Banks have been issuing letters of credit since early Egypt, according to some researchers, but the nature of trade finance has come a long way since then.
In fact, it has come a long way just over the past 20 years. Ask Carmel Borg, who heads Bank of Valletta’s Trade Finance Centre.
“In 1993, when the Centre was set up to centralise the business and build up expertise, we were the only Maltese bank doing trade finance. Admittedly most transactions were plain vanilla deals and no one seemed to be in a hurry at that time. Lead times for orders tended to be much longer whereas nowadays it is just weeks and with the principle of "just in time production”, hours can make a difference. Furthermore, the local economy has evolved and we are now involved in much more diverse and complex transactions where finalising a trade deal could take days of negotiation,” he said.
In fact, one of the most important functions of the Trade Finance Centre is an advisory one, as its long experience and vast expertise enable it to guide its clients through the maze of risks that International Trade inevitably involves.
Trade Finance has always been an integral part of the services offered by the Bank but it has been given considerably more importance as demand evolved.
"This business carries with it a high element of risk so we are very prudent about whom we do business with, the markets we operate in and the commodities we handle. As a minimum, the client must maintain an account relationship with us. After all, the Bank believes very strongly in relationship banking and the importance of knowing the customer," Mr Borg explained.
"International trade is governed by universally-accepted rules but that is not enough. To be successful you need to appreciate cultural issues and perceptions and the characteristics of particular markets, and the political, economic and environmental issues in which such trade takes place. You also need to develop an instinct that warns you of risk when a transaction looks good on paper, but is not."
“Perhaps the Unit’s strongest selling point is the personal approach and the flexibility this small but dedicated team offers. This personal approach spreads to all the persons involved in the chain and has been instrumental in concluding deals that otherwise would have been lost, were it not for our intervention.”
BOV’s Trade Finance Centre has been awarded the Best Trade Finance Provider in Malta accolade by Global Finance for five consecutive years. Carmel attributes this award to the dedication and expertise of the team members, saying, “The key strength of BOV Trade Finance is the years of experience that translate into sound advice and dedication in guiding clients throughout the process. Our people put time and effort to ensure that our clients understand every step of the transaction undertaken.”
Looking ahead, Mr Borg said, “At Bank of Valletta we are committed to be an enabler and long-term partner to corporate clients as well as to entrepreneurs. International trade has always been a fine balance of opportunity and risk, particularly when trading across borders. Our approach reflects our vision – to remain forward looking and continuously reinvent ourselves. It is only in this manner that we can truly be the financial partner of choice for our customers.”
The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice.
Bank of Valletta p.l.c. is a public limited company licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta). Registered Office: 58, Triq San Zakkarija, Il-Belt Valletta VLT 1130-Malta Registration Number: C 2833