The context:
• The financial crisis has severely affected the banks’ lending capacity
• The changes in the banking regulation are likely to lead to additional capital and liquidity requirements for banks and further decrease in their lending capacity
• Government debt is now competing with private debt offering in the capital markets
• As all these items have led to a sustainable increase in the cost of credit for corporates, corporate groups are looking for new funding sources, more than ever.
The Corporate Funding Association (“CFA”) project:
The Corporate Funding Association is an initiative of corporate groups worldwide to create a bank whose sole purpose will be to provide its corporate shareholders with long-term credit facilities at attractive cost. It targets corporate companies with an investment grade credit profile whose main activity is not in the bank, insurance or real-estate business.
CFA’s business strength relies on basic banking techniques (credit diversification, strong governance and conservative risk policy) as well as several original mechanisms which will give this bank a privileged access to the international debt capital markets. Thanks to a Eurozone banking licence, the corporate Members will benefit from a wide and dedicated access to the European Central Bank’s refinancing operations when debt markets are disrupted.
The repayment of a large portion of their credit margin through dividends will result in an attractive cost of funding for the corporate members.
The CFA initiative has started at the end of 2008 and is currently under project phase. The future CFA Bank is expected to be incorporated by the first half of 2011 and to start its lending operations in the second semester of 2011.