Introduction
Bank of China provides trade finance services regarding forfaiting, L/C confirmation, letter of guarantee reissuing for exporters with business in emerging markets, upon the global trade finance agreement with international organizations, such as International Finance Corporation(IFC), Asian Development Bank(ADB), European Bank for Reconstruction and Development(EBRD) and Inter-America Development Bank(IDB). The international organizations guarantee the debtor's credit risks and country risks.
Types of service include:
1. Forfaiting Guaranteed by International Organizations
Based on international organizations' guarantee on accepting/confirming bank, Bank of China provides forfaiting to meet customers' needs regarding avoiding risks, improving cash flow, optimizing the financial statements, handling export tax rebate in advance and writing-off after verification.
2. L/C Confirmation Guaranteed by International Organizations
With guarantees from international organizations, at the customers' request, Bank of China adds open confirmation to L/C, provides bank payment guarantee with higher credit level, thus reducing the customers' payment risk.
3. Letter of Guarantee Re-issuance Guaranteed by International Organizations
Upon receipt of guarantee from foreign banks, Bank of China issues letter of guarantee to customers based on IFC's guarantee, providing local bank protection for exporters with construction projects in medium and high risk countries or regions.
Functions
Solving the financing difficulties of Chinese exporters or contractors with construction projects in countries with medium and high risk.
Features
1. Specific Focus.
Currently, country risks in Asia, Africa, Latin America and other emerging markets cannot be guaranteed by many commercial banks, guarantee from IFC and other international organizations just fills the vacancy. ADB mainly guarantees the risks in Central Asia and South Asia; EBRD largely guarantees the risks in Eastern Europe and other CIS countries; IDB basically guarantees the risks in Latin America and the Caribbean; IFC covers most countries in Asia, Africa, and Latin America.
2. Competitive Price.
International organizations provide guarantee for emerging markets with an aim to promote regional economic development, so that the charges are more competitive than average.
3. A variety of trade settlement instruments are available. Flexible financing term, flexible trade settlement instruments supported by trade finance services under guarantee by international organizations, include not only L/C, letter of guarantee, but also drafts and promissory notes confirmed by banks. Bank of China can provide short-term (less than one year) trade service as well as long-term (three to five years or more) project finance for customers.
Target Customers
1. Domestic enterprises with business in emerging markets: emerging markets have large import demand but less foreign exchange funds, they settle the payment largely by OA and the collection period is relatively long.
2. Small and medium-sized enterprises with limited credit line: these enterprises have relatively small size, low credit line and limited fund raising capability.
Process
1. Customers put forward trade finance or guarantee requirements to Bank of China;
2. Bank of China reviews that whether the issuing bank/accepting bank/counter-guarantee bank is on the guarantee list of international organizations;
3. Bank of China consults with the international organizations whether they can provide guarantee or not;
4. Upon confirmation by the international organizations, Bank of China sends a formal "Application for Guarantee Issue";
5. Bank of China receives "guarantees from international organizations" and conducts forfaiting for customers, confirms L/C or issues letter of guarantee.
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