internal rating). This is not yet possible for the BPO – Initially BPO will be therefore subject to IRB Foundation: LGD fixed by the Basel rules at 45%, but with a Credit Conversion Factor (CCF) of 20% for engagements up to 1 year and 50% for engagements longer than 1 year 28 Basel III and the BPO • • • Basel III = Basel II + Balance Sheet Optimalisation How? – Increased capital requirements, new leverage and liquidity requirements Measurements Measurement Basel II Basel III Capital (% RWA) 2% common equity 4% Tier 1 4,5% common equity 6% Tier 1 10,5% total capital (including buffer) Leverage Ratio (L/R) No requirements [Tier 1/ total assets] >= 3% Liquidity Coverage Ratio (LCR) No requirements [HQLA/30 day NCO] >= 100% * Net Stable Funding Ratio (NSFR) No requirements [ASF/RSF] >= 100%** * High Quality Liquid Assets/30 day Net Cash Outflow ** Avaliable Stable Funding/Required Stable Funding • For the calculation of these ratios, off balance sheet undertakings, like the BPO, also have to be considered • Converted to balance sheet using a CCF (Credit Conversion Factor) 29 Basel III and the BPO • CCF for calculation of Leverage Ratio is set at 100%! • The industry is advocating to bring down the CCF for Letters of Credit for the calculation of the Leverage Ratio from 100% to 20% – BPO should be under the same regime as should be granted to Letters of Credit. – Execution of LCs and BPOs is not triggered by a non-payment, non-performance or default, but by shipment of underlying goods (and presentation of correct documents or submission of matching data) – Unlike other Off Balance Sheet Undertakings (like CDSs) LCs and BPOs cannot turn into on-balance sheet items because of a default or other event beyond the bank’s control • BPOs (and Letters of Credit) should not have an influence on liquidity ratios. Mostly “cash out – cash in”, except in case of discount • Details of requirements and parameters for liquidity and other ratios (Liquidity, LCR, NSFR, …) not final yet 30 Summary: Probability of Default Counterpartydriven Loss Given Default Effective Maturity Credit Conversion Factor IRB Foundation: 45% IRB Advanced: No internal ratings possible yet Effective maturity with minimum of 1 day (if agreed under same regime as LCs) For calculation of RWA: 20% up to 1 year 50% over 1 year For calculation of Leverage Ratio: 100% 31 Conclusion • Because of lack of historical data for the BPO, reference is made to an existing product of the same nature: Commercial Letters of Credit • Early engagement of regulators and proper capital treatment are key elements in the ICC’s and industry’s approach going forward. 32 Agenda • Introduction to BPO • BPO – How Does it Work? • Capital and Accounting for the BPO • ISO Standards to Support BPO • Business Opportunities Using BPO • Panel Discussion ISO 20022 Standards • Defines 51 messages and flows • Published on www.iso20022.org • In tsmt (trade services management) business area • Covering • • • • • Establishment of Baseline (including BPO) Amendment of Baseline Matching of Data Sets Status changes (e.g. closing) Reporting ISO Standards: Baseline • Baseline contains what must be agreed between the parties at the beginning • Parties • Purchase Order • Which Data Sets to be submitted, by whom (Invoice is a must) • Some matching conditions • BPO (optional) Baseline and Data Sets Purchase order Baseline Matching conditions Commercial data set Transport data set Insurance data set Certificates data set Invoice Air waybill, bill of lading, … Insurance document Certificate document Data Elements of the BPO The BPO data block can be repeated The bank that has to pay under the obligation The maximum amount that will be paid under the obligation The maximum amount that will be paid under the obligation, expressed as a percentage of the PO Date at which the obligation will expire The bank that will be paid under the obligation The amount of the charges taken by the obligor bank Amount of the charges expressed as a percentage of the amount paid by the obligor bank Country of which the law governs the BPO Payment terms, expressed as a number of days after an event. Payment terms can be split. Instructions stipulating the cash transfer characteristics between the two parties BPO Rules BPO RULE: PAYMENT TERMS If the BPO section of the Established Baseline does not contain the optional subsection Payment Terms, then the mandatory Payment Terms section in the Established Baseline will apply to the BPO. BPO RULE: EXPIRY DATE Any amount under a BPO for which conditions have not been met is no longer available after 23:59:59 UTC on the expiry date in the Established Baseline. Baseline Establishment BPO RULE: ESTABLISHMENT OF THE BPO A BPO is validly entered into and constitutes a valid, binding and enforceable obligation as from the time the TSU application notifies the Involved Banks that the related Baseline is established by sending a Baseline Match Report with zero mismatches and the state Established. Baseline Establishment The establishment of a TSU Baseline including a BPO is equivalent to a purchase order commitment to pay and can therefore be used as a basis to support a business proposition for pre-shipment finance 1 Purchase order Buyer 2 Seller Request BPO based on Purchase Order 3 BPO TSU established Initial Baseline Submission Confirm BPO based on SO Baseline Re Submission BPO Recipient Bank BPO Obligor Bank 4 Baseline Match Report Industry standards TSU, Standards and Channels Bank Payment Obligation 1 2 3 Commercial solutions Buyer Seller Any channel / any format / any solution • • • • Bank portal SWIFT's SCORE Paper Tsmt with guidelines Trade Txn Matching Scheme • SWIFT's TSU • Any inter-bank scheme based on ISO 20022 messages & rules • FileAct/Interact Any channel / any format / any solution • • • • Bank portal SWIFT's SCORE Paper Tsmt with guidelines Integration Options Transport, invoice, … data Purchase Order data BPO Buyer’s bank Buyer Bank portal Trade back-end Internet Bank ERP ERP Multi-bank Portal Bank Trade front-end back-end Vendor Bank Seller's bank Seller 1. Bank-specific Trade Portals a. Manual access to bank-owned Trade portal over Internet – 1 portal per bank b. ERP integration with bank-owned Trade portal for large volumes 2. Vendor Multi-bank Trade solutions a. Manual access to vendor multi-bank Trade solution (local application or hosted portal) b. ERP integration with vendor-owned multi-bank Trade portal (local or hosted) … both using SWIFT's SCORE to access all your banking partners Agenda • Introduction to BPO • BPO – How Does it Work? • Capital and Accounting for the BPO • ISO Standards to Support BPO • Business Opportunities Using BPO • Panel Discussion Key benefits for banks Business rationale Market needs Low risk business Prudent use of capital Steady source of commission and fee income Automated solution Lower operating costs Open door to new business opportunities Strengthen core relationships Meet market requirement for banks to collaborate more on risk and client on-boarding 44 Easier access to risk / financing services Tomorrow's data-driven risk mitigation and financing services using the Purchase Order Ordering of goods Purchase Order Production of goods Certificates Pre-shipment finance Today's data-driven invoice-based processing and financing services Shipment of goods Issuance of the invoice Transport Documents Invoice Post-shipment finance Approved Invoice E-invoicing Factoring Payment assurance Payment & cash management Approved Payables Financing Payment Initiation Payment processing Timely Payment New “e” services Current “e” services 45 BPO flows for pre-shipment finance Case 1: Recipient Bank finances Seller based on BPO Carriers 1 Purchase order Buyer Confirmed Agree BPO based PO on PO data 3 BPO Obligor Bank Trade Trade Services Services BPO Utility Utility Established (TSU) (TSU) Seller 2 Request BPO based on PO data 4 Pre-shipment financing BPO Recipient Bank 46 BPO flows for post-shipment finance Case 2: Recipient Bank finances Seller based on BPO Carriers Delivery of goods 4 Shipment 1 Purchase order 8 Invoice and shipping documents 2 Request Seller BPO based Buyer Confirmed Agree BPO based on PO data invoice on PO data 3 Trade 5 Transport & BPO is Services Established 6 invoice data Utility BPO due BPO Data match (TSU) BPO 6 Data match Recipient Obligor report report Bank Bank 7 Post-shipment 9 Transfer funds at maturity financing 47 BPO flows for approved payables finance Case 3: Delaying the BPO until the Seller requires finance Carriers Delivery of goods 4 Shipment 1 Purchase order 6 Invoice and shipping documents Without BPO on Buyer 2 Request baseline step (2) based on PO Provide Approved Payables file (authority to issue BPO if required) 6 Obligor Bank accepts the amendment BPO Obligor Bank Pre-match invoice after step (5) PreEstablished Trade Trade matched Established Services baseline Services BPO is due invoice BPO Utility without Utility data (TSU) BPO (TSU) Seller 3 Agree Baseline 5 Provide invoice data Recipient Bank can immediately submit invoice data for full matching 9 Transfer funds at maturity BPO Recipient Bank 7 Request Receivables finance 8 Discount the receivables Amends the baseline to add the BPO after step (7) at any time up until the latest match date BPO impacts on contracts Purchase order: Buyer BPO is one option in the payment conditions BPO-based services terms and conditions Buyer’s bank Seller BPO-based services terms and conditions SWIFT’s Trade Services Utility Rulebook in the TSU Service Description Correspondent banking contract Seller’s bank Live Kabushiki-gaisha Itō Yōkadō (株式会社イトーヨーカ堂BPO to replace L/C and D/P Company profile • Subsidiary of Seven & I Holdings operating convenience stores, superstores, food supermarkets, department stores, food services, financial services, and IT/services • One of the 5 hypermarkets (Superstore) in Japan, part of Seven & I Holdings Co. • +170 stores in Japan, 10+ stores in China • Food (48.7%), Apparel (18.9%), Household goods (14%), Tenants (17.3%) • 167 million USD revenue & 40,000 employees Challenges • Sales decrease of 2.5% in 2011 due to lower consumer spending: offset by cost reduction • Leverage group strengths to raise competitiveness • Direct overseas procurement for apparel • Import garments from suppliers in Hong-Kong and China requires 2 weeks until fund settlement: goods are already sold. • Delay in reconciliation of Account Payables. Key benefits Bank of Tokyo-Mitsubishi UFJ • • • • Branch network on TSU Reduce costs of document handling B/L from exporter to importer directly (70-80% of L/Cs) Agreement template for local regulations Importer: • Early payment to the exporter –financial support • Ability to negotiate better trade terms with exporter • Improve the reconciliation of the Account Payables by using shipping data from TSU • Optimize working capital thanks to earlier settlement • Streamline operations • Flexible order of goods : increase business opportunities Exporter: • Easier operation and earlier funds collection and FX risk elimination: from 10 days to 3 days in average • No need to secure professional resources • Cut discrepancy fees • Improve visibility and traceability Reduce process from 2 weeks to 3 days: pay suppliers in advance, improve working capital management 50 BP Chemicals and Standard Chartered Bank BPO to replace confirmed L/Cs Company profile Key benefits • 2010 Revenues of USD 14 billion • Revenue created for approx. 50% in Asia • Trade account receivables of EUR 1.4 billion (consolidated receivables only) • More than 600 clients worldwide • • • • Challenges • About 50% of exposure on secured terms • Competitive commodities market requires a secure and cheaper alternative to L/Cs • High processing and confirming costs (0,8% of transaction value) • LCs process limits commercial possibilities and weakens compliance under certain conditions • • • • • • • • Get paid on time and avoid judicial proceedings Reduce complexity – removal of paper trail Limit to relevant trade information only Reduce cost by removing vetting activities and presentation assistance Improve customer offer by allowing for flexible options Improve speed of handling discrepancies Reduce the risk of discrepancies Reduce need for confirmation cost by being able to tap larger pools. Free up banking lines. Easy to exercise tool for liquidity Easier access to banks to secure transactions Possibility to spread the risk with multiple obligors Avoid unnecessary paper flows Gains expected greater than $1m worldwide per year but most of the upside lies in more marginal income 51 Agenda • Introduction to BPO • BPO – How Does it Work? • Capital and Accounting for the BPO • ISO Standards to Support BPO • Business Opportunities Using BPO • Panel Discussion Backup Slides Labels TSU/BPO certified trade platforms Partner Trade portal Trade portal Open Account Manager Misys Trade Portal Misys TI Plus Contact Chris Principe [email protected] (772)283-6901 Joel Schrevens Digby Bennett [email protected] [email protected] +32 16 629012 Selene Chan James Tindall [email protected] [email protected] + 44 7941 325716 Stephan Nouy [email protected] +33 (0)1 53 00 70 13 Baseline Amendment BPO RULES: AMENDMENTS TO THE BPO If the BPO amount is amended in an Established Baseline, then the previous amount is replaced by the new amount. If the Buyer's Bank is the only Obligor Bank, then the new amount is effective when the TSU acknowledges the Buyer's Bank’s Amendment Acceptance message Baseline Amendment A BPO does not have to be established at the outset. It can be added (or amended) later by an amendment to the baseline, providing payment assurance to the seller whilst easing pressure on the buyer’s own credit lines Agreement between Buyer & Seller to add BPO later e.g. after shipment of goods Buyer 3 Seller Confirm Amendment to add BPO 1 Baseline Baseline amended established TSU with BPO without BPO BPO Obligor Bank Request Amendment to add BPO BPO Recipient Bank 2 4 5 Amendment Acceptance Notification Mismatch Acceptance Buyer 2 Seller Mismatches accepted BPO TSU established BPO Recipient Bank BPO Obligor Bank 3 1 Data Set Match Report containing mismatches 4 Mismatch Acceptance Notification Multiple Obligor Banks A Bank Payment Obligation always relates to a single transaction A single transaction may contain multiple BPOs Each BPO is the obligation of one Obligor Bank If a single transaction contains multiple BPOs, no joint and several obligations are created between Obligor Banks If multiple Obligor Banks are involved in a single transaction, the amount due by each Obligor Bank is proportional to its share of the total of all BPO amounts In a Trade Services Utility transaction with a baseline amount of 100, Bank A has a bank payment obligation amount of 30 and Bank B has a bank payment obligation amount of 60. Amount Bank A owes the recipient bank Bank B owes the recipient bank 1st shipment = 27 27 x (30 / 90) = 9 27 x (60 / 90) = 18 2nd shipment = 21 21 x (30 / 90) = 7 21 x (60 / 90) = 14 Final shipment = 52 52 x (90 - 27 - 21) x (30 / 90) = 14 52 x (90 - 27 - 21) x (60 / 90) = 28 Total 30 60 100 In the course of the three shipments, the full amount of 100 has been shipped (27 + 21 + 52= 100). Also, in the course of the three shipments, each obligor bank has incurred its full amount: Bank A: 9 + 7 + 14 = 30 Bank B: 18 + 14 + 28 = 60 The invoice from the seller to the buyer will be settled in the normal course of business. BPO Life Cycle No BPO BPO irrevocable & conditional BPO due Baseline submitted with BPO block Baseline established Match or mismatch acceptance i.e. conditions have been met (Payment) For each invoice or shipment