Trade banker Baghdadi: Basel Committee Has Responded Appropriately

With the feared Basel III impact apparently out of the way, Baihas Baghdadi, Head of Working Capital and Trade EMEA at Barclays, explains on CFO Insight TV how the changing trade flows of Europe with the rest of the world are also changing the demands CFOs have on trade finance.

The European trade pattern is changing. Less inner-European trade is supplanted with growing exports to emerging markets – and not just China. “Some regions are increasing their importance for Europe. One example is the Middle East,” Head of Working Capital and Trade EMEA at Barclays, pointing to a trade volume of €275 billion in 2011. “This is creating a higher demand for bank guarantees under local laws as well as letters of credit,” he says, adding that is also means that CFOs are increasingly looking for an “end-to-end working capital solution instead of cherry-picking” from different banks.

Basel III no longer a problem

Baghdadi has more interesting news: a recent decision by the regulator to soften the impact of Basel III, the new banking regulation aimed at making banks crisis proof, on trade finance has put the banking industry’s greatest worries to rest. “Broadly speaking, the Basel Committee has recognised the short-term aspect of trade products,” Baghdadi says. “For example, for committed unfunded products like trade products […], the drawn down of capital of capital was reduced from 100% to 40%.” While he cautions that the actual impact of Basel III will also be determined by the way local regulators implement the regulation, he seems upbeat that the worst has been avoided.