Chinatrust bank treads where not many dare

Not many banks are willing to offer trade finance without the security of a letter of credit. Chinatrust Bank steps up to the plate to offer multi-country financing for TradeCard members.

Taiwan's Chinatrust Commercial Bank has signed on to become a member bank of TradeCard, a global online international trade transaction network. As a member bank, Chinatrust will be considering members of TradeCard for trade financing without the security of a letter of credit. 

Securing the co-operation of Chinatrust is a step forward for TradeCard buyers and sellers. The company's main proposition is to facilitate international paperless transactions based on the co-operation and trust of multiple parties in the trading process, thus making the paper burden of supporting letters of credit redundant. However, not all banks in Asia are ready to finance exporters without the security of a letter of credit.

"Some banks may not be willing to give financing on a TradeCard transaction, because although a lot of the TradeCard terms are the same as the terms of a letter of credit, it is not the same as a letter of credit," admits Carl Wegner, director of business development for TradeCard in Taiwan. What TradeCard is developing is a network of banks that will accept both a letter of credit and also the terms as agreed by TradeCard members, Wegner says.

The advantage is that as TradeCard member bank, Chinatrust will be able to monitor the status of a transaction, thus better managing its risk. "Chinatrust will, for example, be able to monitor when the packing is completed, and the logistics completed…and if the bank wanted to integrate, they could integrate the process of the transaction into their back office.  This menas that they [the bank] don't have to wait until the end to know if the transaction has been completed," says Wegner.

This open-account style of trading with financing by Chinatrust is more attractive to suppliers than it is to buyers. Under TradeCard terms, a buyer may have to pay sooner than usual, says Wegner. However, for suppliers, Chinatrust is added to the list of banks that will consider offering export financing to TradeCard members provided they pass the same credit checks as per normal.

Chinatrust's financing services will be made available to Tradecard members in Taiwan, Hong Kong and the United States, and the bank is the first Taiwanese bank to offer multi-country, multi-currency financing for members.

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