The facility will provide medium-sized private local banks active in import trade, with access to increased confirmation limits for letters of credits (LCs) issued by them.
IFC and HSBC have initially selected Asia United Bank and East West Banking Corp. to participate in the new facility. Asia United Bank president Abraham Co and East West Bank president Elrey Ramos, also signed their respective tripartite framework agreements.
Under the PTF, IFC will guarantee 40 percent of the incremental confirmation facility, enhancing the capability of the selected banks to carry out international trade transactions. HSBC will take the remaining 60 percent risk.
This trade enhancement program was developed by IFC to assist medium-sized commercial banks secure higher credit limits for the issuance of confirmed LCs. IFC has entered into similar agreements with partner banks in Bangladesh, Indonesia, Korea and Pakistan. The PTF is the seventh trade facility put in place by IFC since 1997. These facilities are extended to banks whose financial conditions exhibit growth potential in financing trade.
HSBC chief executive officer Warner Manning said: "We are delighted to work with IFC on this program that aims to develop a robust trade services business in the Philippines by supporting select banks that are trade-focused."
IFC country manager, Vipul Bhagat said: "the establishment of the Philippine trade facility with HSBC is a significant milestone in our work in the Philippines. The participation of mid-market banks will play a strong role in increasing the availa-bility of trade finance to importers and exporters. It is particularly important to maintain trade flows since they contribute significantly to the level of economic activity in the country. IFC is playing a catalytic role in this transaction by mobilizing financing through risk mitigation and credit enhancement and is demonstrating its continuing confidence in the banking sector."