J.P. Morgan Treasury Services has joined the World Bank and its funding partners to launch a $1bn funding facility as part of the Global Trade Liquidity Program (GTLP), a unique initiative that brings together governments, development finance institutions, and commercial banks to support trade in emerging markets. The agreement is designed to stimulate trade growth by extending funded trade financing to J.P. Morgan's client banks in emerging markets.
The J.P. Morgan facility is expected to support estimated trade flows of up to $6bn annually. Per the agreement, J.P. Morgan will provide 60 percent or $600m, and GTLP program partners, including development finance institutions and governments, will purchase participations for the other 40 percent, or $400m in the aggregate, for trade assets averaging a tenor of 270 days.
The global financial crisis and its effects on banks around the world are anticipated to cause a market gap in trade finance of approximately $100bn to $300bn, according to the banking firm. With the increase in funding, J.P. Morgan's regional client banks are better positioned to provide trade financing to importers and exporters in their countries and help bolster country and regional commerce during today's challenging economic conditions, it says. The initiative is expected to have significant development impact by increasing funding for trade of consumer goods, intermediate goods, small machinery and commodities demanded by emerging market enterprises.
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