The Basel III standards for international banking are set to take effect within months. And despite numerous attempts to clarify sections of the accord, there is still so much unknown about the impact the changes will actually have, said panelists at the Finance Credit & International Business Association (FCIB) Annual International Credit & Risk Management Summit in Prague.
Elisabeth Sutter-Becska, vice president, head of global export finance at Raiffeisen Bank International in Austria, says rising importance of the trade credit role and for funding costs, among other increased costs in general, should be expected. As such, trade creditors and their businesses should be preparing in a number of ways in the near-term: Reassess working capital management, consolidate treasurer operations, optimize payment streams, improve receivables management, shorten payment tenors when possible and diversify resources. Still, it is hard to plan actions because of how difficult it is to predict what will actually occur.
“Nobody can say what is going to come from the three regulation, and there are not studies that have determined what would be the affect on the real economy,” she told FCIB delegates.
Meanwhile, panelist Neil Ross, trade credit insurance profit centre manager EMEA, AIG Euopre Limited in the United Kingdom, also voiced concerns about potential confusion about what will actually happen.
“One of the things that strikes me, you have the Basel III rules, but it's up to each country to interpret the rules; each country has slightly different interpretation,” said Ross. “It makes it much more complicated.”
Ross added that credit insurance will likely play a a bigger role as banks are “under pressure to keep head counts down...Doing analysis on thousand of buyers is frankly not where the banks want to be right now.”
-Brian Shappell, CBA, CICP, NACM staff writer