960427

NBP launches $75m

commercial paper

programme in New York

NEW YORK: The National Bank of Pakistan (NBP) launched a $ 75 million commercial paper programme supported by a direct pay letter of credit by a fronting bank (Credit Suisse) under the syndicate consisting of leading international banks and financial institutions with acceptable credit rating for financing trade and commerce of prime customers of NBP within the ambit of State Bank of Pakistan's export finance facility currently in vogue.

This specialised market niche so far has not been tapped by any South Asian bank or financial institution except NBP. The floatation of the $75 million commercial paper programme will expand in its scope and dimensions in the future.

A commercial paper is the least-cost method of mobilising resources from institutions as well as investors, which is quite unique to New York capital markets. Funds thus mobilised would be invested in financing of trade and meeting other short-term commercial requirements of Bank's customers.

The agreement in this regard was signed in New York on Friday evening by Nabi Sher Khan, Executive Vice-President/Regional Head, NBP, New York, and senior representatives of nine leading banks of the world who agreed to join as participants of NBP's commercial paper. These banks are Credit Suisse, ABN Amro Bank, Dresdner Bank, Societe Generale, Mashreq Bank, Arab Investment Company Bank, Arab Banking Corporation, Banca Monte Die, Paschi Die Siena. The fronting bank is Credit Suisse, with First Trust of New York as depository, and BA Securities, Inc. as dealer, while documentation agent is Bank of America NTSA. The commercial paper programme for NBP has been arranged by Bank of America National Trust and Savings Association.

The mobilisation of funds is an important, although not the major element, of such process and optimisation of customer's satisfaction is the ultimate objective of this programme, an NBP official said here on Saturday.

The Bank already has a sound resource base of about $ 1.2 billion abroad and quality of its investments and loans has been by and large appreciated by regulatory authorities in each of the host countries.

The commercial paper programme, according to the Bank official, is therefore a major component and a part of strategy of innovation and diversification. This concept was evolved in consultation with Bank of America by a committee of NBP professionals under the leadership of its president M B Abbasi.

The US commercial paper is an investment-grade short-term promissory note which is drawn to the order of the bearer and settled in New York. It is fully negotiable, bears a stated maturity date not exceeding 270 days and in minimum denominations of 100,000 dollars. The rate of return, for the investor, is determined by the Note's maturity, credit rating, programme structure and the general market level of various short-term options competing for the funds of investors and alternative opportunities available elsewhere in the marketplace.

The facility has been arranged by the Bank's New York branch. In order to operate this facility effectively NBP's New York branch has set up necessary logistics together with trained personnel to handle it.

The selection of Bank of America by the NBP Board of Directors has been based on a host of reasons, important among which were its long association with NBP and its appreciation of quality of NBP operations, coupled with Bank of America being long-standing as a major force in commercial paper programme for a large number of customers consisting of prominent banks and financial institutions. Their participation with NBP out of so many other competing banks in the region was its appreciation for the bank as well as quality of its clientele. Such a programme is only the beginning and is likely to open up a whole range of other innovative products to provide funds to the Bank's customers on most competitive basis.

From NBP's viewpoint, these arrangements not only reflect its appreciation by an international bank but also improve returns on its own funds through a process under which induction of new inexpensive products and services is likely to lead to higher level of customer satisfaction.-PPI