The INSIGHT Interview: Adrian Gostuski, CEO of FIMBank

Transforming Trade Finance

FinanceMalta caught up with Adrian Gostuski, CEO of FIMBank, a global leader in trade finance, factoring, and forfaiting solutions with headquarters in Malta. In our INSIGHT interview, he shares his thoughts on economic recovery, trade finance as an asset class, competition and collaboration with FinTechs, Malta’s attractiveness as a place to do business, and much more.

Trade finance is known to be particularly vulnerable to economic shocks. The coronavirus pandemic has broken supply chains, closed off borders, and disrupted international trade routes. How have these events affected FIMBank’s performance and how has the bank responded to the challenges posed by Covid-19?

The pandemic has indeed disrupted global trade, and consequently, trade finance. However, the prospects of recovery are on the horizon. The World Trade Organisation expects an increase of 8% in the volume of world merchandise trade in 2021, after having fallen by 5.3% in 2020. Throughout this challenging period, FIMBank has successfully managed its operational continuation with minimal disruptions. Over the years, we have invested significantly in a robust, resilient, and flexible IT infrastructure, which allowed for the seamless transition to remote working for most employees based in Malta and around the world. The investment in technology has also enabled us to maintain the necessary service levels for all our clients in the markets we service around the world. Meanwhile, we remained especially focused on credit monitoring and the enhancement of early-warning indicator tools to anticipate client economic difficulties, which would give us ample time for remedial action.

Do you think the Covid crisis has increased the demand for trade finance products?

The demand for trade finance products has never declined. Trade finance is a crucial lifeline for global trade, with approximately USD1.5 trillion of trade finance deficit. What happened during the Covid-19 period was a slowdown in global trade due to several issues, such as a reduction in demand of certain goods due to lockdowns, disruption in logistics for the same reason and uncertainty due to the sharp movements in pricing. Demand is now rebounding strongly.

In the meantime, many large lenders have decided to slow down their involvement in the trade finance space, leading to a gap that must be addressed. The gap is now being tapped into by new FinTech entrants and more specialised, regional or boutique banks. The deficit will remain for the short-term, although gradually the world situation will allow it to normalise.

One big driver of trade finance is the excess amount of investor liquidity currently in place. With the increase in inflation and the low yields in low risk fixed income assets, trade finance becomes an asset class that is both scalable and low risk. Global defaults in trade finance, at 0.11%, remain among the lowest across all asset classes, thus capturing interest from investors.

What are your projections on the recovery of the global economy?

The reality is that the world is still coping with the pandemic and its economic impact. Thanks to improving vaccination rates, we are allowed to hope that the worst is now over. While we expect a gradual economic recovery, given the deep damage inflicted on the fabric of the world’s economies, this recovery is unlikely to be ‘V-shaped’.

FIMBank is a very prominent player in Malta’s financial services sector. The Bank is headquartered in Malta, listed on the Malta Stock Exchange and regulated by the Malta Financial Services Authority. How would you appraise Malta as a financial services centre and as a place to do business?

Malta is an attractive business jurisdiction for a multitude of strategic and innovative industries. It is a small island nation that has never let geographical restraints hinder its potential, but rather has invested in its resources to hone a competitive edge on different fronts. Malta has the ability to attract reputable companies from all over the world and needs to elevate competitiveness to the forefront of the national debate in order to achieve this objective.

There is no doubt that the immediate priority is the removal of Malta’s name from the Financial Action Task Force (FATF)’s advanced monitoring list, with a commitment to have structures in place to safeguard Malta’s reputation and avoid a repeat occurrence. This experience is an opportunity to garner greater knowledge and understanding of the FATF, as well as its standards and protocols, which should prove useful in the future. To exit the greylist, Malta must demonstrate progress in its enforcement capabilities in terms of anti-money laundering and funding of terrorism framework (ALM/CFT) and proliferation financing. Protecting the integrity of Malta’s financial services industry and the island’s reputation is the responsibility of all stakeholders, including businesses and individuals, and not just that of banks.

What should Malta be doing in order to create a business environment in which the financial sector can thrive in the next 10 years?

Malta benefits from a stable banking system with conservative and solvent banks. The Maltese financial services sector needs to continue drawing reputable companies from all over the world; businesses that are attracted to Malta because they understand the advantages that the jurisdiction has to offer.

The country has the potential to register further growth in biotechnology, the pharmaceutical sector, healthcare, engineering, logistics, aviation, the maritime sector, ICT and software development, apart from financial services. It must however aim towards the highest standards of governance, where lawyers, accountants, corporate service providers, and other specialists carry out proper due diligence, and follow sound processes of collecting and scrutinising documentation and information before conducting a transaction.

In order to create a business environment in which the financial sector can flourish, we must focus on initiatives to attract new business, while enhancing the fundamental elements leading to a business-friendly environment. We also need to continue working on improving the island’s connectivity and leveraging the country’s strategic location, reviewing the organisation of the system of court administration, for example by solving the issue of the extensive length of judicial procedure, and improve access to a highly skilled talent pool, amongst others.

What trends are influencing trade finance at the moment, and what opportunities do these developments offer FIMBank?

No doubt technology is one of the main elements that currently impacts trade finance. Developments pertaining to blockchain, digitisation of trade instruments, Internet of Things and artificial intelligence are just a few elements that will serve as game changers on how trade finance will be conducted in the future. Many agree that trade finance needs to be conducted faster and more conveniently for the parties involved. Currently, the traditional mechanisms are slow, paper based and inefficient in nature.

Another major development is the emphasis on reducing fraud potential, using the latest technologies to give more comfort to lenders, buyers and suppliers to do business safely. We also face the commoditisation of trade finance: a product which was once offered mainly by banks is now seeing further entries from FinTech companies, as well as other institutional and personal investors coming together to offer basic supply chain finance using sophisticated platforms.

FIMBank can certainly benefit from these trends by embracing and adopting new technologies and leveraging its decades of experience, through structuring and careful selection of counterparties. By embracing and adopting these new technologies, the Bank can benefit from the significant lending gap out there.

What type of digital solutions is FIMBank looking to implement?

The Covid-19 pandemic has had significant implications for digitalisation and trade, directly impacting trade finance. The reliance on paper-based processes represents a key weakness, and banks are facing mounting difficulties to process transactions that require substantial in-person back office workforce. Surveys from across the globe show that businesses are open to an increasingly wider acceptance of electronic trade documentation, which is a prerequisite for mainstreaming digital trade. However, in order to fully realise the potential of digitalisation, the challenges in achieving end-to-end digitalisation across a trade value chain that remains fragmented need to be addressed.

We will be looking at implementing new platforms that will enable us to offer better trade finance services. We are also interested in tie-ups with FinTech companies to make use of their reach. We will be supporting digitalisation initiatives, including the automation of KYC protocols, while also exploring the different blockchain solutions that would enable better integration in the trade finance ecosystem, subject to the solutions meeting the Bank’s criteria.

How do you see the next two to three years in trade finance?

We expect trade finance to grow in the coming years, with non-traditional entrants, including large tech companies, continuing to enter this space. I anticipate large traders getting involved in trade finance, providing custom-made finance solutions to smaller traders and shipping companies. Technology will continue to evolve, especially after the introduction of a wider accepted legal and regulatory environment, with the support of the International Chamber of Commerce (ICC) and local governments. The flow of trade may see a slight shift from global trade to a more regionalised one, where companies will look to secure their inputs regionally to avoid the disruptions witnessed due to the global pandemic.

On a more personal note, how would you describe your experience of living and working in Malta so far?

Before accepting the role of Group Chief Executive Officer, I was a Director on the FIMBank Board for seven years, so I was very familiar with the country and its culture. I had also built a strong working relationship with the Bank’s senior management. The workforce is extremely professional and highly qualified, benefitting from many years of extensive exposure to international business.

I am now based in Malta, living and working here, and my experience has been very positive. The island is safe and small enough to have everything accessible, and there are many avenues to explore. Driving in Malta does take some getting used to, and I have adopted a defensive driving approach, always trying to anticipate where vehicles will be a few seconds later so that I can respond swiftly.

I have to say that I am enjoying my time in Malta. I enjoy discovering the rocky wild landscapes, hidden nature spots, and experiencing the mild climate. Malta has an incredibly rich culture and history, the people are welcoming and friendly, and the quality of the food served in many local restaurants is genuine and prepared with passion. The island has a lot to offer, including the Mediterranean lifestyle and a high standard of living. Moreover, I never underestimate the fact that few days pass without sunshine, even during the winter months.

BIO:

Adrian Alejandro Gostuski is a French National. He obtained his CPA from the University of Buenos Aires, Argentina, and his MBA from Escuela Superior de Economía y Administración de Empresas, Argentina.

He started his career at PWC before joining Citibank, where he occupied various positions in Buenos Aires, New York, and Singapore, being the latest in Mexico City, as Managing Director and Chief Financial Officer for Corporate Bank, Latin America. He joined Barclays Bank in London in 2008 as Chief Financial Officer – Operations and Technology, Global Retail Bank. Mr Gostuski joined Burgan Bank in 2011 where he occupied the position of Group Chief Financial Planning & Strategic Business Development Officer and is presently a director at Burgan Bank Turkey. Mr Gostuski served as Acting CEO of FIMBank from 30th March 2020 and was confirmed as CEO on the 7th April 2021.

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