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Recent news reports have suggested that the European Union Parliament will likely retain treatment of certain trade finance instruments at a credit conversion factor (CCF) of 20% instead of increasing it to 50%, but trade finance specialists tracking the ongoing proceedings have said that the EU banking community needs to remain extremely cautious.

Christian Cazenove, group head of trade oversight at Societe Generale, is part of the coalition of bankers who have enlisted the help of corporates under the umbrella of the ICC (International Chamber of Commerce) and drawn from solid industry data to make the case to EU policymakers that hiking the CCF to 50% for performance-related trade finance instruments such as bonds, guarantees, and standbys is unwarranted and would be deleterious for corporates, competitiveness, and ultimately national economies.

In late October 2021, the EU Commission launched a Capital Requirements Regulation (CRR3) proposal, which included provisions to raise at 50% the CCF for performance guarantees and set fixed maturity at 2.5 years for all trade finance instruments as part of the much broader movement to implement Basel III capital adequacy reforms.

This unwelcome development prompted a small coalition of banks within the EU to band together along with corporates, Global Credit Data (GCD) and Fleishman-Hillard agency under the ICC to gather compelling data and initiate an effort to convince the EU to reconsider.

Since mid-April 2022, the coalition has conducted over 70 meetings with EU member states, the European Council, and other EU governmental bodies.

By November 2022, the Council adopted the text and agreed to consider the coalitions amendment to keep the CCF at 20% and an effective maturity rate for trade finance products.

In January 2023, the European Parliaments Economic and Monetary Affairs Committee decided to maintain the 20% CCF for off-balance sheet trade finance instruments. The EU trialogue (EU Commission, Council and Parliament) is expected to take up the matter in early March 2023.

Cazenove said, When we discussed the issue, the (European) Council said they would not oppose the amendment, but we are still far from the final outcome and must leave member states do their role.

Sweden holds the Presidency of the Council for the first half of 2023 and indications are that the issue would be settled before the end of their leadership.

To get more appropriate treatment of performance-related trade instruments this far was only possible with the backing of corporates and robust data.

If it was only the banks, it would have been too tough, Cazenove explained to DCW. It was important to gather corporates because a move (of the CCF) from 20% to 50% would have a huge impact on risk weighting for the banks and a massive impact on pricing for corporates. But a worst-case scenario would be banks cutting many credit lines, preventing small/middle-sized corporates from having access to credit from banks. Thats whats at stake.

To illustrate the pricing shock users of performance-related trade products could face if the CCF was increased to 50%, Cazenove cited an example from a December 2021 ICC paper on the treatment of trade finance assets under the proposed CRR3. This report demonstrated the potential impact on corporates needing performance guarantees to develop infrastructure projects (like building a road or an energy station) or participate in a tender.

In the scenario given, Company A delivers work to Company B (beneficiary), with a duration of 1 year and Company B is covered by a Performance Guarantee for 100 million. It has been estimated that the RWA (Risk Weighted Asset) resulting from an increase of CCF would reach 7.4 million (CCF 50%) compared to 2.9 million (CCF 20%).

In total, the new 50% CCF proposed could cause a price increase of 150%, raising the cost to 330,000 instead of 130,000 for Company A.

Corporates from the manufacturing, transportation, and energy sectors, along with large industrial companies, aligned with the coalition of banks to push back against the proposed CCF increase. The coalition relied on statistical evidence obtained from Global Credit Data and the ICC Trade Register to demonstrate that trade finance products are a lower-risk asset class.

This article was originally published in Documentary Credit World (DCW), published by the Instituteof International Banking Law & Practice.

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EU Banks, Corporates Cautiously Optimistic While Awaiting Decision on Treatment of Trade Finance Products - Trade Finance Global

PRAGUE, April 11 (Reuters) - Czech Finance Minister Zbynek Stanjura is considering an increase in the value-added tax (VAT) rate on beer in a major overhaul of the VAT regime, part of government efforts to cut the deficit.

The reforms would combine the current two lower VAT rates of 10% and 15% into a 14% rate, while maintaining a top level of 21%, the Finance Ministry said on Tuesday.

The ministry did not list all the items which could see VAT rates increase, but Czech TV, which first reported the plans on Monday evening and called them the biggest VAT changes in eight years, said hotels, beer, water and sport could see an increase.

Stanjura told Czech TV that beer would be among items moved to a higher bracket and that items would be judged on whether "there is a societal reason to consume more of these services".

A rise in the tax on beer could be the most eye-catching tax move in a country with one of the highest per-capita beer consumption rates in the world.

A half-litre of top-selling brand Pilsner Urquell typically costs around 60 Czech crowns ($2.79) in Prague, so an increase in VAT to 21% from 10% could lead to a 6.6 crowns rise in the retail price.

The VAT changes overall could raise 24 billion crowns ($1.12 billion) for the budget next year, Czech TV said.

The finance ministry estimated that combining the lower rates would lift budget revenue by a single-billion crowns figure, while shifting some lower-taxed items into the higher rate would boost income by the low tens of billions.

The VAT adjustments were part of a wider budget consolidation package still to be negotiated by the five-party, centre-right coalition government, it said.

Prime Minister Petr Fiala also said plans published in the media were not final.

"I will personally announce final proposals on the topic of lowering the budget deficits (resulting) from expert and political debates in about a month," Fiala said.

"Our coalition wants to look for potential savings primarily on the side of the state and only after that in people's pockets."

Czech TV reported that under the changes, services like lodging, water, sport and cultural activities that are currently taxed at lower rates would move into the 21% bracket.

The government is looking for around 70 billion crowns in budget savings or indirect tax increases to cut next year's deficit from a planned 295 billion crown gap this year, seeking to do its part to quell inflation running above 16%.

The government took power at the end of 2021 aiming to rein in debt levels that remain well below European Union averages but have grown in recent years at one of the fastest rates in the bloc.

But higher spending needs due to Russia's invasion of Ukraine and state aid necessary to ease the impact of soaring energy costs have hit its plans.

The central state budget gap should fall by 65 billion crowns in 2023, although the overall fiscal gap is expected to rise to 4.2% of gross domestic product, remaining above EU rules, according to ministry forecasts.

($1 = 21.5190 Czech crowns)

Reporting by Jason Hovet and Jan Lopatka; Editing by Nick Macfie, Angus MacSwan and Jan Harvey

Our Standards: The Thomson Reuters Trust Principles.

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Czech finance ministry's deficit-cutting plans may include higher tax ... - Reuters

The VET for the Future project in Ganja, Azerbaijan, recently organised a two-day training course aimed at enhancing career services in vocational education and training in Azerbaijan.

The project is funded by the European Union and implemented by the United Nations Development Programme (UNDP) and the State Agency on Vocational Education (SAVE).

The training helped to equip existing career centre professionals with up-to-date knowledge and skills in the field and to strengthen their working capacity. The event brought together 25 people including 15 career specialists from Baku, Barda, Jalilabad, Ganja and Gabala, experts from the Education Institute of the Republic of Azerbaijan and the European Training Foundation, as well as coaching specialists and representatives of the organising parties.

Four career centres have so far been established under the project. Over the last 18 months, 13 career advisers from these centres provided around 1,000 career counselling services. Sixty per cent of the users of the career services are men and 40% are women.

Find out more

Press release

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EU and UNDP support expansion of career services in vocational ... - euneighbourseast.eu

Feeling safe and being social are crucial for children in times of war. Kindergarten children in Slavutych, in northern Ukraine, will be safe in a bomb shelter that was restored and equipped by the United Nations Childrens Fund (UNICEF).

It is one of 56 facilities in Ukraine that has been rehabilitated to provide a safe haven for kindergarten and school children thanks to EU humanitarian funding and other donors. Protecting the most vulnerable.

Children in the EU-funded shelter in northern Ukraine can socialise and stay safe.

UNICEF

Previously, bomb shelters did not exist in the Slavutych kindergarten, and children and teachers were forced to hide behind walls during air alarms.

Now, children spend their rest hours in the shelter, which was specially equipped just over a month ago to protect them during air alerts and missile attacks.

Not long ago, this colourful and bright shelter was a dark and cold basement, providing no safety or comfort for children.

UNICEF

"We are going to visit an ant," says 5-year-old Maksym, clutching a toy as he follows his friends and teachers down the stairs. As he enters the shelter, he finds a bright, spacious room with drawings of ants on the walls.

There are currently 112 children who attend the kindergarten, and the shelter is designed for 220 people. According to the teachers, rest hours are best spent in the shelter for childrens sleep not to be disrupted during air alarms.

While the kindergarten was closed, Oksana and her colleagues guarded it, but then decided to return to work to support the children.

UNICEF

"While half awake, each child reacts to an air alarm differently, that's why we decided to have the rest hour in the shelter, says teacher Oksana.

Instead of saying we are going to the shelter, we told children from the very beginning we are going to visit an ant. It's our favourite character, she explains.

Following the start of Russias full-scale war on Ukraine in February 2022, the kindergarten in Slavutych remained closed for months until it was finally able to reopen its doors in the end of August. Yet, teachers at the kindergarten say the fear is still very real.

"We try to hold on and not to show the children that we are worried, says Oksana. We hope for the better. When the kindergarten was closed, we guarded it and then decided to return to work, because children need to socialise.

Now the children have a safe and comfortable place to play and socialise.

UNICEF

In the kindergarten, children can play in a safe environment. Parents, too, can relax in the knowledge that the new shelter protects their children.

For children to continue attending schools and kindergartens, UNICEF and partners are rehabilitating shelters and rebuilding schools in the most affected areas of Ukraine. Currently, 56 facilities have been restored.

The implementation of this programme is possible thanks to the support and funding of the European Union and USAID. In addition, UNICEF provides necessary supplies and materials for various activities and for the comfort of children in shelters.

Story by UNICEF.Publication date: 13/04/2023

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From darkness to light: how Ukrainian children find comfort and ... - Humanitarian Aid

Across European Union March 30th, 2023 will beremembered as the day the European Parliament("EP") tackled the EU gender pay gap. Inour 'Mind the gap!' article we have alreadystated that pay transparency offers a solution in bridging the paygap. However, until today the first step still needed to betaken.

The members of EP have understood the need to tackle this issueand on March 30th, 2023 a large majority in the EP votedin favour of the Pay Transparency Directive("Directive"): 427 members voted infavour. The 79 votes against and 76 abstentions could not havestopped this first step in closing the gender pay gap.

The EU Commissioner for Equality Helena Dalli welcomed EP'ssupport for the new rules:

"Today's adoption of the pay transparency directiveis a significant step towards addressing the gender pay gap in theEuropean Union and increasing women's economic and financialindependence"

The proposal for this Directive was introduced by the EuropeanCommission in March 2021 and entailed amongst other an obligationfor EU organisations to be open about the pay policiesstrengthening the principal of equal pay for equal work.

Adopting the Directive is the first step in making salaries moretransparent as the lack of pay transparency has proven to be one ofthe main obstacles, if not the major one in closing the gender paygap women (of EU) so badly need.

The Directive also ensures job-seekers to have access toinformation on the pay range of positions they apply for anddisabling employers to ask about previous pay, thus limiting thepossibility of job-seekers salary history to influence the salaryoffered to the candidate.

The Pay Transparency Act, in order to prevent discrimination,requires employers to be open about the pay policies making itaccessible to their employees. The pay policies need to offerobjective and gender-neutral criteria used to determine wages andwage increases.

However, this is only applicable to companies with more than 100employees. But it is a starting point giving employersresponsibility for providing transparency as they have to sharethis information with the competent national authority, withemployees and with employees' representatives (e.g. unions).Additionally, employees and their representatives shall be able torequest information on their pay level and that of other employeesdoing the same work in order to compare the wages.

If it should appear that the average pay of male and femaleemployees differs by at least 5% (on a full-time basis!) and theemployer cannot sufficiently justify the difference (e.g. noobjective and gender-neutral criteria) the employers incooperation with employees' representatives must carryout a joint pay review. If unjustified differences exist, theemployer shall have to take corrective measures.

Moreover, under the new pay transparency rules the employersshall be obliged to provide the information on pay policiesannually or every three years, depending on the size of the companyand intersectional discrimination will be considered an aggravatingfactor.

Employers who fail to comply with the 'equal pay for equalwork' principle risk compensation claims by employees, judicialmeasures such as forcing employers to comply with this law withintheir own organisation and organisations, e.g. equality bodies orstaff representatives taking action on behalf of employees.

More specific penalties and measures will have to be set up bymember states upon implementation of the Directive.

Directives contain targets that all European Union member statesmust meet. The intended outcome is therefore fixed, but how amember state meets it is not. Member States are free to decide howto implement the directive. In doing so, they can take into accountthe specific situation in their own country.

So we're not there yet!

The period for implementation is three years, meaning that fore.g. the Netherlands, the legislation will have to be in force by2026 at the latest.

Let's hope the House of Representatives (TweedeKamer) won't wait that long and implementation shall bequicker than continued consideration on the proposal 'GenderPay Equality Bill', similar to the one EP just adopted, whichhas been submitted in March 2019 and not yet deliberated on.

It is clear that employers cannot give the same wage toeveryone. A lot of work is needed in determining someone'sworth. It takes a lot of effort to take into account differentwages and everyone's different situations and to organize itall to a fair amount of money.

As an employer you may have good grounds to reward someone withless work experience even if they have to do the same work, butthis needs to have a good justification. This requires labourtransparency and that is difficult.

It can seem overwhelming and often employers do not know exactlywhere and how to start. These kinds of issues can cause problemsand create a tense working atmosphere. ACG International can helpemployers to achieve transparency.

ACG International is specialized and experienced in assistingcompanies preparing these kinds of divisions of labour. It isimportant for both employers and employees that these issues areand remain properly managed.

ACG International's managing partner, Edith Nordmann, has anexpert qualification in labour law. She has been working as alawyer in the field for over twenty years and can offer practicaland strategic advice about employment contracts as well as help youmaximize the transparency you have been searching for.

In addition, as of 2023, Edith has been appointed as member ofthe Task Force Future of Work, Skilling and Mobility under theBusiness 20 (B20 (of the G20 2023)) meeting withapproximately 100 esteemed professionals from around the worldspecialised in the field of employment. The B20?is the official G20dialogue forum representing the global business community.Established in 2010, the B20 is among the most prominent EngagementGroups in G20, with companies and business organisations asparticipants. The B20 leads the process of galvanising globalbusiness leaders for their views on issues of global economic andtrade governance and speaks in a single voice for the entire G20business community.

So, at ACG International you're in great hands.

If you want to learn more about labour transparency and labourdivisions, or how to really start reducing inequality in anefficient way on the business floor you are at the right place. ACGInternational offers free"labour-transparency-check" strategy sessions tohelp employers assess what needs to be done to achieve labourtransparency.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

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European Parliament Adopts Pay Transparency Directive First ... - Mondaq News Alerts