Trade & investment

ICC-IFA to draft trade finance forfaiting rules

  • 24 June 2009

ICC and the International Forfaiting Association (IFA) have created a joint drafting group to prepare new global forfaiting rules, the ICC Banking Commission announced today.

The drafting group was created following a request last year to form a special task force to review existing IFA guidelines for the Forfaiting Primary Market. Following discussions, both ICC and IFA proposed to work together with the objective of developing a set of global rules for the forfaiting market at both the primary and secondary levels.

“It is envisaged that the drafting may take several years before a final document is eventually approved,” remarked Thierry Senechal, Policy Manager for the ICC Banking Commission.

Forfaiting is growing rapidly in emerging markets in Asia and elsewhere. At least in its traditional form, forfaiting is a form of export trade finance involving the discount of trade related debt obligations due to mature at a future date without recourse to the exporter/endorser.

Forfaiting is typically medium term finance running from 3 to 5 years concluded at a fixed interest rate, although it can also be arranged on a floating interest-bearing basis for periods ranging from 6 months to 10 years or more.

IFA is the worldwide trade association for commercial companies, financial institutions and intermediaries engaged in forfaiting. Founded in 1999 and with more than 140 members, IFA aims to foster business relationships and enable best practice among those engaged in the ever-expanding, global forfaiting community.

IFA’s Market Practice Committee has the task of setting a framework and providing points of reference for transactions in the international forfaiting market. Over the past years, it has prepared guidelines and advised on a code of conduct.

For its part, the ICC Banking Commission is a leading global rule-making body for the commercial banking industry as well as a worldwide forum of trade finance experts whose common aim is to facilitate international trade finance across the globe. The Banking Commission is known for producing universally accepted rules and guidelines for documentary credits, documentary collections, bank-to-bank reimbursement and bank guarantees