Banking
beyond borders
Currency fluctuations, credit risk, tax implications… these are just some of the
issues that may concern clients conducting transactions that involve entities in
another country. Banker SA takes a look at some of the measures introduced by
local players to address their apprehensions. By Lisa Witepski
BANKING BASICS
Standard Bank points out that common
considerations facing users wishing to make
cross-border payments range from concern
about the safety of their funds, to costs and
issues related to currency fluctuations.
A number of simple tools can be employed
to allay these fears. For example, consumers
who need to send funds abroad and who
wish to ensure that their monies have safely
reached the intended destination at full foreign
currency value, may feel assured if they use
well-known, reputable mechanisms like
MoneyGram, Western Union or, in the case of
bank-to-bank payments, SWIFT.
Companies that have established
international trade partners seek similar
assurance. For such clients, safety is key.
With this in mind, Standard Bank offers
an integrated solution for foreign exchange
transactions, as well as international banking,
namely IBFX. This single platform facilitates
foreign payments, enabling tracking, while also
guarding funds against exchange rate volatility.
The bank advises that companies feeling
threatened by credit risk should make use
of foreign guarantees. Inward guarantees
might be particularly useful for beneficiaries
who feel uncertain about the standing of the
issuing bank in the applicants’ country, and
therefore prefer a guarantee from a local bank
in their own country. A further suggestion
is that companies engaging in foreign trade
make use of telegraphic or electronic transfers
as the most simple and convenient means of
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payment, especially for funds being transferred
internationally. According to Standard Bank,
this process negates the complications, delays
and security risks associated with using
physical instruments.
Finally, recognising that international
transactions often involve a degree of
complexity – particularly if a variety of
trade finance mechanisms, like international
payment instruments and hedging techniques,
are employed – Standard Bank advises that
clients should be given the option to consult
with a trade finance specialist who can help
to provide professional guidance.
INTO AFRICA
Building on the political goal of creating an
economically integrated region, the SADC
Banking Association was mandated to develop
the regional instruments required to promote
the development of interoperable systems, as
well as represent the interest of commercial
banks in the region.
The resulting platform, SADC Integrated
Regional Electronic Settlement System
(SIRESS), is a cross-border platform which
facilitates transactions between member states.
“Regional economic integration is
considered a spur for trade and investment in
southern Africa, and payments are a pivotal
part of this. The idea was to make payments
between countries easier, more streamlined
and ultimately more cost-effective in
support of greater trade and investment,” the
organisation’s Arthur Cousins explains.
SADC Banking Association’s manager
Maxine Hlaba explains that the platform is the
initiative of the SADC Committee of Central
Bank Governors (CCBG) in the region, as
set out in the SADC protocol on Finance and
Investment (FIP), and belongs to all member
states. It is currently housed in South Africa at
the South African Reserve Bank. The system
is used to facilitate high-value payments, with
payments to the value of R60 billion currently
being processed by the system. SIRESS was
piloted in the Common Monetary Area of South
Africa, Namibia, Swaziland and Lesotho, in July
2013, before it was made available to the broader
SADC region. It is now live in nine countries,
with 63 banks covered by the system.
Cousins says before the implementation
of SIRESS, banks generally transacted with
each other in a bilateral correspondent mode.
In contrast, SIRESS allows for all banks to be
connected through a single platform. Because it
is possible for all members of the platform to see
when a settlement is made, the settlement risk
between banks is eliminated, while the payment
is speeded up.
“Once all banks improve processing internally,
the process will be far more simple than before
and this, in turn, will ensure cost effectiveness,”
Cousins comments. With this in mind, the goal
now is to ensure that more banks and countries
within the region subscribe to the system. The
Association is also working to implement the
retail payment streams, and this will further
streamline processes and reduce risks inherent
in these payment streams.
BANKERSA | Edition 12
2014/12/18 10:54 AM