___________________________________________________________________________

2013/FMP/WKSP4/003 Session: I

A Perspective of Trade Finance by Bank of Tokyo-Mitsubishi UFJ

Submitted by: Bank of Tokyo-Mitsubishi UFJ

Workshop on Trade FinanceLombok, Indonesia

1 July 2013

July 1, 2013

A Perspective of Trade Financeby BTMU

Tateya HaradaGeneral Manager

Asian Transaction Banking Office

Transaction Banking Division

1

Characteristics of Intra-Asia Trade

Rapid Goods Delivery

Documentary Trade

Diversification of Trade Flow

2

Source: BCG workshop with SWIFT, June 2012

Source: SWIFT Statistics (2012)

L/Cs in Asia-Pacific

3

• Reduce number of L/C transactions

• Reduce costs related to L/C transactions

• Reduce document handling workload

• Increase efficiency of trade operations

• Digitize trade flows

• Trade portal platform with end-to-end service

• Reduce number of L/C transactions

• Accelerate A/P reconciliation

• Reduce settlement period to support suppliers

• Trade portal platform with end-to-end service

Corporate Demands

Importer

Demands

Exporter

Demands

4

Trade Product Portfolio & TSU BPO

Trade Service Utility (TSU)

Trade Product Portfolio

IMPORT

Bank +

POShipment

Document

EXPORT

Bank

Payment

Buyer Seller

Letter of Credit

Document against Payment

Open Account

TSU Payment Service

With

Bank Payment Obligation (BPO)

TSU Payment Service

Without

Bank Payment Obligation (BPO)

5

“TSU Payment Service with BPO”

Simplified documentation

Shortened transaction period

Reduced discrepancies

Reduced risk of bank error to spot discrepancies

Payment on time after electronic matching

Improved and faster traceability

BPO based financing for importer and exporter

Electronic data management

Automated data matching

Real time visibility

Streamlined operation

BPO

6

Key Features of TSU Payment Service with BPO

Subject Description

Main function Bank guarantees the payment of the importer

Payment Trigger Successful data matching on SWIFT TSU system

Type of risk to mitigate Buyer’s credit risk, insufficient fund risk and payment risk

Type of Obligation Primary Obligation

Documents Originals are exchanged between importer and exporter.

Rules ICC Uniform Rules for Bank Payment Obligations (URBPO)

Additional services - For the importer, credit based on BPO

- For the exporter, Bills Bought with BPO

Fees Similar as L/C

7

Shortening the Transaction TimeReducing processing time from 2 weeks to 3 days

• Buyers can pay suppliers earlier than before

• Buyers can reduce inventory

• Suppliers can reduce discrepancies

• Buyers and suppliers can improve working capital

10-15 days on traditional L/C

3 days on TSU/BPO transactions

Application Doc checkDoc

shippingDoc check Payment

ApplicationTSU

matchingPayment

8

Key Benefits for Corporates

Buyers

• Ability to negotiate better trade terms with suppliers

• Improve reconciliation of account payables

• Improve working capital

• Streamline operation and reduce cost

• Reduce inventories

Suppliers

• Easier trade and payment operations

• Earlier funds collection and FX risk elimination

• Reduce discrepancy fees and bank fees

• Improve transaction visibility and traceability

• Improve reconciliation of account receivables

9

Benefits for Banks

･Reduce cost of document handling

･Reduce cost for skilled human resource

･Open door to new business opportunities

Cost and

revenue

･Automated solution

･No original document handling and no checking

･Easier and faster operation

Shorter

transaction time

･Provide solution to improve working capital

･Provide easier and faster operation

･Meet the market requirement

Strengthen core

relationships

10

Contracts and Rules

Seller’s bank

Buyer’s bank

Buyer Seller

Purchase order:

BPO is one option of

payment conditions

TSU Payment

Service Agreement

BPO Agreement

Rulebook in the

TSU Service

Description

TSU

Correspondent banking contract

TSU Payment

Service Agreement

BPO Agreement

No additional

bilateral agreement

is required

11

BPO Limitations

Need for more correspondent banks ready on BPO

ICC URBPO rule effective from 1 July 2013

B/L does not go through bank (*), therefore BPO presents the

same risk as

in “1/3 B/L directly sent to importer” or

“Surrender B/L in L/C transactions”

Credit line of buyer is the same as for L/C but are affected for a

shorter period

(*) Original documents are not sent to the bank

because the BPO instrument is about electronic data

and not paper documents.

This point is covered by clauses in the bank terms

and conditions.

12

URBPO as a Global Standard Rule

SOURCE: International Chamber of Commerce HP

13

BTMU Challenges & Strengths

Challenges

• Sustainable growth in trade business

• Shift from L/C to open account

• New range of open account solutions

• Process efficiency without losing

business information

Strengths

• Large global network

• Strong credit rating

• Pioneer for TSU BPO business

• Capability for TSU based services

14

BTMU Locations Offering BPO-Based Services (status at 31 May 2013)

ARGENTINA

BRAZIL

BEIJING

SHANGHAIGUANGZHOU

HONG KONG

INDONESIA

TOKYO

MALAYSIA

SINGAPORE

THAILAND

TAIWAN

Target locations in 2013:

Asia and Latin America

PHILIPPINES

CHILE AUSTRALIA

Live

Testing

15

Disclaimer

The information herein is provided for information purposes only, and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or

subscribe for securities or other financial instruments. Neither this nor any other communication prepared by The Bank of Tokyo-Mitsubishi UFJ, Ltd. (collectively

with its various offices and affiliates, "BTMU") is or should be construed as investment advice, a recommendation to enter into a particular transaction or pursue a

particular strategy, or any statement as to the likelihood that a particular transaction or strategy will be effective in light of your business objectives or operations.

Before entering into any particular transaction, you are advised to obtain such independent financial, legal, accounting and other advice as may be appropriate

under the circumstances. In any event, any decision to enter into a transaction will be yours alone, not based on information prepared or provided by BTMU.

BTMU hereby disclaims any responsibility to you concerning the characterization or identification of terms, conditions, and legal or accounting or other issues or

risks that may arise in connection with any particular transaction or business strategy. Note that BTMU may have issued, and may in the future issue, other reports

that are inconsistent with or that reach conclusions different from the information set forth herein. Such other reports, if any, reflect the different assumptions,

views and/or analytical methods of the advisors who prepared them, and BTMU is under no obligation to ensure that such other reports are brought to your

attention.

The Bank retains copyright to this report and no part of this report may be reproduced or re distributed without the written permission of the Bank. The Bank

expressly prohibits the distribution or re-distribution of this report to any parties, via the Internet or otherwise and the Bank, its head office, branches, subsidiaries

or affiliates accepts no liability whatsoever to any third parties resulting from such distribution or re-distribution.

Copyright© 2013. The Bank of Tokyo-Mitsubishi UFJ, Ltd. All rights reserved.

Thank you