J.P. Morgan, ADB forge trade credit guarantee deal
J.P. Morgan and the Asian Development Bank on Tuesday signed a Credit Guarantee Agreement under ADB's Trade Finance Facilitation Program to further enhance support for international trade in developing countries in Asia.
The partnership, J.P. Morgan said, is designed to stimulate trade growth by extending trade financing to its clients in emerging markets. Combined with the Risk Participation Agreement signed last year with ADB, this collaboration will enable J.P. Morgan to expand risk coverage in markets such as Indonesia, Nepal and the Philippines.
'We are pleased to further broaden our partnership with ADB to help bolster trade flows to a wider range of Asian countries recovering from recent market instability,” said Yanti Agustin, Asia Pacific head of global trade services at J.P. Morgan Treasury Services, in a statement.
Under ADB’s Credit Guarantee Agreement, ADB provides guarantees to confirming banks like J.P. Morgan covering country risk as well as risk on issuing banks’ letters of credit and other instruments in support of trade. Through the credit guarantee, ADB shares risk with confirming banks to provide comfort to exporting companies that they will in fact get paid for shipments to the most challenging Asian markets.
The initiative is expected to have significant impact on increasing funding for trade of consumer goods, intermediate goods, small machinery and commodities demanded by emerging market enterprises.
“Trade is an important component of economic development and ADB works to achieve this, in part, by developing public-private partnerships involving risk-sharing arrangements,” said Philip Erquiaga, ADB's director general of private sector operations.
J.P. Morgan also said it will be able to benefit from ADB’s AAA credit rating.
“With Asia recovering from the global economic crisis, this Credit Guarantee Agreement will open new avenues for J.P. Morgan to provide stronger support in financing trade for emerging markets,” said Conor O’Dowd, global head of trade distribution at J.P. Morgan.