Whereas:
- corporate issuers have found out that debt capital markets can suddenly close down
- some large banks have dramatically reduced their client portfolio
- the banks’ capital adequacy ratios have been badly hurt by losses or / and by the downgrade in the quality of their assets
- financial uncertainties surge periodically to a dramatic extent (2002, 2008, 2011)
- the Basel III regulatory mainframe will increase the capital requirements for banks, thus reducing their lending capacity and increasing the cost of credit
- Basel III will also increase liquidity requirements for banks, affecting availability and cost of credit even more than additional capital requirements
The Corporate Funding Association is a unique opportunity for corporates to join forces in order to diversify and stabilise their funding sources. They create their bank, with a simple business model, strong credit enhancement features, a relatively transparent credit portfolio and build up their own dedicated and large access to the European Central Bank refinancing operations in case of credit market disruption. The objective of CFA is to cover a fair share of its corporate Members’ funding needs.
In addition, by doing so, the corporates contribute to release the pressure on the regulatory capital of “regular” banks. As CFA’s sole business purpose is to provide credit facilities, it helps its corporate members to share a non-extendable amount of side business between a lesser number of lending banks.