Global Supply Chain Finance Forum (GSCFF) announces update to its Standard Definitions to include description of Dynamic Discounting (DD)
The update to the influential document comes following discussions with industry experts and intention to include most accurate reflection of latest supply chain finance market practices
The Global Supply Chain Finance Forum (GSCFF) – comprising BAFT (Bankers Association for Finance and Trade ), FCI (previously known as Factors Chain International), the International Chamber of Commerce (ICC), the International Trade & Forfaiting Association (ITFA) and the Euro Banking Association (EBA) – had announced plans to update its Standard Definitions for Techniques of Supply Chain Finance (Standard Definitions) in January 2021 to provide further clarity on the distinctions between the individual techniques.
Alongside the existing Receivables Purchase and retitled Loan sub-categories, a newly created Advanced Payable sub-category now includes three techniques: Corporate Payment Undertaking (CPU), Dynamic Discounting (DD) and Bank Payment Undertaking (BPU).
This update highlights and confirms the quality of the original content – first published four years ago – and the need to be agile in a dynamic field such as supply chain finance. Thus, it is intended to reflect an up-to-date view of current market practices within supply chain finance, by establishing greater clarity between the Payables Finance technique under the Receivables Purchase category and the CPU technique. In January, the GSCFF had published the first paper in this series, elaborating on the CPU. The second description document on DD has been released today.
Like Payables Finance and the CPU, Dynamic Discounting is a buyer-led programme within which sellers in the buyer’s supply chain can, at their option, access liquidity by requesting a discounted early payment. However, unlike in the Payables Finance or Corporate Payment Undertaking scenario, it is not the finance provider that finances the underlying instrument, but rather the buyer itself, using its own working capital.
The GSCFF is currently working on the third description document on the Bank Payment undertaking, which is expected to be published in 2022. All description documents provide an overview of the technique’s definition, involved parties, distinctive features and variations, relevant risks and benefits, among other technicalities. Once the series has been published, a final updated version of the master Standard Definitions document will be made publicly available.
To read the full breakdown of the reasoning behind the enhancements to the Standard Definitions, please click here.
- On October 25, 2021