Compliance and Regulation

• The ICC Banking Commission reports negative impact of regulation and compliance requirements on trade finance and calls for the industry to work together.
• A survey by the ICC Banking Commission finds that 90% of respondents believe regulatory and compliance concerns is a major obstacle to growth.
• Among the concerns regarding compliance and regulation is the fair treatment of trade finance accross jurisditions.
• With the increase in capital requirements, some banks retreated in trade finance resulting in a decline in transaction-banking revenue from 27% in 2010 to 19% in 2018.

Other Negative Drivers

• In an earlier survey, protectionist and trade-restrictive measures are also named as one of the major concerns.
•  Trade war between the United States and China has reportedly threatened the industry. For example, both lenders and traders reportedly required more paperwork in 2019 as a result.
• There is also a resurgence in letters of credit at the expense of the supply-chain finance.

Summary

• The initial research identifies two challenges in the trade finance industry: regulation/compliance and trade war.
• Given the nature the industry, the scope of the research is global.