The large-scale trade finance joint venture between BNY Mellon and Germany's 25 largest savings bank should boost the flow of trade between Asia and Germany. The joint venture, announced in August, covers China, India and Southeast Asia

Satan

Bilateral trade between Germany and China had grown to over US$190 billion at the end of 2013, making the two economies the third largest trade partner of one another. Trade volumes with Southeast Asia and India stood at around US$50 billion and US$16 billion, respectively.

Small and medium sized enterprises in Germany and Asia-Pacific, which account for a large portion to both import and export flows, often do not have direct relationships with major global banks to facilitate their secure trade finance.

The arrangement between BNY Mellon, the 25 largest savings banks and a regional state bank, Heleba, seeks to complement BNY Mellon's large directory of direct corporate client and correspondent banking relationships in Asia as well as the pervasive market presence of German savings banks among SMEs in the country.

"The savings banks are well established in Germany, covering 40% of the SME segment. Together, they represent one of the largest financial institutions in the world, with roughly 250,000 employees throughout Germany and a huge branch network," relates Simone Satan, vice-president in BNY Mellon's treasury services sales and client management team.

Savings banks have a market share of 28% on import letters of credit (L/Cs) in Germany, but the majority of these are based on trade with European partners. They are constrained by lack of brand awareness abroad as well as competition from major German private banks, she adds.

The 25 largest of them and Heleba embarked on a project to increase their presence abroad.

The idea of partnering with BNY Mellon was first floated a little over a year ago, Satan shares, partly because BNY Mellon does not compete with the banks in the SME sector. The arrangement enables the savings banks to send German import letters of credit to Asia-Pacific beneficiaries via BNY Mellon's branch network for advisement.

Sammy Lee, regional manager of trade processing product in Asia-Pacific at BNY Mellon notes that apart from roughly 2,000 correspondent banking relationships, the bank has direct beneficiary relationships with over 20,000 clients in Asia-Pacific. Receivable financing is available to some of them.

Lee expects at least a couple of thousand import L/Cs to be processed in the first six to 12 months of the agreement and Satan confirms that the banks involved are currently in the ramp up stage with systems live and running.

	Lee

The agreement also covers trade finance in the other direction for export L/Cs issued in Asia-Pacific with a German client as beneficiary. Already, Lee shares, BNY Mellon has structured a couple of deals involving exports L/Cs issued by regional banks, sent to the BNY Mellon Frankfurt offices for advising and onward to the savings bank for delivery to the end client.

The agreement between BNY Mellon, Heleba and the 25 largest savings banks in Germany follows a similar arrangement between Lloyds Bank and Standard Chartered announced last year. The L/C relay programme between the two banks makes Standard Chartered the processing and paying agent for import L/Cs issued by Lloyds Bank in the UK. Beneficiaries in Asia can send the documents necessary for collection of payment to Standard Chartered branches in the region rather than the issuing bank in the UK.