Short-term trade finance cost in foreign currencies goes up

The Bangladesh Bank yesterday increased the all-in-cost ceiling for short-term trade finance in foreign currencies to 4 percent.

The move comes considering the global market trend and interest rate scenario, the central bank said in a notice.

All-in-costs comprise the entire cost of a financial transaction or business operation, including all taxes and fees such as closing costs, origination fees, or commissions.

The BB said it has decided to fix all-in-cost ceiling per annum with a mark-up of 4 percent over benchmark rates such as SOFR and Euribor applicable to the relevant foreign currency against short-term trade finance.

The previous rate was, for example, SOFR plus 3.50 percent, which was set in September 2022.

The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans that replaced the London Interbank Offered Rate (LIBOR).
Euribor, or the euro interbank offer rate, is a reference rate that is constructed from the average interest rate at which eurozone banks offer unsecured short-term lending on the inter-bank market.