2009
Banks could do more to assist exporters affected by the Credit squeeze by improving the Letters of Credit mechanism;
-state the Irish Exporters Association
The Irish Exporters Association (IEA) stated today that lack of credit facilities continue to impact exporters, and that the Irish Government must re-visit the options for State intervention as has happened in the UK in their recent budgetary measures, as well as across most of Europe over the past 6 months.
However, the IEA also point to the need for the banks to become pro-active in marketing their Letter of Credit facilities, which could help break the cash, debt, risk vicious circle that exporters are currently grappling with.
Letters of Credit accomplish their purpose by substituting the bank's creditworthiness for that of the customer, for the purpose of facilitating trade. There are basically two types: commercial and standby. The commercial letter of credit is the primary payment mechanism for a transaction, whereas the standby letter of credit is a secondary payment mechanism. A Letter of Credit can be further confirmed by a bank in Ireland providing the Exporter, additional comfort on credit and cross border risks.
A recent IEA survey shows that less than 10% of exporters use the Letter of Credit (L/C). Many exporters state they would utilize the L/C method of securing payment and easing their cash flow requirements if the banks reduced the cost and the complexity of the system. In the current climate, L/C could be introduced for trading within Europe as well as across Asia and the USA and South America.
John Whelan, CEO of the Irish Exporters Association stated;
"In this critical time for exporters ,we need a pro-active stance by all the banks to reduce the cost and complexity of their Letter of Credit facilities , as one way of assisting companies through the current credit crises."
Wale Soyingbe, Director, EMEA Trade, Citibank Europe plc, Ireland stated;
"Citi is your reliable and trusted partner for Letters of Credit. Our vast network of trade-capable branches spanning 113 cities in 72 countries, with a correspondent network of more than 3,000 banks gives you the needed confidence that we are more likely to be present or have a correspondent relationship in every country IEA members trade with."
Citi has partnered with more than 60 multilateral and export credit agencies such as the International Finance Corporation's Global, the European Bank for Reconstruction and Development and the Asian Development Bank's. Citi is a key player in these partnerships, and has been a prominent driver of programme activity in several developing regions of the world. Citi lends its global reach in support of these institutions and could be very beneficial to IEA members."
Mr. Soyingbe goes on to say:
"With an unmatched global network, Citi in Ireland can offer the know-how and stability IEA members need to support their trade business in these challenging times and well into the future. Our cutting-edge systems combined with regionalization of processing centres have enabled us to build capacity for growth, provide competitive processing costs and offer consistent service to Issuing Banks and Exporters.
The IEA offer the following Tips for Exporters
- Communicate with your customers in detail before they apply for letters of credit.
- Consider whether a confirmed letter of credit is needed.
- Contact the advising/confirming bank and get an idea of all charges to be paid by you under the LC. Citibank Europe plc, Ireland offers a drop mail box tradeservices.europe@citi.com for such inquiries.
- Ask for a copy of the application to be fax /scanned to you, so you can check for terms or conditions that may cause you problems in compliance.
- Upon first advice of the letter of credit, check that all its terms and conditions can be complied with within the prescribed time limits.
- Many presentations of documents run into problems with time-limits. You must be aware of at least three time constraints - the expiration date of the credit, the latest shipping date and the maximum time allowed between dispatch and presentation.
- If the letter of credit calls for documents supplied by third parties, make reasonable allowance for the time this may take to complete.
- After dispatch of the goods, check all the documents both against the terms of the credit and against each other for internal consistency.
END
For further information contact:
John Whelan, Chief Executive, Irish Exporters Association
Mobile: 087 9271243 Email: jfwhelan@irishexporters.ie
About the Irish Exporters Association (IEA)
The IEA represents the needs of export industry ensuring that the necessary conditions are created and the necessary support is provided to assist companies to maximize their export sales. The IEA draws its membership from every exporting sector, ensuring that the interests of all industries are represented and promoted at the highest level.
About Citi
Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries. Through its two operating units, Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com/.
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