In the current financial environment, when Governments worldwide are cutting back on public expenditure, investors have suddenly become wary that, with no recourse to public funds, calls for more sophisticated financial engineering techniques are required.
The Benefit of History
British merchants were clearly in the vanguard of the creation of the international economy that emerged from 1780 up to 1914, though other merchants such as the Dutch contributed greatly to these developments. Their British activities followed the expansion of British imperial frontiers; yet they also went beyond "empire" playing a major role in Latin America. The traders were closely connected with the expansion of British shipping. They were also associated with the growth of overseas banks.
In the UK, three centres for the mercantile developments emerged: Liverpool, London, and Glasgow. The principal trading companies (Confirming Houses), as of 1870, were identified with each centre. These Confirming Houses participated in banking activities, providing credit to customers and suppliers, financing trade, and by necessity dealing in foreign exchange; they also became active in "investment banking," aiding and prompting the design and build of some of the world’s greatest railways, most rolling from the harbours they had already built. In fact, they were the cornerstone of the economy of the then Empire.
The FairFund Federation ('Federation') structure have gone back to basics by taking all of the good proven elements of the Confirming House using the existing banking infrastructure combined with modern communications. The Federation will use these structures to build infrastructure projects, generating Enterprise and Development, in response to the call for these by developers in any nation not under UN embargo thereby meeting its own prime objective of increasing stability, investment and growth in the jurisdictions of its activities.
It is the view of the Federation that if the structure of the Confirming Houses, through their partnerships, were used to build Empires and to create most of the large investment and trading banks, that built most of the existing old infrastructure and landmark buildings around the world, then it would be mistaken if it did not use today these well tried and tested structures. It is therefore the intention of the Federation to apply these well proven structures, using today’s international Banks as Merchant Banks handing over the completed projects to the Reserve or Public sector after the Members have built and delivered their projects with the settlement value of the Bills of Exchange remaining in perpetuity in the Trust accounts in the correspondent banks in those jurisdiction’s.
Developing countries need greater access to international finance in order to create sustainable economies and to help eliminate poverty. In recent times, potential lenders for infrastructure and enterprise development have been reticent to facilitate financing of such investments, mainly because of the risks of lending: whether such risks were political, sovereign credit, exchange rate, or simply project related. The mitigation of such risks is fundamental for the economic development of any country and in particular that of developing countries.
The Federation stands apart from this norm due to the fact that all capital distributed to projects is the capital belonging to the Trust, where it is held free, clear and unencumbered, with no third party liability to shareholders, governments, or banking institutions. Therefore, it is unlikely that the Federation or Foundations would wish to be part of a PPP.
Under this structure and these arrangements, the Federation becomes a net economic investor into the host jurisdictions of projects. It creates economic stability, investment and growth without the generation of any sovereign debt, due to there being no repatriation of capital and no exposure to currency exchange control.
The Federation remains separate and apart from these politically imposed restrictions, due to its structure and the fact it does not avail of public funds or sovereign debt.
Throughout the world, there are an enormous number of major projects that must be built to give empowerment and self-governance in areas of great need. Development Banks are not permitted to operate without having to meet the sovereign risk and guidelines laid down by the regulatory bodies. Unfortunately, these projects are within the poorest nations where development is desperately needed, but the structures set up to assist these nations are failing due to regulations and credit controls politically imposed.
The uniqueness of the Federation structure is that, unlike banks and other financial institutions, the Federation and its related Foundations have no beneficial shareholders nor do they accept any third party liability. All Trust capital held to the benefit of the Federation, within the network of correspondent banks is capital which has been unconditionally benefacted to the Trust in perpetuity, with no obligations to the Benefactors or any third parties. All such capital remains under the custodianship of the banking institutions and not in Reserve hands where it might be abused or generate economic imbalance.
To meet this urgent demand for major infrastructural projects to relieve suffering and poverty and to create economic stability, investment and growth as well as to increase employment priority will be given by the Federation through the granting of Concession Licenses to Members applying for Concession Funding in such poorer nations. Out of respect for the host jurisdiction’s self-determination and autonomy, it shall be left with the host jurisdiction’s Foundation to advise the Executive Council on its priorities for development, seeking to ensure that such priorities are in line with the Mission, Ethos, and Objectives of the Federation.
The "corporate landscape" for the British trading houses changed dramatically in the 1950s, 1960s, and 1970s. In 1958, Inchape was floated on the London Stock Exchange, and, as the Empire shrunk, so the family ties transcending frontiers gave way to the Multinational companies on the stock exchanges, driven more by greed than need.
In the 1950s, 1960s, and 1970s, host country groups or governments frequently acquired (often through nationalizations or straight encroachment and confiscation of these trading houses and shook off the old empire links).
Reserve Funding Initiative (‘RFI’) is a term used by many banking and non-banking institutions to refer to project capital made available through the Reserve sector. What is common in most, if not all RFIs, is that, although the capital may be held in Reserve hands, generally it appears on the accounts of those entities and forms part of the overall liquidity ratio employed. Consequently, RFI funding typically seeks guarantees from the recipient of such funding in the form of treasury notes and/or sovereign guarantees. RFIs are likely to be part of a Public Reserve Partnership (PPP) where the public partner carries the financial risk from the public purse.
The Federation needs to establish cash resources to finance such infrastructure on a continuous basis through the initial five-year term of SPV funding for the construction and commissioning of such projects. The structure must be designed to protect against the diminution and leakage experienced with traditional assistance and aid that has been given to developing nations.
Since this is the objective, a structure is required to be managed through the banking and non-banking institutions without drawing on or having a negative effect on their existing ratios, weighting and/or credit lines. As a result, the Federation must enter into corporate contractual relations with such banking and non-banking institutions permitting them to handle the distribution of and to hold the free, clear and unencumbered capital belonging to the Federation. The Federation does not borrow or lend and must rely on paid services from the international network of banking and non-banking institutions. Therefore, Concession Funding finances projects during their initial five-year term and such funding is distributed through the banking system, as opposed to being provided by the banking system.
