RBS’s trade-finance operations took a blow after it was ruled the bank had been using the BankTrade system without permission.
The ruling is the outcome of a six-year legal proceeding brought by software developer Complex Systems.
The dispute centres on whether ABN’s licence to use the software came under the sale agreement to Bank of America, or if it had been retained by ABN, which has continued to use it.
At the ruling, US district judge Katherine Forrest stated it had been a “blatant and ongoing infringement” of copyright, continued as it would be disruptive to ABN’s business to stop using the system.
The ruling prevents RBS from using BankTrade in trade finance transactions for letters of credit, collections and guarantees from August 1. It must stop using the system altogether from June 1, 2015.
The ruling does not impact RBS Citizens or Plc customers, or trade loans and structured trade customers, including ECA finance and commodity finance.
In total, 21 of the 37 countries in which RBS operates will be affected to some level. This relates to 2,600 of the bank’s FI and corporate clients, who have been receiving letters advising them of the next best course of action, which in some cases will include looking for alternative banking.
In some cases, the bank has already begun moving clients to existing decommissioned platforms.
A source involved in the proceedings questions how easy it will be for the bank to switch its fully automated operations within the permitted 32-month time frame.
Court documents indicate that RBS stated it would take a substantial amount of effort and several years to move on from the system. Some of the countries affected run multiple books, with a number of currencies potentially impacted.
Although one market source suggested there was a risk that other platforms within the bank include elements of the BankTrade software that would also infringe copyright, the bank states there are no other platforms affected by the ruling.
Carole Berndt, head of global transaction services at RBS, says: “Our first priority is to help ensure our affected clients can continue to process their transactions, and we are communicating with them about how we can best serve them to do this.
“BankTrade is only one of many platforms RBS uses to process trade-finance transactions. Therefore, the ruling only affects a limited part of our trade-finance business.”
After the legal proceedings, a banker with knowledge of the case commented: “The start of it was a poorly handled acquisition. Six years ago there wasn’t the diligence in place that we now see post-crisis.”
Enrico Camerinelli, senior analyst at Aite Group, believes the bank will feel the effect of the removal of the platform immediately, foreseeing an impact on the added-value services it can offer.
More importantly, he points to the hit on reputation – the bank was one of the first to offer technology infrastructures with BankTrade, and now the experience and expertise it has developed down the years have gone.
However, Camerinelli says there could be a silver lining for RBS. “The glass, however, can still be half full because it is very likely that the functionalities featured by a specialized vendor platform outpace BankTrade’s,” he says.
“In essence, with BankTrade goes away also the burden of the legacies of a proprietary platform that in many circumstances have slowed down the desire of banks to adapt and change with the dynamics of a continuously evolving supply chain finance market.”
The global transaction services business is preparing to implement a new trade platform, but this will not be ready for use for some months.
The case will likely see a damages pay-out for the software provider, which a market source, involved with the legal process, suggests could be based on RBS’s profits derived from using BankTrade since 2007, which would be a further blow to the bank's balance sheet.