Role of Switzerland as a hub for commodity trading and finance

Jacques-Olivier Thomann Honorary President Geneva Trading and Shipping Association (GTSA)

Role of Switzerland as a hub for commodity trading and finance What Switzerland can bring to Arab financial institutions and commodity houses ? Trends and Developments

Jacques-Olivier Thomann Board member Geneva Financial Center

Geneva April, 3rd 2014

Honorary President GTSA

3

Role of Switzerland as a hub for commodity trading and finance A unique positioning with a true cluster effect No other international centre can match Switzerland for the strong positions it holds across all key areas of the commodities sector      

Commodity trading companies Trade finance Banks Ship chartering Legal Inspection and certification Commodity sectorial Associations

 10,000 jobs relating to the sector  Over 400 companies  3,5% + of GDP 4

Geneva Trading and Shipping Association Founded in 2006, GTSA regroup the commodity sector players: Trade Finance Banks, commodity traders, shipping companies, brokers, security and inspection companies

Zug Commodity Association

Lugano Commodity Trading Association and soon a SWISS COMMODITY TRADING FEDERATION 5

The Lake Geneva Region, the centre for commodity trading Key dates

Players in the sector

First Second World World War First oil War crisis

1950

International organisations

1973

Trading companies

Collapse of Soviet Union

1990

Egyptian End cotton of the oil producers majors’ monopoly

2000

• Several hundred billion in combined revenue • Approx. 400 companies including Cargill, Mercuria, Vitol, Trafigura, Louis Dreyfus, Totsa,Bunge, Addax, Gunvor, Metinvest, Sucafina … 2010

CIS International traders trading companies

Banks • Aprox. 15 including BNPP, Crédit Agricole, ING, Société Générale, Credit Suisse, UBS, the cantonal banks, Arab Bank, National Bank of Abu Dhabi,BCP…

Shipping companies • Over 1,200 million tonnes of commodities shipped • MSC, Geogas, Promar, Riverlake...

Certification and inspection companies SGS, Cotecna…. Service companies • Lawyers, insurance brokers, auditors...

Positioning

Association : Geneva Trading and Shipping Association, GTSA University : Master, Diploma, ++

Positive momentum

Oil: • Number 1 : 35% of world oil traded • 75% of ex-USSR exports

Following the financial crisis

• Traders: 10% of global exports • Banks: 60% of exports

The commodities sector is part of the real economy

Steel

Soft commodities • Number 1: cereals and vegetable oils 35%, coffee 50%, sugar 50%, cotton, cocoa • 60% of Russian and Ukrainian exports

Inspection and Certification : Worldwide leader

• Very pragmatic financings • Secured financing of real and physical goods • Ensures logistics for and movements of commodities • Ensures that markets are well supplied with strategic products • Contributes to the development of the emerging markets

6

What Switzerland can bring to Arab financial institutions and commodity houses ? Trends and Developments With an extremely restrictive regulatory framework : Basel III……..   

Liquidity ratio: liquidity coverage ratio (LCR) Funding ratio: net stable funding ratio (NSFR) Capital ratio: leverage ratio (LR)  from 4% to 7%, 9% and above

…..and political uncertainties in a debt crisis environment  

Fall in USD money market funds cheap liquidity "Nationalist" pressures

 European banks must take exceptional measures   

Deleveraging their balance sheets and improve their ratios Downsizing their USD funding requirement Looking for alternative sources of funding

This situation creates a particularly favourable environment for investors, innovative banks and trading companies, indeed Commodity Trade financing structures will be moving to non-banking type of facilities such as

• Trade finance funds • CLO’s • Securitisations

These investment models are generating with a

uncorrelated to traditional asset classes, good return to investors wide range of risk profile

Thank you for your attention

Jacques-Olivier Thomann