Drivers that Impact Trade Finance
Drivers of negative change trade finance.
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.
- 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.
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