VEB.RF Expert: ‘International Rules of Trade Finance Need to Be Adapted for New Economic Conditions’
With the participation of a VEB.RF expert, the Banking Commission of the International Chamber of Commerce (ICC) prepared and released a guidance paper on trade finance transactions subject to ICC rules for use at this difficult time. The economic pressures on coronavirus-affected banks are intense. The most important question is whether or not the force majeure provisions of ICC rules can be applied during the COVID-19 pandemic.
As specified in the paper, even where a trade finance transaction is made subject to ICC rules, depending on the applicable law it will require a court or tribunal with jurisdiction, or a government or regulatory authority to make a decision as to whether an event of force majeure is to be declared. The main recommendation made by ICC is that the parties to transactions should resolve any issues through negotiations for mutual benefit. The Commission also provided comments on how to deal with interruptions in the delivery of documents.
The principles laid down in the guidance paper can be applied not only to the uniform rules for documentary credits, guarantees, documentary collections and payments, but also to transactions that are not subject to the rules, for example lending.
VEB.RF is constantly involved with the Paris-based head office of the ICC Banking Commission, working to create the favourable conditions for international payments. ICC rules are indispensable for all kinds of trade finance. VEB.RF co-founded ICC Russia in 2000, serving the interests of the Russian business community.
VEB.RF is represented on the ICC Banking Commission by Alexander Zelenov, Senior Managing Director of Finance. He was a vice-chairman of the ICC Banking Commission for 12 years, was in charge of the Russian National Committee of the ICC Banking Commission for almost 20 years, and was a member of some of the Commission’s working bodies, including the working group that drafted the 2017 version of the Uniform Customs and Practice for Documentary Credits (UCP 600), which has governed the issuance and use of letters of credit for many years.
First Interest-Free Loans Given by SME Bank to Coronavirus-Affected Companies
SME Bank, a subsidiary of RSMB Corporation, has given the first interest-free loans to support coronavirus-affected small and medium-sized enterprises. Support was provided for three cargo carriers in the Krasnodar Territory and the Rostov Region and a freight business in the Perm Territory. The bank lent a total of 17.5 million roubles intended for salaries paid to 175 employees.
With support from SME Bank, the companies will be able to continue operations without interruption and pay stable salaries to their employees. The customers intend to adapt themselves to the new economic environment in the freight services market and maintain their current business.
As the bank’s existing customers, the companies received loans in record time, within one business day.
Russian Economic Development Minister Maxim Reshetnikov said: “Another programme we are launching this week is salary loans. The ultimate goal of our policy is to help businesses to retain and keep paying their employees. For this purpose, we’ve launched a rescue scheme: a business will be able to take out a zero-interest loan to pay a minimum wage to each employee. This will help out small and medium-sized enterprises across the industries affected during six months.”
As a reminder, SME Bank launched a new interest-free loan scheme on 1 April 2020 to help SMEs to meet the immediate needs related to supporting and retaining their employees, such as salary payments. The loan amount is calculated on the basis of the region-specific minimum wage and the number of staff members. The loan has a maturity of six months, a balloon payment and an interest rate of 0% p.a.
The new scheme is part of the Russian Government’s prompt measures to support small and medium-sized enterprises. The zero-interest loan has a limit of 5 billion roubles and is backed by a surety bond issued by VEB.RF to SME Bank. As previously noted by VEB.RF Chairman Igor Shuvalov, development institutions have all the necessary tools to react flexibly to the needs of the real economy and lend a helping hand to businesses and their employees.