Swiss bank BCGE cashes in on trade finance demand

Tue Aug 14, 2012 11:43am EDT

Related Topics

* BCGE sees strong trade finance demand as some banks pull back

* Says can "cherry pick" among trading houses

* Expects trade finance to grow vs Swiss private banking

By Emma Farge

GENEVA, Aug 14 (Reuters) - A clampdown on trade finance by some of Europe's biggest lenders is proving a windfall for one regional bank in Switzerland, home to some of the world's biggest commodity traders.

Banque Cantonale de Geneve (BCGE) is seeing strong demand for commodity trade finance as trading houses become more desperate for funding following the retrenchment of traditional lenders, its Chief Executive Blaise Goetschin said on Tuesday.

Such is the demand that trade finance could even grow in importance in the Swiss economy relative to under-pressure wealth management, Goetschin added.

Several banks including BNP Paribas have cut lending due to a lack of dollar financing and new European rules on capital requirements due to be phased in next year, leaving some Swiss traders in the lurch.

"The market has transformed itself in our favour because trading houses are in a highly nervous state with regards to funding," Goetschin told a news conference on Tuesday.

"We have introduced a policy of cherry picking ... which improves the margins and the risk," he added, without giving details.

Switzerland, home to the likes of leading commodities trading group Glencore International Plc, is one of the world's largest commodities trading hubs and accounts for about a third of physical global oil volumes for instance.

Ton Schurink at Geneva-based Commodity Finance Trading Advisory Services said Swiss banks are profiting from a reduction in competition in the sector.

"When they can spot a winner, they will support them, but admittedly at a nice margin. The limited availability in the market has made life for the trade finance activities quite nice and profitable," he said.

Goetschin said he expects trade finance, traditionally a low-margin business, to play a growing role in the Swiss economy especially given the attacks on the wealth management sector from U.S. authorities gunning for tax dodgers.

"Trade finance is helping to compensate for private banking (in Switzerland). It's very important for a commodities trading hub to have a bank that's attached to Geneva as the whole banking model can easily go elsewhere," he said.

While Swiss banks including BCGE will also face higher capital requirements as part of Basel III regulations, they are still deemed to be at an advantage versus their European peers.

That's because they are mostly capitalised in Swiss francs and costs for dollar-based funding, the dominant currency in commodities markets, are relatively low.

Credit Suisse, already active in trade finance for 20 years, said it had added five new relationship manager roles in Geneva and Zurich since the start of the year, while UBS hired an executive from BNP Paribas.

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