Presented at the Bankers Association for Finance and Trades 13th Annual Conference on International

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(No Transcript)
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Marcia M. Davis
Senior Vice President Bank of America,
N.A. Trends in Global Trade Risk Management and
Mitigation
Presented at the Bankers Association for
Finance and Trades13th Annual Conference on
International TradeProspects for the Future
November 13-14, 2003The Fairmont Hotel, Chicago,
IL
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Traditional Trade Risk

• Country Risk
• Credit Risk

• Mitigants
• PRI
• ECA
• Sale to Third Party
• Multi-lateral Development Bank support
• Collateral
• Risk Sharing

Growing area
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Operational Risks

• New face to a traditional trade risk
• Outsourcing / Private Labeling
• Critical information in hands of outsiders
• Concentration risk of too much with one provider
• E Commerce (Future)
• Longer trade terms negotiated to offset quicker
  documentary negotiation
• Fraud reduction due to electronic presentation

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Regulatory / Compliance Risks

• KYC
• Performed on correspondent bank and corporate
  clients
• AML and Patriot Act
• Increasing technology spent
• Interface with other monitoring systems (OFAC and
  Anti-boycott Compliance)

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Measuring Trade Profitability

• Relative to Internal Capital Adequacy Modeling
  Trend toward higher pricing due to
• Impact of costs relating to credit and country
  risk scoring
• Impact of Relationship Costs and Profitability
• Operational costs associated with transaction
  types.

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Measuring Trade Profitability

• Relative to Basel 2
• Lesser benefit of Multi-lateral support in A/B
  Loan structure.
• Trend back to FIs acting as borrowers /
  guarantors in term financing requirements.
• Higher importance and distinction placed on
  government controlled ECA support.