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COMMERZBANK AND UNICREDIT COMPLETE FIRST BPO LIVE TRANSACTION IN THE UK

Commerzbank London and UniCredit have successfully processed the first UK Bank Payment Obligation (BPO) live transaction. The transaction covers the export of chemicals from Ireland to Italy. Commerzbank’s customer, the supplier, is Shannon-based chemicals company, Heraeus Metal Processing Ltd. The buyer, UniCredit’s customer Ecocat Italia Srl, is an automotive parts producer in Genoa.

With the particular backing of the ICC Banking Commission and SWIFT, there has been growing demand for, and an increasing number of, BPO transactions, as a proven digital settlement tool. The solution consists of the irrevocable undertaking of the buyer’s bank towards the seller’s bank to effect the relevant payment as the invoice falls due. This undertaking of payment is made based on the electronic matching of trade data between participating banks on the SWIFT Trade Services Utility platform. While the BPO is a new instrument in Trade Finance, it is also an enabling framework for Supply Chain Finance, following the requirements of the market for providing liquidity and mitigating risk along the supply chain.

The reasons for Heraeus Metal Processing Ltd to settle the transaction by BPO are various: payment assurance, from establishment of baseline, before shipment, until maturity of extended payment terms, and cost savings by faster and more efficient processes due to electronic handling of data.

Petra Burckhardt, Global Head of Product Management Trade Services at Commerzbank, says: “The benefits of the BPO for our clients and their increasing demand for it are the drivers behind our decision to expand our BPO activities in Europe and overseas.”

Raphael Barisaac, Global Head of Trade Products at UniCredit, adds: “We have put great effort into improving the availability and convenience of the BPO for our clients. Through the creation of a fully digitalised BPO execution platform we can offer our clients a solution which combines automated processing of the flows with careful cost management, prompt payments and financial options for the seller.”

Heraeus Metal Processing manufactures a large range of precious metal compounds – including gold, iridium, palladium, platinum, rhodium, and ruthenium – for customers worldwide. The company is part of Heraeus Metal Management, one of the largest industrial precious metal traders worldwide. Ecocat Italia is leader in production of spare parts and catalysts for use in the automotive industry. Transactions between the two were previously handled by open account invoice, secured by a bank guarantee.

Commerzbank processed its first two live transactions supported by a BPO, one for a German SME and one for an international group based in Belgium, in October 2014. Since then, the bank has successfully settled BPO transactions with SMEs, large corporates and multinationals.

For UniCredit, this is the latest in a number of landmark BPO deals in recent years. In October 2014, UniCredit completed the first ever BPO transaction between a German and a Japanese company. Some weeks ago, UniCredit completed the first Romanian BPO.

As the first bank to facilitate a BPO transaction in Germany, Italy and Romania, UniCredit has since extended coverage to countries such as Bulgaria.