Drivers that Impact Trade Finance

Goals

Drivers of negative change trade finance.

Early Findings

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.



Proposed next steps:

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