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Sharon Bowles MEP welcomes Basel committee concessions on trade finance but says more could be done Print E-mail
Tuesday, 14 January 2014

On Sunday the Basel Committee’s Group of Governors and Heads of Supervision, chaired by President of the European Central Bank Mario Draghi, updated their proposals on leverage and within that made some improvements to the treatment of ‘trade finance’.

Sharon Bowles MEP, Chair of the European Parliament’s Economic and Monetary Affairs Committee, has had a long running battle with Basel over their harsh treatment of trade finance. She is not alone, with help from her committee she pushed through better terms in the EU’s Capital Requirements Regulation (CRR). These better terms have been welcomed by the World Bank and IMF.
 
Basel’s Sunday decision lowers the ‘credit conversion factor’ (a tool for converting off-balance sheet exposures to an on-balance sheet equivalent) from a uniform 100% to 20% for trade related contingencies and 50% for transaction related guarantees. This matches the CRR.
 
While the move signals an improvement in the line taken by Basel, it falls short of the suite of changes made to the CRR under the instigation of the European Parliament.
 
Commenting, Sharon Bowles MEP said: 
 
“In Europe we applied a 20% credit conversion factor to performance guarantees, as well as allowing the recognition of 100% of trade finance outflows within the liquidity coverage ratio. Currently the Basel rules mean all inflows are still capped at 75%. I think that there is room for Basel to match the European position.
 
“Frankly I do not understand what is holding Basel back. Trade finance is short term and backed by the goods and services that it finances, so the risk is relatively low.”
 
Sharon Bowles has raised the issue with several regulators on the international stage, and says she will continue to press them.
 
Ms Bowles is speaking in London at the BAFT-IFSA Global Annual Meeting on trade finance next Monday.

(Source - Sharon Bowles Press Release)
 

 

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