A transparent cost attractive solution:
The Members of the Corporate Funding Association, as its borrowers, pay at all time their market credit spread for their rating category. They pay no upfront fee. At the end of each year, all Members, as shareholders, are entitled to receiving dividends, which reduces economically their cost of funding. Therefore CFA is a cost attractive funding solution for all rating categories, including the highest-rated corporate groups.
Dividend distribution:
As shareholders of CFA, the Members will be entitled to receive in dividend the entire portion for the revenues of CFA in excess of:
• the cost of CFA’s refinancing
• the cost of the banking infrastructure
• the cost of risk on its credit portfolio
Refinancing costs: CFA’s refinancing cost is expected to be significantly lower than the average of its Members, based on its strong credit profile and prime access to capital markets and ECB funding.
Operating costs: CFA will benefit from a cost/income ratio well below 10%, which is particularly low for the industry. Because CFA’s sole business purpose is to grant plain-vanilla credit lines to a few hundred corporate members, it will not have to pay for a large infrastructure, sales force or trading desks: its primary focus will be liquidity and process management operations, thereby reducing significantly the operating risks and costs.
Cost of risks: the resetting margin mechanism allows CFA to always collect credit margins in excess of the operating expenses, refinancing costs and actual cost of default, which is the most variable component of its costs.