Lloyds Bank and Standard Chartered extend partnership on Asian trade

November 2013

In September, Lloyds Bank and Standard Chartered announced a deepening of their relationship, specifically around Asian trade. Treasury Today caught up with Jacqueline Keogh, Head of Global Trade in the Transaction Banking team at Lloyds, to find out more.

Notwithstanding their long-lasting strategic partnership across many different product areas and geographical regions, Lloyds and Standard Chartered took the opportunity of Sibos in Dubai to announce a specific development around Asian trade, which both parties believe will “enhance the experience for UK clients importing from Asia”.

As part of this agreement, Lloyds Bank will use Standard Chartered’s on-the-ground capabilities to directly issue import letters of credit (LCs) locally in 20 Asian markets, including China, India and Korea. This provides UK clients with the benefit of local language and time zones, in-country document handing and local currency settlement, including Chinese renminbi (RMB).

In a press statement, Andrew England, Head of Transaction Banking, Lloyds Bank Commercial Banking, said: “This agreement will enable us to improve our product offering, accelerate our growth plans and is part of an on-going strategy to strengthen our international partner network.”

What’s new?

 

To gain a better understanding of what’s new in this deal, Treasury Today spoke with Jacqueline Keogh, Head of Global Trade in the Transaction Banking team at Lloyds. Keogh moved across to Lloyds from Standard Chartered just two months ago and is tasked with revitalising and significantly growing Lloyds’ trade business. Prior to Standard Chartered, she did an 11-year stint with SWIFT and was responsible for strategic development on many projects including the Bank Payment Obligation (BPO) and the Trade Services Utility (TSU).

Keogh says that a strategic partnership operates at a much deeper level than the correspondent banking relationships of the past. “We have a common strategy and objectives, as well as complementary geographical coverage and skills. We see each other as natural partners because Standard Chartered is focused on Africa, Asia and the Middle East, with no desire to engage in the UK other than to help their core client base. Lloyds, on the other hand, is firmly focused on the UK market.”

This new agreement “reinforces a shared strategy” on international flows and how to better serve clients, according to Keogh. “This is not for our mutual benefit, but for the benefit of our shared client base.”

The ability to issue LCs through Standard Chartered is one such customer benefit. Historically, Lloyds issued LCs through a number of correspondent banks. “From a corporate perspective, it meant being dependent on Lloyds having relationships in a multitude of countries, all with different terms and conditions,” explains Keogh. “Through partnering with Standard Chartered, we are extremely confident with regards to the level of service, price, process and how the whole transaction will be managed.” Also there is a clear escalation path in order to resolve any potential issue. “This provides greater assurance in terms of the product offering that we can provide for our UK corporate clients. Whereas with the correspondent banking model a bank is dependent on many different parties, so achieving that level of consistency and standardisation is close to impossible,” she says.

In terms of a reciprocal agreement, Standard Chartered is already directing its clients who are looking to expand in the UK towards Lloyds; however, the significance of the agreement relates to the much higher level of trade flows from the UK to Asia.

The future

 

Given Keogh’s experience of the BPO, we asked her whether this was an area of interest for future collaboration between the two banks. “Currently Lloyds is not signed up to the BPO, mainly because it is just beginning to revitalise its trade capability and strategy,” she explains. “It is an area that we are following very closely and, based on client demand and the on-going development of Lloyds capability, it is something that we will most likely sign up to in the future.

“When that does happen – and it is a ‘when’ rather than an ‘if’ – Standard Chartered would be a good partner to work with because it was one of the early adopters and has extensive experience of the BPO, both within its own organisation where it is on both sides of the transaction, and also in collaboration with other financial institutions,” she adds.

Keogh believes that it will take time to create the network and flow around the BPO. “Most instruments in this industry have been around for thousands of years. Therefore when a new instrument is launched, it is going to take time before it achieves the required level of adoption. But I think that it will gain momentum because the industry requires common standardised instruments around open account that operate cross border.”

Although the industry needs something like the BPO, it may not survive in its current form, according to Keogh. “There are very few people in the industry that would question the need – both from the financial industry and the corporate perspective – to have a common definition, shared standards, shared structure and shared products around open account. The BPO is the best we have today and it has the best chance of success, whether in its current form or another variation.”