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