Rules & Regulations Governing Trade Services

Transcription

1 Rules & Regulations Governing Trade Services

2 The (Unintended) Impact on Exporters of the Rules & Regulations Governing Banks That Provide Trade Services Buddy Baker (312)

3 Speaker Bio: Walter (Buddy) Baker Walter (Buddy) Baker brings more than 30 years of experience in international trade finance to his current position as Vice President and head of Global Trade Solutions Delivery for Fifth Third Bank. Fifth Third is one of the 20 largest banks in the US and provides a full range of risk mitigation and financing products for exporters and importers. His professional experience includes earlier stints with Atradius Trade Credit Insurance, ABN AMRO Bank, Bank of America, Wachovia Bank, and The First National Bank of Chicago. Buddy is a recognized expert in trade finance and makes frequent presentations for national associations of exporters, importers, bankers, and lawyers. He designed the online training/certification programs used by the Association of International Credit and Trade Finance Professionals (ICTF) and by the Association of Trade and Forfaiting in the Americas (ATFA) and the trade finance sections of the certification program used by the Finance, Credit and International Business Group (FCIB) of the National Association of Credit Management (NACM). Mr. Baker has authored numerous magazine articles and the books Users Handbook to Documentary Credits under UCP600, Documentary Payments & Short-Term Trade Finance, and The Regulatory Environment of Letters of Credit and Trade Finance. He serves as a member-at-large of the National Letter of Credit Committee of the Bankers Association for Finance and Trade/International Financial Services Association and is actively involved in establishing national and worldwide standard practices for LCs, such as the current version of the Uniform Customs and Practice for Documentary Credits (referred to as UCP600 ), the official ICC guide for examining letter of credit documents, called the International Standard Banking Practices for the Examination of Documents under Documentary Credits ( ISBP ), the eucp supplement to the UCP dealing with electronic documents, the International Standby Practices ( ISP98 ), and Article 5 of the Uniform Commercial Code. Buddy also serves on the Board of Directors of the Association of International Credit and Trade Finance Professionals (ICTF), a multinational association of export credit managers, on the Advisory Council of the Institute for International Banking Law and Practice, and on the Council on International Standby Practices. Buddy earned his undergraduate degree at Yale University and his MBA at Northwestern. He can be reached at (312) or buddy.baker@53.com. Rules & Regulations - Buddy Baker 4

4 Rules & Regulations Pertaining to Exporting The Uniform Customs and Practice for Documentary Credits ( UCP ) International Standard Banking Practice for the Examination of Documents under Documentary Credits ( ISBP ) The eucp The International Standby Practices ( ISP98 ) The Uniform Rules for Demand Guarantees Letter of credit law (e.g., Uniform Commercial Code, Article 5) The Uniform Rules for Collections Negotiable instrument law (e.g., Uniform Commercial Code, Articles 3 and 4) The International Commercial Terms ( Incoterms ) The U.N. Convention on Contracts for the International Sale of Goods ( CISG ) Export licensing (e.g., the Export Administration Regulations ( EAR ) and International Traffic in Arms Regulations ( ITAR )) FX controls Sanctions against enemy countries (e.g., the Office of Foreign Assets Control and U.N. sanctions) Antiboycott regulations Anti-Money Laundering regulations (e.g., the USA PATRIOT Act) Anti-corruption regulations (e.g., the Foreign Corrupt Practices Act) Rules & Regulations - Buddy Baker 5

5 Rules & Regulations Pertaining to Exporting The Uniform Customs and Practice for Documentary Credits ( UCP ) International Standard Banking Practice for the Examination of Documents under Documentary Credits ( ISBP ) The eucp The International Standby Practices ( ISP98 ) The Uniform Rules for Demand Guarantees Letter of credit law (e.g., Uniform Commercial Code, Article 5) The Uniform Rules for Collections Negotiable instrument law (e.g., Uniform Commercial Code, Articles 3 and 4) The International Commercial Terms ( Incoterms ) The U.N. Convention on Contracts for the International Sale of Goods ( CISG ) Export licensing (e.g., the Export Administration Regulations ( EAR ) and International Traffic in Arms Regulations ( ITAR )) FX controls Sanctions against enemy countries (e.g., the Office of Foreign Assets Control and U.N. sanctions) Antiboycott regulations Anti-Money Laundering regulations (e.g., the USA PATRIOT Act) Anti-corruption regulations (e.g., the Foreign Corrupt Practices Act) Rules & Regulations - Buddy Baker 6

6 What Banks Are Required to Do Block any assets of parties located in sanctioned countries and of Specially Designated Nationals of those countries coming under control of the bank Block any assets of Designated Terrorists and Terrorist Organizations and Designated Drug Traffickers and Kingpins coming under control of the bank Not implement any letter of credit containing prohibited boycott language Report every letter of credit containing reportable boycott language Conduct due diligence on all account relationships of the bank Report suspicious activities Rules & Regulations - Buddy Baker 7

7 Sanctions

8 Sanctions - Introduction Definition: Action by one or more states toward another state calculated to force it to comply with legal obligations. Sanctions are supposed to persuade rulers to change their military, economic, or human rights policies, so as to end wars, civil conflicts, or other crises that threaten international peace and security. Sanctions are meant to bring about a change of behavior; they are not supposed to be punishment or retribution. The U.N. Security Council imposes sanctions to enforce international law, but depends on member nations to actually enforce them. The U.S. often takes independent action, usually before the U.N. Rules & Regulations - Buddy Baker 9

9 Sanctions - An Analysis Typically, sanctions cut off trade and investments, preventing a target country from buying or selling goods in the global marketplace. Sanctions aim at particular items like arms or oil. They may cut off air traffic, suspend or drastically curtail diplomatic relations, block movement of persons, bar investments, or freeze international bank deposits and other property. Rules & Regulations - Buddy Baker 10

10 U.S. Office of Foreign Assets Control (OFAC)

11 Office of Foreign Assets Control OFAC is a division of the U.S. Department of Treasury. It administers and enforces economic and trade sanctions against hostile targets to further U.S. foreign policy and security objectives. Enemy countries Individual sponsors of terrorism and any agency sponsoring terrorism International narcotics traffickers Rules & Regulations - Buddy Baker 12

12 Office of Foreign Assets Control Many of OFAC sanctions are based on United Nations or other international agreements. As such, they are multilateral in scope and involve close cooperation with concerned governments. OFAC acts under Presidential wartime and national emergency powers and under the authority granted by specific legislation to authorize imposing of controls on trade transactions and foreign investments and even freeze foreign assets that may come under U.S. jurisdiction. Rules & Regulations - Buddy Baker 13

13 OFAC Sanctions Apply to U.S. residents or nationals This includes- Individuals Any partnership, corporation, company, association, or other entity organised under U.S. law U.S. companies foreign subsidiaries, partnership affiliates, branches, offices, or other permanent foreign establishments that are controlled in fact by such U.S. company The government of the U.S. or any department, agency or commission thereof; the government of any state of the U.S., the District of Columbia, the Commonwealth of Puerto Rico, any territory of the U.S. or any subdivision, department, agency, or commission of any such government Rules & Regulations - Buddy Baker 14

14 Role of Banks U.S. banks & U.S. branches of foreign banks must comply in all respects with the laws, policies, and regulations of the United States Department of Treasury. They are like a front-line defense against foreign threats to U.S. interests. Rules & Regulations - Buddy Baker 15

15 Role of Banks Enforce sanctions against imports and exports of any goods and services from/to: Sanctioned countries Specially Designated Nationals (SDNs) Specially Designated Terrorists (SDTs) Specially Designated Narcotics Traffickers (SDNTs) Foreign Terrorist Organisation (FTOs) Blocked Persons (companies and individuals) Block or freeze property and payment of any funds transfers or transactions intended for these entities. Report all blocked property to OFAC within 10 days of occurrence. This does not mean the bank returns the funds or property they ve received. They must hold the funds/property on behalf of the U.S. Treasury Department. Rules & Regulations - Buddy Baker 16

16 Property Property includes Money, checks, drafts, bullion, bank deposits, savings accounts, debts, indebtedness, obligations, notes, debentures, stocks, bonds, coupons, financial securities, BANKERS ACCEPTANCES, mortgages, pledges, liens or other rights in the nature of security, property, warehouse receipts, B/Ls, TRUST RECEIPTS, bills of sale, any other evidences of title, ownership, LETTERS OF CREDIT, powers of attorney, goods, wares, chattels*, stock on hand, ships, goods on ships, vendors sales agreements, land contracts, real estate interests, lease holds, rents options, NEGOTIABLE INSTRUMENTS, TRADE ACCEPTANCES, royalties, account payable, patents, trademarks, copyrights, insurance policies, safe deposit boxes, pooling agreements, contracts of any nature. * Moveable possessions Rules & Regulations - Buddy Baker 17

17 General & Specific Licenses A license is a permit issued by OFAC allowing an activity that would otherwise be prohibited by sanctions. A General License allows certain types of transactions described in the regulations. (A General License is not a document.) In the other cases, the shipper or importer can apply for a Specific License. (A Specific License is a document. It is signed and on U.S. Treasury Department stationery.) Rules & Regulations - Buddy Baker 18

18 U.S.-Sanctioned Countries (and Their Agents) Include: Broad Cuba Iran North Korea* Sudan Syria * Imports are prohibited; exports are permitted. Limited to Specific Individuals The Balkans Belarus Burma (Myanmar) Congo, Democratic Republic of Iraq Ivory Coast Liberia Libya Russia (Sectoral Sanctions) Somalia Zimbabwe In addition, importation into the U.S. of rough diamonds from any country is prohibited without certain documentation proving the country of origin. Rules & Regulations - Buddy Baker 19

19 Penalties Fines: USD50, to USD1,075, per count Criminal Penalties Up to 20 years in jail Certain violations, e.g., money laundering, can carry more adverse consequences Loss of reputation due to adverse publicity If a bank participates in a transaction that violates OFAC regulations and a correspondent bank, freight forwarder, airline, etc., detects the omission, they are obligated to report that bank to OFAC. Rules & Regulations - Buddy Baker 20

20 What Banks Actually Do Check the names and addresses of all parties and the routing instructions in all letters of credit (import, export, standby) against the OFAC lists and various lists of bad people, like the list of Denial Orders, and Politically Exposed Persons; refuse to issue or advise L/Cs that involve any such people Check the names and addresses of all parties and actual routing of goods in letter of credit documents against the OFAC lists and the lists of bad people Block both funds and documents if any people or countries from the OFAC lists show up in the documents Rules & Regulations - Buddy Baker 21

21 What Banks Actually Do Include language of the following sort in transferable letters of credit: This letter of credit may be transferred, however, the name of any proposed transferee must be provided to us for approval prior to any transfer being effected. This letter of credit is transferable. Transfer to any parties under this letter of credit is subject to the United States Office of Foreign Assets Control regulations in force from time to time. This has, however, become problematic Rules & Regulations - Buddy Baker 22

22 Sanctions Clauses Used in Letters of Credit Were originally used by foreign branches of U.S. banks to remind parties that they will follow U.S. law and regulations Are not standardized Are generally not objectionable when they simply inform the parties Are objectionable when they give the issuer discretion as to whether or not to honor Are objectionable when they are unnecessarily complex There is no requirement for banks to include sanctions clauses in L/Cs The best sanctions clause merely reminds the parties to the L/C that the bank follows U.N., U.S., etc., sanctions Rules & Regulations - Buddy Baker 23

23 Sanctions Clauses Used in Letters of Credit An example of a simple, informative sanctions clause is: Presentation of document(s) that are not in compliance with the applicable anti-boycott, anti-money laundering, anti-terrorism, anti-drug trafficking, and economic sanctions laws and regulations is not acceptable. Applicable laws vary depending on the transaction and may include United Nations, United States, and/or local laws. Rules & Regulations - Buddy Baker 24

24 Sanctions Clauses Used in Letters of Credit An example of a more complex sanctions clause that brings into question the bank s obligation is: [Bank] complies with the international sanctions laws and regulations issued by the United States of America, the European Union, and the United Nations (as well as local laws and regulations applicable to the issuing branch) and in furtherance of those laws and regulations, [Bank] has adopted policies that in some cases go beyond the requirements of applicable laws and regulations. Therefore [Bank] undertakes no obligation to make any payment under, or otherwise to implement, this letter of credit (including but not limited to processing documents or advising the letter of credit), if there is involvement by any person (natural, corporate or governmental) listed in the USA, EU, UN, or local sanctions lists, or any involvement by or nexus with Cuba, North Korea, Sudan, Iran, or Myanmar, or any of their governmental agencies. Rules & Regulations - Buddy Baker 25

25 U.S. Anti-Boycott Regulations

26 What Are We Talking About? Boycotting of countries, individuals, companies, and products Regulations prohibiting U.S. Persons from participating in another country s boycott by: Refusing to do business (with blacklisted firms & friendly countries) Discriminating (based on race, religion, sex, or national origin) Furnishing individual information (about race, etc.) Furnishing business information Public disclosure of participation in a boycott The point of the anti-boycott regulations is to prevent U.S. entities from being used as pawns in someone else s game Rules & Regulations - Buddy Baker 29

27 Structure of Boycotts 1. Primary Boycott Syria refuses to trade with the country of Israel. Countries are free to boycott one another. U.S. Persons may comply with a Primary Boycott, by contracting not to ship goods from a boycotted country, but must report receipt of requests to comply. Permissible but Reportable Example: Goods of Israeli origin prohibited Rules & Regulations - Buddy Baker 30

28 Structure of Boycotts 2. Secondary Boycott Syria refuses to trade with anyone who does business with Israel. Syria develops a black list of those trading with Israel. U.S. Persons may not comply with a request to participate in another country s boycotts and must report receipt of requests to comply. Prohibited and Reportable Example: Certificate that goods are not of Israeli origin Rules & Regulations - Buddy Baker 31

29 Structure of Boycotts 3. Tertiary Boycott Syria refuses to trade with anyone who does business with those on Syria s black list. U.S. Persons may not comply with a request to refuse to do business with people on a black list and must report receipt of such requests. Prohibited and Reportable Example: Certificate that the exporter does not do business with companies on the Saudi Arabian black list Rules & Regulations - Buddy Baker 32

30 Other Concerns White List A list of companies, etc. that a country is willing to do business with. Opposite of a black list but is considered Reportable and Prohibited. Rules & Regulations - Buddy Baker 34

31 Role of Banks No bank may issue, pay, honor, confirm, or otherwise implement a letter of credit that contains a condition or requirement, compliance with which would violate a prohibition of the Export Administration Act. A bank may, however, advise a beneficiary that there exists a letter of credit in his favor. It is not clear whether the bank may deliver a copy of the letter of credit to the beneficiary before Prohibited language is deleted. Rules & Regulations - Buddy Baker 35

32 Role of Banks Review letters of credit and documents Identify boycott-related language Reportable but not Prohibited Reportable and Prohibited Neither Reportable nor Prohibited Report findings Rules & Regulations - Buddy Baker 36

33 Penalties Fines are imposed by the Department of Commerce. Fines can be for implementing an L/C with Prohibited language, for failing to report an LC with Reportable language, or for late reporting. Fines may be for up to USD50, per violation -- more for repeat offenders and serious violations. Criminal penalties maybe sought against individual for up to USD50, and or up to 5 years in prison. Companies can also have their export privileges denied. Rules & Regulations - Buddy Baker 37

34 What Banks Actually Do Read every export L/C before advising it to catch boycott language; obtain amendments when necessary before advising and file reports when required Examine documents presented under export L/Cs for prohibited and reportable language; refuse documents with prohibited language (get the language removed); file reports when necessary Rules & Regulations - Buddy Baker 41

35 USA PATRIOT Act

36 What Is Money Laundering? Money laundering is the process of integrating the proceeds of crime into the legitimate stream of financial commerce by masking their origin A process to make illegitimate funds appear legitimate Seeks to conceal or disguise the existence or source of funds Facilitates crime by allowing criminals to maintain control over such funds after they ve been laundered Involves more than handling deposits of large amounts of cash may involve elaborate systems of loans, wires, purchase and sale of goods, front companies, and shell banks Rules & Regulations - Buddy Baker 44

37 Example 1 Trade price manipulation - sell something for nothing: Move USD1,000,000 from U.S. drug dealer to foreign drug supplier through U.S. export at low price 1. U.S. drug dealer has USD1 million cash from street sales to pay to foreign drug supplier 2. Dealer buys 200 Rolex watches at USD5,000/ea (pays USD1,000,000 cash) 3. Dealer exports watches to foreign supplier at USD5.00 each (receives USD1,000) 4. Foreign supplier sells 200 Rolex watches at USD5,000 each = USD1,000,000 Rules & Regulations - Buddy Baker 45

38 Example 2 Trade price manipulation - buy nothing for something: Move USD1,000,000 from U.S. drug dealer to foreign drug supplier through U.S. import at high price 1. U.S. drug dealer has USD1 million in bank deposits to pay to foreign drug supplier 2. Foreign drug supplier buys 10,000 pencils at equivalent of 10 cents (USD1,000) locally 3. Foreign drug supplier sells 10,000 pencils to U.S. drug dealer at USD100 each 4. U.S. drug dealer pays USD1,000,000 to foreign drug dealer Rules & Regulations - Buddy Baker 46

39 Activities That Need Money Laundering Criminal activities Primary objective is financial gain Terrorism Primary objective is to intimidate a population or to compel a government to do or abstain from doing an act Both terrorism and other criminal activities must develop: Sources of funding Means of laundering those funds Rules & Regulations - Buddy Baker 48

40 Sources of Terrorist Financing Some governments sponsor terrorists Illegal revenue-generating activities Kidnapping Extortion Large-scale smuggling Fraud Thefts and robberies Narcotics trafficking Income derived from various legal activities Community solicitation Fundraising by charitable or relief organizations Donations Rules & Regulations - Buddy Baker 49

41 The USA PATRIOT Act, Section 326 Requires banks to establish and maintain Customer Identification Programs ( CIPs ) for ALL persons seeking to open accounts Applies to federally-regulated financial institutions, including US offices of foreign banks Minimum requirement is to obtain and verify Name (and birth date for individuals) Address Tax ID then keep a record Rules & Regulations - Buddy Baker 51

42 Penalties Reputational damage Supervisory penalties Possible loss of banking charter Other enforcement actions Civil monetary penalties In some cases, criminal penalties Fines Jail Disciplinary action/termination of employment Rules & Regulations - Buddy Baker 52

43 Elements of an AML Compliance Program A Customer Identification (Know Your Customer)/Enhanced Due Diligence Program that provides for identification of clients at account opening or inception of a business relationship and collection/verification of additional information commensurate with the risk assessment A process to identify high-risk customers for on-going transaction monitoring and enhanced due diligence Procedures to identify and report suspicious transactions to government authorities Rules & Regulations - Buddy Baker 53

44 When Is Customer Identification Required? Before a relationship is established with any new client, anywhere in the bank, a due-diligence process known as a Customer Identification must be undertaken Relationship is not defined in the regulations, but can be taken to involve some formality New credit facilities always require approval New depositary accounts always require approval Repetitive or large transactions may justify approval Increased risk clients require Enhanced Due Diligence ( EDD ) Rules & Regulations - Buddy Baker 55

45 Applicability to Global Trade Services Departments at Banks Trade transactions, by definition, involve 2 parties A bank will not usually deal directly with both parties, but with one party and the other party s bank For the purposes of KYC, there are 2 potential customers in a trade transaction, the domestic corporation and the foreign bank Who is considered the customer depends on the type of transaction Although the bank must know their own customer, it is not necessary to know the customer s customers (or suppliers) Rules & Regulations - Buddy Baker 58

46 What Banks Actually Do Make sure a KYC due diligence review has been conducted on the parties with whom an account relationship seems to exist (most banks use the IFSA guidelines as to what constitutes an account relationship under a letter of credit) Decline transactions where no appropriate party can be properly identified and classified as a desirable relationship Return and/or report all suspicious transactions, e.g., where the value of the goods seems out of line or the type of goods seems out of character for the business the buyer and/or seller appear to be in. Rules & Regulations - Buddy Baker 61

47 Suspicious Activities

48 Red Flags for Suspicious Activities Politically Exposed Persons ( PEPs ) Individuals who have or have had senior positions of public trust such as government officials, senior executives of government corporations, politicians, important political party officials, etc. and their families/close associates Examples of PEPs: heads of state, government/cabinet ministers, senior judges, senior political party functionaries, members of royal families, etc. Denied Parties Companies that have had their export privileges revoked or suspended, making it illegal for them to sell U.S. products to foreign buyers PEPs and Denied Parties are added by many services to the list of Specially Designated Nationals so a subscriber can search on all at once. Rules & Regulations - Buddy Baker 66

49 Suspicious Trade Transactions The customer engages in transactions that are inconsistent with the customer s business strategy or profile (e.g., a steel company that starts dealing in paper products) or make no economic sense A customer deviates significantly from its historical pattern of trade activity (in terms of markets, monetary value, frequency of transactions, volume or merchandise type) Transacting parties appear to be affiliated, conduct business out of a residential address, or provide only a registered agent s address Customer that conducts business in jurisdictions that are at higher risk for money laundering, terrorist financing, or other financial crimes Customer shipping items to, through, or from higher-money-laundering-risk jurisdictions including countries identified by the Financial Action Task Force as non-cooperative jurisdictions as regards anti-money laundering regulations Rules & Regulations - Buddy Baker 67

50 Suspicious Trade Transactions Customers transacting in activities/goods that potentially involve a higher risk of money laundering and other financial crimes including activities/goods that may be subject to export/ import restrictions Obvious over- or underpricing of goods Obvious misrepresentation of quantity of goods shipped The payment terms or tenor are inconsistent with the type of goods Transaction structure and/or shipment terms appear unnecessarily complex or unusual and designed to obscure the true nature of the transaction The L/C contains non-standard clauses or phrases or has unusual characteristics The L/C is frequently significantly amended for extensions, changes to the beneficiary and/or changes to payment location Rules & Regulations - Buddy Baker 68

51 Suspicious Trade Transactions The transaction appears to involve the use of front or shell companies for the purpose of hiding the true parties involved The bank is approached by a previously unknown party whose identity is not clear, who seems evasive about their identity or connections, or whose references are not convincing, or payment instructions are changed at the last minute Trade-related documentation under an L/C or documentary collection appears illogical, altered, fraudulent, or certain documentation is absent that would be expected given the nature of the transaction Transaction involves obvious dual-use goods Rules & Regulations - Buddy Baker 69

52 Questions?

53 Basel Accords Requirement Basel I Basel II 2013 Basel III Common Equity 2.0% of RWA 3.5% of RWA 4.5% of RWA 4.5% of RWA Tier 1 Capital 4.0% of RWA 4.0% of RWA 4.5% of RWA 6.0% of RWA 6.0% of RWA Total Capital 8.0% of RWA 8.0% of RWA 8.0% of RWA 8.0% of RWA 8.0% of RWA Capital Conversion Buffer % of RWA Counter Cyclical Buffer Under Basel I, confirmation of a commercial letter of credit has a capital requirement of 0.32% Additional Loss Absorbency Leverage (based on Tier 1 Capital) (based on Total Capital) Under Basel III, it can be as high as 23.25% +Up to 2.5% of RWA +1% to 2.5% of RWA Observation Observation 3% of direct and contingent assets (4% of direct assets) Banks will need to charge 4.2% per annum to get a Return on Capital of 18% and 72 times as much to get the same Return on Capital as before! Liquidity Coverage Observation 21 days (30 days) Net Stable Funding Observation Observation 1 year 21 days (30 days) The amount of Risk-Weighted Assets ( RWA ) is computed by multiplying the amount of each asset and contingent asset by a risk weighting and a Credit Conversion Factor ( CCF ) Under Basel I, risk weightings are set: 0% for sovereigns, 20% for banks where tenors one year, 50% for municipalities and residential mortgages, 100% for all corporate obligors Under Basel II, risk weightings are based on internal or external (rating agency) risk ratings with no special distinction for banks; capital requirements for exposures to banks are increased by as much as 650% (from 20% to as much as 150%) The Credit Conversion Factor for Letters of Credit varies under Basel I vs. Basel II and Basel III Under Basel I, this is 20% for commercial L/Cs, 50% for performance standbys and 100% for financial standbys; confirmation of a commercial letter of credit has a capital requirement of 0.32% (8% x 20% x 20%) Under Basel II and III, Sophisticated Banks are required to do a statistical analysis of losses based on structure (and, due to limited losses, there are insufficient loss data for any bank in the world to do this for letters of credit, resulting in using the default CCF of 100%; under Basel II, the capital requirement to confirm a letter of credit can jump from 0.32% to 12%, viz., 8% x 150% x 100%; under Basel III, it can be as high as 23.25%, viz., 15.5% x 150% x 100%) In the US, Basel II only applies to Large, Internationally-Active Banks --the 9 largest commercial banks fit the definition; as of January 1, 2013, Basel III applicability has not been finalized, but is proposed to remain the same The Leverage ratio does NOT apply risk weightings or credit conversion factors; the ratio is 100% for all direct and contingent assets except performance-based standbys (50%) and commercial L/Cs (20%) The Additional Loss Absorbency requirement applies only to Globally Systemically Important Banks Depending on the bank and the point in the economic cycle, under Basel III, the total capital requirement for a bank in 2019 may be as much as 15.5% of Risk-Weighted Assets ( RWA ), compared with 8% under Basel I and Basel II

54 The Impact on Exporters of the Rules & Regulations Governing Banks That Provide Trade Services Buddy Baker (312)

55 Rules & Regulations Governing Trade Services