Digital rules (URDTT) for Trade Finance: What, How and When?
10-01-2022 | Wim Kok | treasuryXL | LinkedIn
Watch Episode 1 of a series of free, educational videos focusing on Uniform Rules for Digital Trade Transactions (URDTT)
Trade Advisory Network Limited and treasuryXL Trade Finance experts launched their first episodes of a series of free, educational videos on URDTT. There will be 6 episodes in total covering all aspects of the development, interpretation, and application of URDTT in the context of a digital trade strategy. In the upcoming 6 months you can expect one educational video per month.
What can you expect in the first episode?
This first episode focuses on the background to the decision to create a new set of rules for digital trade transactions and provides definitions of some of the most important terms. Subsequent episodes will focus on the use of electronic records, payment obligations and, the role of banks/non-bank financial service providers.
Duration: 19.20 min
Enjoy, explore and develop!
Interested to know more about this topic and the upcoming educational videos? Contact our Expert Wim Kok.
International Business Consultant
Trade Finance Specialist
Trade Finance for Treasurers
23-11-2021 | Wim Kok | treasuryXL | LinkedIn
The current global trading environment has exposed new complexities and heightened risks associated with international trade, notably through Covid 19. Following the latest studies (* ADB) the global trade finance gap grew to an all-time high of USD 1,7 trillion. Especially for SME sector (being hardest hit) the availability of bank liquidity and credit is increasingly under pressure. As a result, the playing field of international trade needs greater focus on understanding and mitigating risks and making use of new opportunities in the accelerating digital world of Trade Finance.
“Following the latest studies (* ADB) the global trade finance gap grew to an all-time high of USD 1,7 trillion.”
The ability to quickly access cost-effective financing when and where it is needed is key for also treasury departments. The new challenges and rapid changing finance landscape prompts many Corporate Treasurers to re-educate themselves and/or seek specialized expertise from trusted advisors, identify new and reliable alternative funding sources, streamline their digital journeys and current (internal) processes to achieve additional efficiency, transparency and cost reduction.
The use of Trade Finance solutions via (mostly standard and “old”) banking products goes way back in history to the golden age (Bill of exchange and promissory note financing). Our TreasuryXL expert Wim Kok can guide and advise you on the roles of banks and other key players, including emerging Fintech providers, insurers and alternative providers. It is essential for the Treasury department to address the needs and or pain points of the company select the most appropriate solution or partner to solve the problems or make use of new opportunities.
To give you an idea of the regular trade finance products that are available to facilitate trade, we list the instruments below.
Why is Trade Finance so Important to Corporate Treasurers?
- Obtaining liquidity using risk mitigation and financing options from international trade transactions
- The role of banks in trade finance products (risk mitigation / financing and transaction processing)
- Obtaining insight into the various trading conditions (Incoterms), the additional securities (title of documents, warehouse warrants) and credit insurance principles
Below is a brief overview of the most commonly used trade finance instruments, i.e.
- Documentary Letters of Credit (import, export), Stand-by LCs, Guarantees and Indemnities.
- Documentary Collections (CAA, CAD) – Bills of exchange and Promissory notes. Obtaining liquidity through discounting the instruments (with or without recourse).
Besides the classical trade finance banking products liquidity techniques such Receivable Finance or the Factoring of complete debtor portfolios (with or without credit insurance) are also frequently in the industry.
Your TreasuryXL trusted advisor Wim Kok is available for advice on the use of the various trade finance products or techniques.
Whereas the majority of trade finance products are (mostly) standardized and in international accepted format that are subject and adhere to the various international rules issued by the ICC** to name a few: UCP 600, ISP98, URDG758 and Incoterms etc.
International Business Consultant
Trade Finance Specialist
*The global trade finance gap grew to an all-time high of $1.7 trillion in 2020, a 15% increase from two years earlier, as the pandemic heightened economic and financial uncertainties and devastated global trade, according to the latest Trade Finance Gaps, Growth, and Jobs Survey, released today by the Asian Development Bank (ADB).
**ICC Headquarters 33-43 avenue du Président Wilson 75116 Paris, France Tel: +33 (0) 1 49 53 28 28 Fax: + 33 (0) 1 86 26 67 44 Email: [email protected]
Changing priorities of corporate treasurers post-pandemic
| 15-11-2021 | Eurofinance | treasuryXL | LinkedIn
More than 18 months have passed since treasury professionals around the world had to leave their offices at short notice due to the escalating covid-19 crisis. In April 2021, EuroFinance carried out a survey to find out more about the different ways the pandemic has affected treasury professionals. Alongside the adoption of remote working, the subsequent report highlights treasurers’ accelerated adoption of digital technologies, and the contribution that treasurers make to board-level decision-making during a crisis.
What are the key takeaways from this report?
- The importance of cash flow forecasting has been underlined by the crisis. Almost three quarters of treasury professionals have increased their focus on cash forecasting during the crisis, while 54% plan to prioritise cash forecasting in the future.
- Cash management and liquidity management remains a top priority for treasury professionals. Seven out of ten said cash management/liquidity management was a top priority going forward.
- Covid-19 has accelerated digital transformation. Alongside the rise in remote working, treasury teams have increased their adoption of robotic process automation (RPA), APIs/cloud, machine learning/AI and virtual accounts/in-house banks.
- Treasurers have been more involved in board-level decision making during the pandemic, with 39% of treasurers saying they are more involved since the crisis began.
Want to see the full report?
Download here
Your Last Call | International Treasury Management Virtual Week | September 27 – October 1
22-09-2021 | Eurofinance | treasuryXL |
It’s free, It’s Virtual…
International Treasury Management is the annual meeting place for 1000s of the World’s most senior treasurers to learn and share experiences in valuable peer to peer discussions. With a reputation for ground-breaking sessions and world-class speakers, our 30th anniversary event will explore the boundaries of the profession, take a glimpse into the future of business, treasury and working life as well as offer the practical case studies on the treasurer’s top agenda items.
Only one treasury event can deliver the comprehensive mix of big picture global insight and granular treasury knowledge you need to make the right choices for the future.
Back to the future, again
Over the past 30 years since EuroFinance’s inaugural conference on International Cash and Treasury Management, much has changed. Treasurers have firmly become business partners, technology experts, risk managers and opportunity spotters. They often lead fundamental change within the company as markets, business models and technology shifts.
What next? This event will delve into how treasury operations can gear up for the future, having learned the lessons from the past. Where, who, what and how will the corporate be in the coming years and what is treasury’s role?
Keynote sessions will offer big-picture insight alongside themed streams including:
- Payments revisited
- Risks and Rewards
- Digital strategies
- Practical solutions to day-to-day Treasury challenges
- The power of partnership
What makes International Treasury Management the must-attend event of the year?
- networking on a global scale – a significant rise in attendees in 2020 boosted the value networking with banks, providers and potential clients… all in one place
- strategic insights and best practices – get solutions to the challenges you face from treasury and economic experts during keynotes, practical case studies, fireside chats, analytical panels and more
- future trends – delve into the latest innovations and new technology driving change in treasury, and their practical applications
- live Q&A with world-class treasurers – enjoy borderless networking and live Q&As with high-profile speakers directly after each session
- cost and time-efficiency – tune in form anywhere in the world, at the click of a button with no long distance travel or accommodation costs
- continued learning – catch up on any missed sessions and re-watch your highlights, on demand for up 2 months after the event
- unite your international teams – as a free event, it offers an opportunity for your whole treasury team to attend. Perfect for encouraging learning and development at all levels
September 27th – October 1st | Virtual
Register Now for Free!
International Treasury Management Virtual Week | Celebrating 30 years as the world’s leading treasury event
| 19-05-2021 | Eurofinance | treasuryXL |
International Treasury Management is the annual meeting place for 1000s of the World’s most senior treasurers to learn and share experiences in valuable peer to peer discussions. With a reputation for ground-breaking sessions and world-class speakers, our 30th anniversary event will explore the boundaries of the profession, take a glimpse into the future of business, treasury and working life as well as offer the practical case studies on the treasurer’s top agenda items.
Only one treasury event can deliver the comprehensive mix of big picture global insight and granular treasury knowledge you need to make the right choices for the future.
Back to the future, again
Over the past 30 years since EuroFinance’s inaugural conference on International Cash and Treasury Management, much has changed. Treasurers have firmly become business partners, technology experts, risk managers and opportunity spotters. They often lead fundamental change within the company as markets, business models and technology shifts.
What next? This event will delve into how treasury operations can gear up for the future, having learned the lessons from the past. Where, who, what and how will the corporate be in the coming years and what is treasury’s role?
Keynote sessions will offer big-picture insight alongside themed streams including:
- Payments revisited
- Risks and Rewards
- Digital strategies
- Practical solutions to day-to-day Treasury challenges
- The power of partnership
What makes International Treasury Management the must-attend event of the year?
- networking on a global scale – a significant rise in attendees in 2020 boosted the value networking with banks, providers and potential clients… all in one place
- strategic insights and best practices – get solutions to the challenges you face from treasury and economic experts during keynotes, practical case studies, fireside chats, analytical panels and more
- future trends – delve into the latest innovations and new technology driving change in treasury, and their practical applications
- live Q&A with world-class treasurers – enjoy borderless networking and live Q&As with high-profile speakers directly after each session
- cost and time-efficiency – tune in form anywhere in the world, at the click of a button with no long distance travel or accommodation costs
- continued learning – catch up on any missed sessions and re-watch your highlights, on demand for up 2 months after the event
- unite your international teams – as a free event, it offers an opportunity for your whole treasury team to attend. Perfect for encouraging learning and development at all levels
September 27th – October 1st | Virtual
Register Now for Free!
Global Treasury Americas | Planning the post-pandemic Treasury
| 12-05-2021 | Eurofinance | treasuryXL |
The leading virtual event defining today’s corporate treasury agenda
For the past year, treasurers have sweated the core stuff: securing short-term liquidity and longer-term credit; enhancing risk monitoring and hedging processes; and dealing with the implications of remote working. But in the complex and uncertain transition to a new ‘normal’, finance functions will have to resume the search for growth. Can treasury help identify where growth is most likely to come from and which parts of the business are most threatened by digital disruption? And can they do better – can they help build the business strategies needed to prosper as we emerge into the next phase of the pandemic.
This event will explore the practical steps treasurers can take to make enterprise and treasury digitalization a reality and look at varied case studies of transformation in the treasury. The event will look in-depth at new technologies in action as well as more strategic concepts including the sustainability agenda. We look at how treasury can make a difference. Finally, we look at what it takes to transform treasury wherever you are in your journey in order to increase efficiencies, protect the business and make a difference to the bottom-line.
Global Treasury Americas: Planning the post-pandemic treasury
2 days of actionable insights, plus real world case studies tackling the key issues facing treasurers in the region. Topics include:
- The Great Bounce-back
- Practical steps on the path to automated Treasury
- Why sustainability matters for Treasury
- Name that threat: What’s next
- Building a true cash culture
- Payments evolution – the Treasurer’s view
What makes Global Treasury Americas your must-attend event of the year?
- Understand the practical steps towards making enterprise and treasury digitalization a reality
- Gain actionable solutions and best practices from varied real-world case studies
- Network with an unrivalled audience of 800+ senior treasury professionals across the Americas
- Benchmark your operations against the regions most forward-thinking treasury teams
- Explore how to support business growth whilst balancing the traditional role of treasury
June 9-10 | Virtual
Register Now
How to simplify Procurement and Finance in the Supply Chain
| 21-04-2020 | Wim Kok | treasuryXL
Accelerated by the Corona pandemic, an unforeseen global crisis affecting us all, digitalisation, transparency, efficiency and real time settlement has moved dramatically up north on the priority scale of all global industries. At least it makes an important move to rethink sustainable business models in the post Corona era.
Secured (cyber proof) Platform connectivity bolstering strategic supply chains will become a very important aspect in the future survival of trading companies globally.
More and more initiatives are seen to phase out the “old school” handling of paper-based settlement. Rain forest of papers are being used to settle payment out of export and import contracts. Its cumbersome processes to settle payments through bank using old payment methodologies like Bills of Exchange, Cash Against Documents and Documentary Letters of Credit. Do not misunderstand my objective, nowadays contract settlements are strongly embedded in society supported by different legislation countries by country. This is also the reason why things are moving so slowly. Institutions like ICC, Swift, Customs & Harbour authorities (to name few) are constantly trying to move the needle in digitising processes. The reality is that the transformation goes to slowly. Maybe when COVID19 is behind us there will be an acceleration after reconsidering existing business models of supply chains dependent from documentary evidence.
In this 15 trillion USD ($) global trade market there is enough space next to the big banks and big corporates, who started to explore already after the 2008 crisis using agile inhouse innovation labs.
Initiatives like Komgo and R3 syndicates already looking at blockchain technology, however still geared toward the larger (commodity) trading community. It is interesting to see that the big Agri trading companies recently started a new initiative Covantis.
After PSD2 introducing Open banking a lot of financial FinTech’s are entering the market not having the burden of an absolute (outdated) big banking system. Big tech giants like google, Facebook and Amazon are looking into their enormous data bases trying to grasp their market share.
TransDocLink is developing a platform based upon the above ideas, capturing as much as possible stakeholders & features. Transdoclink already can make use of the TDeal concept on its platform. Creating in a supplier/buyer relationship full transparency, efficiency and trust in their contracted supply chain. A dashboard gives visibility around the whereabouts of the goods and money (triggered movements are settled through a dedicated wallet). TransDocLink aims to serve the SME market in an open (independent) platform environment.
In 2016 TransDocLink already recognised that the Letter of Credit (and its very paper heavy documentary settlement) is a “dinosaur” in the expensive settlement of payments in the banking industry. The aim was to digitise these processes and offer an alternative on a platform-based initiative. Buyer and Seller create on the platform a trusted lane (supply chain) by matching contracts. The settlement of agreed terms is being executed through an independent trust account instead of the alternative using an expensive settlement via Letter of Credit. The original concept was built around a straight through processing payment engine (exempted by the Dutch Central bank) and further enhancements are being made (escrow-TDeal , working capital, asset based & trade finance modules) to keep up with the quick changing landscape in the FinTech industry.
Curious what TransDocLink can do for your business? Visit transdoclink.com and/or contact me directly for some advice.
International Business Consultant
Trade Finance Specialist
Corporate Trade Finance Products : Letter of Credit
| 11-10-2018 | by Nijay Gupta | treasuryXL |
What is Letter of Credit/Documentary Credit under UCP 600 – ICC Paris:
A letter of Credit is a sort of Guarantee issued by a Bank – Opening Bank, on behalf of a buyer(applicant) favouring the seller (Beneficiary) to honour the compliant documents presented thru a Bank (negotiating bank) in terms of the LC conditions. In order to secure payment, the Supplier of goods is given a sort of guarantee by the buyer’s bank to pay (at Sight or Usance or Deferred Payment) on presentation of Documents in terms of LC. So, the LC can provide payment on Sight Basis, Usance Basis or Deferred Payment Basis, based on the Terms of Payment agreed between Supplier & Buyer. The buyer/Opener of the LC is assured Delivery of Goods within the dates of shipment mentioned in the LC.
LC is also known as Documentary Credit, as banks deals in documents and not in goods.
The LC is governed by the UCP 600 (2007) Revision publication by ICC, Paris, provides the set of rules governing LC in Domestic/International Trade in almost all 175 countries. The 39 Articles of UCP 600, gives the details of the various types of LC’s, role/rights/liabilities of various parties i.e.
- Opener/Applicant (buyer),
- Beneficiary (seller),
- Issuing Bank (buyer’s bank),
Advising Bank (Correspondent bank of the LC issuing bank), may act as LC Transferring or Negotiating Bank too for the availability of LC for Negotiation leads to be known as : Restricted LC or LC avaialable with…. Bank
Negotiating Bank (Generally Sellers Bank),
Re-imbursing Bank (generally overseas correspondent bank, where the LC issuing bank maintains its Nostro a/c).
The articles also provide the way various Documents like Bill of exchange, Invoices, Cerifiticate of Origin, BL/AWB, Inspection Certificate, Insurance Policy etc to be preapred and presented to the LC Issuring bank for Payment (Sight document), Acceptance & Payment (Usance/Deferred Payment documents).
What are the various Types of Documentary Credit:
Irrevocable: The LC, which can not be cancelled/amended without the consent of all the parties to the LC, is the most common type of LC is used in Domestic/International Trade. In this, the LC issuing bank guarantees the payment of LC as per the Tenor of the Documents on presentation of compliant documents to the beneficiary.. This is the most common type of LC is used in domestic/international Trade. All types of LC’s are Irrevocable, unless a bank issues Revocable LC, specifically. UCP discussed only about issuing of Irrevocable LC, though the banks can issue Revocable LC or combination of other types of LC as below.
Revocable LC, (which could be cancelled by LC issuing Bank or Applicant without the consent of Beneficiary before the shipment is made) is not in practice and not provided in UCP 600, though the same can still be established by the LC Issuing bank at the request of the Applicant. Irrevocable Confirmed: In this type of LC, the Payment Guarantee is given by LC Advising or a Bank nominated by LC issuing Bank . The bank adding confirmation to the LC is done only at the request of LC issuing bank and the Conforming bank can be in the country of exporter or elsewhere. Since this type of LC requires payment of confirmation charges by the Beneficiary, the use of this type of LC is restricted in case of Geo-political conditions in the buyer country or high risk buyer only.
Irrevocable Transferable: The LC which can be transferred by the Advising Bank at the request of Beneficiary, in part/full or for lesser amount by keeping the profit for the beneficary of LC. Once LC is Transferred, it can not be transferred back to Benficiary of LC. Under this, the LC Transferring bank is the only bank authorised to Negotiate/Pay for documents over and above the LC opening bank
Irrevocable Confirm: LC can be confirmed by a bank in Beneficiary’s Country (generally done by LC Advising bank) or by a bank in other country, when beneficiary is not very sure about the standing of the LC issuing bank or Geo-political situation in buyer’s country. LC is confirmed at the request of LC issuing bank and Confirming bank may ask beneficiary to pay for the confirming charges. On presentation of documents, confirming bank shall becoming like LC issuing bank and is bound to pay/accept documents, as per LC conditions.
Irrevocable Back to Back: Its not provided in UCP but its used by Beneficiary for opening another/local LC backed by the Original LC on same terms and conditions to provide security for payment for supply of goods to the origianl beneficiary .
Irrevocable Revolving: This type of LC provides flexiblity of Re-instating the amount of the LC, on utilisation of the LC amount by exporting the goods as per terms of LC. This type of LC is usefull, for exports of different goods at different period without committing the total value of all exports in one LC. This reduces the requirement of lower LC limit or Cash margin for opening of the LC by applicant (importer).
Irrevocable Stand-By LC: This was inititated at the time when US banks were not authorised to Issue Guarnatees or take Guarantees . But this is very popolus amongst the suppliers of goods and services in today’s time all over the world. This type of LC, provides a guarantee to the supplier of services, equipments, airlines etc to be paid on completion of the serives or agreed time period. Its very common in Airlines and Equipment suppliers on lease or rental basis.
Which type of LC is desirable in Domestic & International Trade:
An Irrevocable LC is quite fine, which allows payment on compliance with the LC terms and this also allows surety of shipment by exporters within the terms mentioned in the LC, though there is no guarantee of quality of goods being supplied by the exporters. That is why Banks say, Bank Deal in Documents and not in Goods and its known as documentary credit.
Should there be a Geo-political situation in the LC issuing bank’s country or the standing of the LC issuing bank can not be established, its better to go for a Confirmed LC. Other types of LC’s are practiced based on the requirement of Importer and Exporters in Trade. LC can have a combination of types of LC together too and i.e. Why LC is the most flexible instrument used in Domestic and International Trade.
What Importer (Applicant) should do before opening LC:
- Get the detailed report of the Supplier from their banks interms of their Standing, Line of business, other business dealings, sanctions on the country etc
- The previous experiences of others with the supplier & Country Risks, or Sanctions
- Get the lines set-up by the Bank for opening of the LC
- Apply to bank for Issuing LC along-with Proforma Invoice or Confirmed Order
- After bank’s issuing LC, ensure, LC is recieved by the Supplier with same terms of Proforma Invoice or confirm order
What Exporter (Beneficiary) should do on receipt of LC:
- check all the terms & conditions of LC as per Proforma Invoice or confirm order.
- Check Incoterms and Terms of Payment
- Check the names of various parties, goods, addresses, requirements of shipments, Incoterms, LC payment terms, Inspection Certitificate, Certificate of Origin, Insurance & other special documents requirments like Weight/analysis/Packing Certificates etc.
- Get the LC confirmed, if the same was desired and the same has been requested by the LC issuing bank to the LC advising bank
- Get the LC amended, in case exporter can not comply with any conditions or terms of LC
- Meanwhile, the exporter can start with Manufacturing or arranging for the goods for shipment
- Can request for fixing lines and ask ask for Pre-shipment and Post shipment finance against LC and presentation of documents
- Exporters should ensure compliance of all terms and conditions of LC, before presentation of documents for payment/acceptance by the Negotiating or LC issuing bank to get protection under UCP 600 of ICC, Paris
What is the future of LC in view of E-Banking and Online business/trade:
Though most of the business is overtaken by online operators, the need for LC shall continue at least for next 25 years. In order to get well worsed with LC, I suggest all to read articles UCP 600 of ICC, Paris and practice with various types of LC, rights & responsibilities of the LC Issuing Bank, Advising Bank, Negotiating Bank, applicant, Beneficiary & Confirming/Re-mbursing/Transferring banks etc in usage.
Founder & CEO NK GUPTA Consulting
Credit Default Swap: What is it – good or bad?
| 26-03-2018 | Lionel Pavey |
A decade ago it was one of the financial instruments that was identified as causing the financial crisis. It had been one of the most popular financial products before the crisis with the market turnover growing by more than 50 times over a period of 7 years. It started out as a simple financial instrument to aid bond holders in obtaining protection from the risk of default. So what is a Credit Default Swap (CDS) and where did it all go wrong?
The buyer of a CDS pays regular premiums to the seller of the CDS – expressed in basis points. These payments are normally quarterly in arrears and the total value of the payment is dependent on the nominal value of the contract. This nominal value relates to the par value of the underlying bonds – if you hold bonds with a par value of EUR 5 million and wanted to buy protection for the full amount, then the CDS contract would be for EUR 5 million.
The seller of a CDS would receive these regular payments and would only pay out if the bond issuer defaulted. At the time of a credit event (default), the CDS seller would assume ownership of the bonds and pay the CDS buyer their par value. It can be likened to comprehensive insurance that we buy for our cars – we pay an annual premium and the insurance company covers us for the costs of any damage to the vehicle in the event of an accident.
What is a credit event?
The definitions of a credit event are set out in the contract and defined by referencing terms agreed by the International Swaps and Derivatives Association (ISDA). The major credit events, in European contracts, are bankruptcy, failure to pay on its debt obligations, and restructuring.
A contract will contain standard terms and conditions –
- effective start date
- scheduled termination date
- the agreed price
- payment dates
- the reference entity (normally a bond issuer)
- the reference obligation (usually an unsubordinated bond)
- substitute reference obligations (if the original was repaid earlier than the termination date of the contract)
- calculation agent
As previously stated, when the CDS market started it was seen as a product to protect bond holders and, in the event of a default, the CDS buyer could deliver the agreed reference obligation and receive its par value. In 2005, the limitations of this system were first recognised; Delphi – a manufacturer of auto parts – defaulted. The par value of their outstanding bonds was USD 2 billion – the sum of CDS contracts was USD 20 billion. As original bonds had to be tendered to validate the contract, a run ensued on the bonds and, whilst defaulting, the bond price went up!
This led to the next phase – cash settlement. Here, in the event of default, the CDS seller paid to the CDS buyer the difference between the par value and the market price – facilitated by an auction process to determine the fair market value.
However, an unintended consequence was the discovery and creation of different trading strategies that had not be envisaged when the CDS was designed. Before the introduction of CDS contracts, if you were bearish on a company you would need to short-sell their bonds. This is a sensitive process as the short position needs to be covered via bond lending to maintain the settlement position. With CDS it now became possible to purchase protection on a specific entity at a relatively cheap price – the CDS premium. It was therefore possible to replicate a physical short position with a derivative position.
It also led to the creation of “synthetic” instruments – synthetic CDS’s and CDO’s (Collateralized Debt Obligations). The sum of actual tradeable financial instruments were limited by their issue – synthetic products allowed banks to create products to meet the demand from clients to gain exposure to entities. It was a this stage that the market truly grew – it was possible to replicate any exposure that the client desired. When the financial crisis hit, all the “over the counter” derivatives compounded the problems. No one knew what the potential exposure of their counterparties was. These counterparties could have easily sold CDS contracts that could have a potential exposure to the par value of the underlying reference entities of bonds, CDO’s etc.
Is there a future?
CDS are useful financial products – most of the trades now take place on exchanges. However, the genie is not yet back in the bottle. There are now lawsuits – initiated by hedge funds – claiming that defaults are now being prearranged (Hovnanian Enterprises Inc.). The main problem is still who holds the potential risk and for how much. The essence of the product is viable and the original demand is still there. But, as with many financial products, as soon as they become commoditised, market turnover far exceeds the actual underlying market.
Cash Management and Treasury Specialist