Trade Finance Global https://www.tradefinanceglobal.com Trade Finance Without Borders Thu, 06 Jan 2022 11:47:09 +0000 en-GB hourly 1 https://wordpress.org/?v=5.8.3 https://www.tradefinanceglobal.com/wp-content/uploads/2020/09/cropped-TFG-ico-1-32x32.jpg Trade Finance Global https://www.tradefinanceglobal.com 32 32 Stagflation: UK recovery weakening as inflation worries hit record highs, says new BCC survey https://www.tradefinanceglobal.com/posts/stagflation-uk-recovery-weakening-as-inflation-worries-hit-record-highs-new-bcc-survey/ Thu, 06 Jan 2022 11:32:58 +0000 https://www.tradefinanceglobal.com/?p=54725 A new survey has found that the UK’s post-pandemic recovery is losing momentum as inflation worries spread and business sentiment turns negative, stoking fears of a stagflationary period not seen since the 1970s.

The British Chamber of Commerce’s (BCC) latest Quarterly Economic Survey (QES), published today, found that 58% of firms – the highest percentage on record – expect their prices to increase in Q1 2022.

Only 1% of firms surveyed – which is within the margin of error – expect their prices to decrease in the next three months.

The QES is Britain’s largest independent survey of business sentiment and a leading indicator of UK GDP growth.

Its latest edition suggests that the UK’s post-pandemic recovery stalled in Q4 2021, with firms facing unprecedented inflationary pressures.

The survey of almost 5,500 firms showed that some indicators also revealed a continued stagnation in the proportion of firms reporting improved cash flow and increased investment.

Inflation was the top issue for firms, while a rise in interests rate was also a cause for concern for many.

Business activity flatlines

Just under half of firms (45%) reported increased domestic sales in Q4 2021, compared to 47% in Q3 2021.

Meanwhile, 16% of firms reported a decrease in domestic sales, which is unchanged from Q3 2021.

In the services sector, the balance of firms reporting increased domestic sales dropped to +26% in Q4 2021, down from +31% in Q3 2021.

In the manufacturing sector, the balance of firms reporting increased domestic sales was +22% in Q4 2021, down from +28 in Q3 2021.

The BCC notes that, prior to the UK’s surge in Omicron infections, hotels and catering had been the most likely to report increased domestic sales (55%).

This represented the beginning of a potential recovery, as the sector was also the most likely to report decreased sales throughout the pandemic prior to Omicron.

For example, at the start of the pandemic in Q2 2020, 94% of hotels and catering firms reported decreased sales and cash flow.

trade downfall covid

Plan B and other restrictions

Worryingly, the BCC warns that a similar decline is now possible in the face of the Omicron variant and the government’s implementation of Plan B restrictions.

Plan B restrictions in England – such as working from home and mandatory mask-wearing – have already caused many businesses to behave as if they were under prior lockdown orders, with many cancelling Christmas parties and other events as a cautionary measure.

But in Wales and Scotland, an even more onerous set of restrictions is now in place, and it is the hospitality sector that is most affected.

In Scotland, since Boxing Day, indoor standing events are limited to up to 100 people, indoor seated events to up to 200 people, and outdoor events to up to 500 people.

In Wales, likewise since Boxing Day, indoor events are limited to up to 30 people, and outdoor events (including amateur sports) are limited to up to 50 people. Professional sports can take place but without spectators.

For the hospitality sector, customers in Wales must not meet with more than five other people in pubs, cafes, or restaurants, and table service is compulsory.

Finance for exporters | Trade Finance Global

Unprecedented Inflationary Pressures

As noted above, 58% of UK firms expect their prices to increase in the next three months.

The percentage expecting an increase rises dramatically to 77% for production and manufacturing firms, 74% for retailers and wholesalers, 72% for construction firms, and 69% for transport and distribution firms.

As the BCC emphasises, these percentages are the highest on record.

When asked why they were facing pressures to raise prices, 94% of manufacturers cited raw materials, 49% cited other overheads, 30% cited pay settlements, and 13% cited finance costs.

When asked what was more of a concern to their business than three months ago, 66% of firms overall cited inflation (compared to 52% in Q3 2020 and 25% in Q4 2020).

Concerns over higher interest rates rise sharply

The number of firms citing interest rates as a concern rose to one in four (27%) in Q4 2021, up from 19% in Q3 2021.

Among manufacturers, 28% cited interest rate hikes as a concern – the highest since the metric was first collected in Q4 2009 – which was up from 21% in Q3 2021.

Among service sector firms, 29% cited interest rates as a concern in Q4 2021, which is the highest reading seen since Q3 2014 and up from 22% in Q3 2021.

Little recovery to cash flow

Overall, 31% of firms reported an increase in cash flow, while 46% reported no change and 23% reported a decrease.

The BCC notes that, given that these figures were reported before the full impact of Omicron and the introduction of Plan B, this metric is a cause for concern, as some firms are still struggling to recover from heavy losses incurred since the start of the pandemic.

Importantly, the BCC said that most firms are still not investing, further indicating the stagflationary environment previously warned of by Trade Finance Global.

Investment in plant, machinery, or equipment also continued to flatline in Q4 2021, with 29% overall reporting an increase, while 60% reported no change, and 11% a decline.

This was largely unchanged from Q3 and Q2.

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UK trade deficit with China triples in one year thanks to COVID-19 lockdowns – report https://www.tradefinanceglobal.com/posts/uk-trade-deficit-with-china-triples-in-one-year-thanks-to-covid-19-lockdowns/ Tue, 04 Jan 2022 15:00:12 +0000 https://www.tradefinanceglobal.com/?p=54703 The UK’s trade deficit with China has more than tripled after a year of lockdowns during the COVID-19 pandemic.

New data from the Department for International Trade, as reported by The Telegraph, shows that the UK imported £40.5 billion more from China than it exported during the year to June 2021.

This amounts to a 243% increase on the UK’s £11.8 billion trade deficit with China during the previous 12 months.

In the year to June 2021, the UK’s imports from China increased 38%, while the UK’s exports to China decreased 34%.

One reason for the shift is thought to be that lockdowns in the UK have raised demand for a range of electronic goods, which are primarily supplied by China.

While at the same time, UK lockdowns put pressure on British industries that would normally be exporting to China.

Jonathan Ashworth, an expert on the Chinese economy at Fathom Consulting, told The Telegraph that weakness in Chinese consumer spending also played a role in tripling the trade deficit.

“There has been less spending on services in the UK economy and more spending on goods,” he said.

“That has been a phenomenon seen across a number of advanced economies, and it has really helped Chinese exports.

“UK exports to China have fallen sharply. I suspect this is related to weakness in the Chinese economy, but also the spending of domestic Chinese consumers might be weighed towards the electronics and goods required to work from home.”

China’s place in world trade

The news of the UK’s growing trade deficit comes only three weeks after China celebrated the 20th anniversary of its 2001 accession to the World Trade Organization (WTO).

As reported by Trade Finance Global, the anniversary was marked by mixed feelings among China’s trading partners, many of whom have developed enormous trade deficits with the world’s biggest exporter during those 20 years.

Since 2001, for example, the US trade deficit with China rose almost every year until 2018, when President Donald Trump began to impose tariffs on Chinese imports, sparking what became known as the US-China trade war.

Source: Harvard Business Review

After rising from less than $100 billion in 2001 to a peak of over $400 billion in 2018, the US trade deficit with China declined in 2019 and 2020, but is expected to have increased again during 2021, according to the US Census Bureau.

Reducing dependence on China

The story of China’s accession to the WTO is the story of almost every nation’s growing dependence on China in terms of imports.

This trend is so strong that, as with the US from 2018 to 2020, any year in which a major economy manages to decrease its imports from China is seen as something remarkable.

Take India, for example, the world’s second most populous country and 15th largest goods exporter in 2020, according to the Organisation for Economic Co-operation and Development (OECD).

Yesterday, Indian Commerce and Industry Minister Piyush Goyal said that, from 2004-05 to 2014-15, India’s trade deficit with China grew from $1.5 billion to $48 billion – an increase of 3,100%. 

However, as quoted by India’s NDTV, Goyal was pleased to announce that, in 2021, India’s trade deficit with China came in at $44 billion.

This represents almost a 10% decline from the $48 billion trade deficit India recorded with China in 2014-15.

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‘Straightforward and efficient’ – Tat Yeen Yap explores partial confirmations of letters of credit https://www.tradefinanceglobal.com/posts/straightforward-and-efficient-tat-yeen-yap-explores-partial-confirmations-of-letters-of-credit/ Tue, 04 Jan 2022 12:15:18 +0000 https://www.tradefinanceglobal.com/?p=54685 As trade finance participants may have noticed, there is no specific provision in the Uniform Customs & Practice for Documentary Credits (UCP) 600 for partial confirmation of letters of credit (LCs).

Likewise, no such provision is offered by the International Standard Banking Practice (ISBP) 745 either.

But despite this, partial confirmation of LCs is possible under UCP 600

  • The rules of UCP 600 define “confirmation” as a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation. (The confirming bank is the bank that adds its confirmation to an LC upon the issuing bank’s authorisation or request.)
  • Although the confirmation relates to the LC, it is a separate undertaking of the confirming bank to the beneficiary, and it is independent of the undertaking of the issuing bank to the beneficiary.
  • Provided that the confirming bank does not alter what would constitute a complying presentation under the LC, the undertaking of the confirming bank need not be identical to that of the issuing bank. The confirmation can therefore be made for an amount different from that of the LC.

Defining best practice for partial confirmations

What is, or ought to be, the international standard banking practice for partial confirmations? 

It is worthwhile to begin our discussion by noting a ‘natural’ example of a partial confirmation. 

A partial confirmation occurs when a bank that has confirmed an LC does not confirm an amendment for an increase of the LC amount. 

Say, for instance, if an LC was originally issued for an amount of $500,000 and confirmed, and an amendment was then issued to increase the LC amount to $700,000.

The confirming bank advised the amendment without adding its confirmation, so the beneficiary now has an LC for an amount of $700,000, and a confirmation for an amount of only $500,000.

[As per UCP 600 sub-article 10(b), the confirming bank may choose to advise an amendment without extending its confirmation. 

If the confirming bank chooses not to add its confirmation to the amendment, it must inform the issuing bank without delay and inform the beneficiary that it has not added confirmation to the amendment in its advice.]

Consider a different example of partial confirmation: An LC is issued for an amount of $4 million, with a request to the advising bank to confirm. 

The advising bank has an available risk limit of $2 million for the issuing bank, and hence wishes to add confirmation of only $2 million to this LC. 

It obtains the agreement of the beneficiary on this lower amount to confirm.

The confirming bank should pay attention to how it structures a partial confirmation. It should take into account certain specifics of the LC, for example:

  • Are partial shipments prohibited?
  • Are instalment drawings or shipments provided for?

Such terms in the LC have implications on the amount that the confirming bank should honour or negotiate without recourse in a drawing. 

This is because, in cases where the LC prohibits partial shipments and does not provide for instalment drawings, only a single presentation shall be made – the confirming bank’s undertaking is to honour or negotiate without recourse on this single presentation up to its confirmation amount. 

If, however, the LC does not prohibit partial shipments or provides for instalment drawings, it will be important to be clear how the confirmation amount will be applied to different drawings under the LC. 

Taking the example of a bank confirming $2 million of a $4 million LC in this situation, does the confirming bank honour or negotiate without recourse an amount up to $2 million based on first drawing(s), or up to $2 million by applying a percentage (50%) to the amount in each drawing? 

Suppose the first drawing was for $2.5 million for a partial shipment: does the confirming bank honour or negotiate without recourse the full $2 million (its confirmation limit) in this first drawing, or does it limit it to 50% of the drawn amount, i.e. $1.25 million of the amount drawn (and 50% of each subsequent drawing until the $2 million is reached)? 

If the confirmation merely states that it is for $2 million, it will reasonably mean that the confirming bank should honour or negotiate without recourse the amount of $2 million of the first drawing(s). 

If, however, the confirmation states that it is for 50% of each drawing for a total amount not exceeding $2 million, the amount that the confirming bank honours or negotiates without recourse shall be in the stated proportion (50%) to each drawing, for a cumulative total of $2 million.

bank to customer

Little to no risk for confirming bank

The author is of the opinion that there is little or no increased risk to the confirming bank to honour or negotiate without recourse the amounts up to its confirmation limit based on first drawing(s). 

The risk to the confirming bank is not reduced by the proportionate approach, but could actually be slightly increased as the timeframe for reimbursement by the issuing bank is stretched out over multiple drawings.

Here we shall consider some practice questions pertaining to partial confirmations:

  1. If an advising bank wishes to partially confirm an LC, must the bank inform the issuing bank?

    In the author’s view, the advising bank ought to, based on the principle outlined in UCP 600 sub-article 8(d):

    “If a bank is authorised or requested by the issuing bank to confirm a credit but is not prepared to do so, it must inform the issuing bank without delay and may advise the credit without confirmation.” 

    Partial confirmation may be construed to mean that the advising bank is not prepared to confirm the LC up to the amount authorised or requested, and hence the bank should inform the issuing bank that it is adding confirmation for a lower amount.
  1. Does partial confirmation require the consent of the issuing bank?

    Notifying the issuing bank of the confirmation amount is sufficient, and requesting the issuing bank’s consent is unnecessary.

    This is because, as per sub-article 8(d), an advising bank that chooses not to add its confirmation (at all) may inform the issuing bank and advise the LC without confirmation to the beneficiary – without requiring the issuing bank’s consent to advise the LC without confirmation.

    By the same logic, the advising bank may inform the issuing bank that it has added confirmation for a lower amount and advise the LC accordingly to the beneficiary, without requiring the issuing bank’s consent to do so.

    As confirmation is for the benefit of the beneficiary, the agreement of the beneficiary to the partial confirmation is the only agreement that the confirming bank needs.

  2. Are there risks to the confirming bank if it does not obtain the issuing bank’s consent for a partial confirmation?

    A confirming bank’s rights to reimbursement from the issuing bank is tied to its honouring or negotiating a complying presentation, as outlined in UCP 600 sub-article 7(c):

    “An issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank.”

    A confirming bank does not enjoy separate protection in UCP 600 – its protection is the same as that of any nominated bank, i.e. the confirming bank, as a nominated bank, is entitled to reimbursement from the issuing bank if it has honoured or negotiated a complying presentation, and forwarded the documents to the issuing bank (and is further protected by article 35 covering loss of documents in transit from the confirming bank or nominated bank to the issuing bank).

    As long as the confirming bank or another nominated bank has acted on its nomination pursuant to the LC and forwarded the documents to the issuing bank as instructed in the LC, the issuing bank must reimburse that bank at maturity.

    (This is also the case in a commitment to honour or negotiate (also known as ‘silent confirmation’ at some banks) where a nominated bank undertakes to honour or negotiate a complying presentation for LCs for which confirmation was not authorised or requested by the LC.)

  3. Does the method of LC availability restrict partial confirmations?

    There are four methods of availability provided by UCP 600 – for a discussion of these, please refer to my article from August 2020 published by TFG.

Honouring and negotiating – the banks’ responsibilities

When adding partial confirmation, a bank should give thought to how it shall honour or negotiate without recourse up to the amount of its confirmation, taking into account the method of LC availability. 

If a draft is to be drawn on the confirming bank, the confirming bank should provide instructions in its confirmation on the amount of the draft(s) that it shall accept.

If the LC is available by deferred payment, the deferred payment undertaking of the confirming bank needs to be carefully worded to reflect the partial confirmation.

There are alternatives to partial confirmations for a bank that wishes to add its confirmation but has insufficient limits for the full amount. 

These alternatives include:

  • Risk participation – The confirming bank may find another bank to participate in a portion of the confirmation amount. The confirming bank substitutes the risk of the issuing bank with that of the participating bank(s) for the amount(s) of risk the bank(s) participate in.
  • Guarantee from a multilateral development bank (MDB) – MDBs like the ADB, EBRD, and IFC provide full or partial guarantees for LC confirmations. This requires the issuing bank and the confirming bank to both be participating banks in the MDB’s trade finance/facilitation programmes. The confirming bank substitutes the risk of the issuing bank with that of the MDB for the amount of the guarantee.
  • Irrevocable reimbursement undertaking (IRU) from another bank – The confirming bank may request the issuing bank to arrange for an IRU and subject its LC to URR 725 as a prerequisite to adding confirmation. The confirming bank substitutes the risk of the issuing bank with that of the reimbursing bank for the amount of the IRU.
  • Credit insurance – The confirming bank may purchase a policy from a credit insurer to cover part of the confirmation amount. The confirming bank may treat the credit insurance as a form of collateral, noting that payment from credit insurance is usually subject to a waiting period. 

The alternatives to partial confirmation may provide opportunity for the risk transaction to be more remunerative to the confirming bank, as the confirming bank would likely be able to retain a margin or have a skim over the costs of these risk mitigation techniques. 

That being said, providing partial confirmations is straightforward and efficient, and requires a lot less effort on the part of the confirming bank. 

However, partial confirmation requires the beneficiary to be agreeable to it, whereas the other techniques typically do not.

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2021 – A Year in Review with Trade Finance Global https://www.tradefinanceglobal.com/posts/2021-trade-finance-year-in-review-with-tfg/ Fri, 31 Dec 2021 13:00:02 +0000 https://www.tradefinanceglobal.com/?p=54640 It goes without saying that 2020 was quite a year, and not in the way that many of us would have hoped for.

It was a year marked by the global spread of SARS-CoV-2, followed by a series of destabilising ‘lockdown’ policies imposed by panicked governments on the world’s major economies.

A topsy-turvy ride for global trade volumes

Not surprisingly, it took a while for global trade to recover from such disruption, but by the end of the year, things were already starting to look up.

In November 2020, the Netherlands Bureau for Economic Policy Analysis recorded a 2.1% month-on-month increase in the volume of global goods trade, taking it above its December 2019 pre-pandemic level for the first time.

This finding was soon corroborated by the United Nations Conference on Trade and Development (UNCTAD), which found that global trade grew 1% above pre-pandemic levels in Q4 2020, followed by 10% above in Q1 2021, and 20% above in Q2 2021.

UNCTAD was quick to point out, however, that the recovery wasn’t enjoyed equally by all.

Among the lowest decile of the world’s poorest economies, trade contracted 26% in H1 2021 compared to H1 2019, and exports fell 4% for those economies during the same period.

Nevertheless, UNCTAD sees global trade growth ending Q4 2021 up 22% above its 2019 average, despite ongoing supply chain disruptions, decades-high inflation, and, of course, the virus. 

Clearly, there is a story as to how a tentative global recovery this time last year went from strength to strength in 2021, so let’s take a look back at some of the highlights along the way.

Around the blocs in 2021 – free trade agreements increase

2021 opened with a flourish for the UK, as the country’s post-Brexit first free trade agreement went into effect on New Year’s Day.

Known as the UK-Japan Comprehensive Economic Partnership Agreement (CEPA), the agreement was largely based on the pre-existing EU-Japan Economic Partnership Agreement (JEEPA), albeit with a few new additions.

Both the UK and Japan, for example, drew attention to the digital trade provisions of the deal.

Importantly, the CEPA prohibits restrictions on cross-border transfer of data (including personal data) and imposes a ban on data localisation requirements.

The two countries also agreed to maintain principles of net neutrality; to strengthen provisions on the transfer of financial information between financial services providers; and to commit to not imposing customs duties on electronic transmissions. 

Finally, the deal also contains provisions for the protection of source codes and the use of e-signatures.

It is worth noting that many of these commitments are similar to those made by Japan in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the UK also formally applied to join in January 2021.

Mesopotamian tablets go digital, proofs of concept go live

Sticking to the theme of going digital, in 2021 we saw the letter of credit – one of the most ancient instruments of trade – undergo a number of modern makeovers.

In February, for example, Finnish technology company Wärtsilä and Swedish bank SEB announced that they had successfully piloted a series of digital export letters of credit (LCs). 

As part of a secure data-sharing experiment, the Scandinavian duo implemented a full digital LC document exchange via a Finnish data-sharing platform.

Harri Rantanen, business developer in transaction services at SEB, said the results were impressive: “The prototype was evaluated in January and the result is ground-breaking.

“This pilot will pave the way for further developments where each of the pilot participants will be able to expand the use case portfolio into common or to digitalise the exchange of information within their own value networks.”

Greensill – the Bear Stearns of trade finance?

Of course, no 2021 Year in Review would be complete without at least a passing mention of the collapse of Greensill Capital.

Once a pioneer of trade finance, Australian businessman Lex Greensill had grown his eponymous company to become a major player in the industry, delivering $143 billion in finance in 2019 and 2020 respectively.

Greensill even secured the backing of Japanese investment firm SoftBank, in addition to the advisory skills of former British Prime Minister David Cameron.

But the Greensill empire quickly crumbled in March this year, after Credit Suisse froze $10 billion of funds that included assets originated by Greensill.

As with Bear Stearns in 2007, it was a reminder that things are not always as they seem in high finance, and even the mighty can fall a long way from the top.

Prior to March 2021, the market had believed Greensill to be in good shape. But as it turned out, what investors could see from a distance was merely the tip of a debt-laden iceberg submerged deep underwater.

Even today, 10 months on, the costs of Greensill’s collapse are still being counted, and heads are still rolling.

Just this week, for example, Credit Suisse fired two fund managers who oversaw the $10 billion of Greensill-linked funds mentioned above.

Lukas Haas, a portfolio manager, and Luc Mathys, who was head of fixed income, both saw their suspensions turn to firings after a company investigation was completed.

Suez Canal grinds to a standstill

In terms of raw news impact, however, not even Greensill could match what was about to transpire in the final week of March – in one of those rare trade stories that captured not just the business press, but the entire world’s media.

We’re talking, of course, about the Suez Canal blockage caused by the grounding of the Ever Given.

Who could forget the image of the 400-metre-long, 220,000-tonne vessel as it lay beached and motionless, bringing one of the world’s busiest shipping lanes to a standstill?  

The blockage lasted six days, from March 23-29, and its impact on global trade was severe.

Each hour of the blockage led to a hold-up of around $400 million of cargo, or more than $57 billion over the six days.

But perhaps the main lesson we should take from the blockage is that, when things don’t go to plan in global shipping, bigger vessels create bigger problems.

As Captain Rahul Khanna, global head of marine risk consulting at Allianz, has said: “We need to look more closely at how we can minimise the risks of mega-ships, especially in ports or in bottleneck passages like the Suez Canal or the Panama Canal, given the disruption we have seen that grounding incidents can cause.

“As a shipping insurer we want to support the industry and its growth. We have nothing against ships getting bigger, but all the additional aspects that come with this increase in size need to be considered from a risk management perspective.”

Khanna’s message was seconded by Régis Broudin, global head of marine claims at Allianz, who said that “dealing with incidents involving large ships, such as fires, groundings and collisions, is becoming more complex and expensive from a claims perspective.”

Source: Allianz

Broudin points to data from the Nordic Association of Marine Insurers (Cefor), for example, which has shown that the most costly 1% of all claims account for at least 30% of the value of total claims in any given year.

“The coronavirus pandemic is putting further pressure on maintenance cycles and margins are under strain, but we shouldn’t compromise on safety standards,” Khanna added. 

“We all need to think in more innovative ways.”

From scandals to blockages to the RCEP

Thankfully, April had better news in store after a tumultuous March.

In April, Singapore became the first country to ratify the Regional Comprehensive Economic Partnership (RCEP), with plans to implement the accord on January 1, 2022.

The RCEP is the world’s largest free trade deal and trading bloc, covering a third of the world’s population and 30% of global GDP.

The RCEP’s members include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam (who together make up the Association of Southeast Asian Nations, or ASEAN), as well as Japan, China, South Korea, Australia, and New Zealand.

RCEP members will benefit from tariff-free trade for over 90% of goods traded within the bloc, and preferential access to certain products in selected markets.

Companies within the RCEP zone will also be able to provide services to the wider region and increase foreign shareholding limits.

Climate alarm and financial response

One of the biggest stories of the summer of 2021 was the publication of a United Nations (UN) report on climate change.

In August, the Intergovernmental Panel on Climate Change (IPCC) published a report which predicts that global temperatures are likely to increase by 1.5°C above pre-industrial levels by 2050, unless the world commits to a net zero target on greenhouse gas emissions. (Here is our summary on what this could mean for trade.)

One major outcome of the IPCC report was that it laid the groundwork for the COP26 agreement to ‘keep 1.5 alive’, which was signed by almost 200 countries in November this year.

Among other announcements made at COP26, we also heard more from British Chancellor Rishi Sunak on the UK’s forthcoming mandatory financial disclosures regime for emissions-producing businesses. 

And we heard from UN Special Envoy Mark Carney on his Glasgow Financial Alliance for Net Zero (GFANZ), which claims it now has the backing of over 450 firms with $130 trillion in assets, each committed to investing for net zero by 2050.

Mind the ($1.7 trillion) gap

The latter half of 2021 was marked primarily by inflation, but also by certain key data from the trade finance industry.

Chief among these data was the publication, in October 2021, of the Asian Development Bank’s (ADB) latest figures on the global trade finance gap.

According to the ADB, the global trade finance gap grew to a record $1.7 trillion in 2020, eclipsing its previous high of $1.5 trillion recorded in 2018.

The ADB’s findings also exposed other challenges within the trade finance industry, none of which were particularly good news for small and medium-sized enterprises (SMEs).

For example, the ADB found that SMEs, and specifically women-owned SMEs, were significantly more likely to have a trade finance application rejected. 

SMEs accounted for 40% of rejected trade finance requests during the pandemic, and 70% of women-owned SMEs reported that their applications had been totally or partially rejected.

As noted above, given that SMEs in poorer economies are suffering the most due to the pandemic, this needs to change.

Welcome to inflation nation

And finally, what would a 2021 Year in Review be without a hat tip to decades-high inflation, making life more expensive and more miserable for all of us, though especially for those on low incomes?

In November this year, the US recorded a 6.7% increase in its 12-month consumer price index (CPI), taking inflation to its highest level in almost 40 years.

On the other side of the Atlantic, the UK’s inflation print fared little better, coming in at a 10-year high of 5.1% for the month of November.

As reported by Trade Finance Global, SMEs on both sides of the Atlantic and in the EU are starting to feel the pinch of this inflation

One survey found that 92% of US SMEs have seen their costs increase since March 2020, and 82% of US SMEs have raised prices for the end-customer during the same period.

On the plus side, as of November, Federal Reserve Chair Jerome Powell finally retired the word “transitory” to describe US inflation.

But his admission will do little to roll back the 18 months of quantitative easing on steroids that he has presided over, more than doubling the Fed’s balance sheet to a record high of $8.8 trillion since the start of the pandemic.

The Fed’s easy money policies – replicated by the Bank of England and the European Central Bank – are now helping to squeeze margins across the board going into 2022, setting up for a stagflationary period not seen since the 1970s.

That’s a wrap

And there you have it, a 2021 Year in Review from Trade Finance Global.

We would also like to apologise to the many newsworthy stories that didn’t make the cut, and in that spirit, we should perhaps offer some honourable mentions.

Back to the theme of going digital, in October, we were delighted to see the International Chamber of Commerce (ICC) put a number on the value of digitalised trade.

With legal reform, standardisation, and adoption of digital records, the ICC estimates that the value of trade between G7 countries could rise by $9 trillion by 2026 – a 43% increase above its 2019 value.

As a member of the G7, the UK is certainly taking seriously the opportunity presented by digitalised trade and an increase in digital trade itself.

In November, the SWIFT Standards Release also impacted banks and corporates. With significant changes to MT 760 and MT 767, important guarantee, standby issuance and Letter of Credit messages, steps towards automation and standardisation of bank messages continue their trajectory.

This month, in partnership with Singapore, the UK signed the first digital free trade agreement of any nation in Europe, known as the Digital Economy Agreement (DEA).

And to round off the year much like it began, the UK delivered another post-Brexit milestone after signing its first from-scratch free trade deal with Australia, which was announced just before Christmas.

As we head into 2022, financial history will be made, as the Libor benchmark, ‘the world’s most important number’ will be phased out. Though just a fraction of the $230 trillion of existing contracts referencing the Libor (and equivalent) benchmarks, its implications for trade and export finance are considerable. Throughout 2021, TFG worked with ITFA to create the Libor for Trade Finance hub, providing updates and guidance on navigating the Libor transition.

If you want to take a look back at what you, our readers, enjoyed reading the most this year, do take a look at our 2021 TFG review, here.

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Top 12 – Christmas Countdown from TFG https://www.tradefinanceglobal.com/posts/christmas-2021/ Fri, 24 Dec 2021 07:22:00 +0000 https://www.tradefinanceglobal.com/?p=54132

Top 12 – Christmas Countdown from TFG

As we approach Christmas – following a very unusual year for global trade – we will be taking a step back from the 2021 roller coaster and announcing our top 12 of the very best trade highlights of the year – one per day, until Christmas Day.

Happy Holidays from the Trade Finance Global team!

So, without further ado, let’s reveal our next highlight of 12 for 2021…

Day 12

On the 12th day of Christmas, we explore the new normal for trade. COVID-19 has shifted global value chains in unprecedented ways, from which there will likely be no going back. 

TFG partnered with Finastra to analyse the impact of recent events on new behaviours, purchasing trends and trade, as well as the focus on economic recovery and sustainable job creation.

Watch now

Day 11

The winner of ITPP 2021 Alejandro Battistotti explored the tokenisation of trade finance.

A future where blockchain is an integral part of trade finance has been widely forecasted. 
New potential applications of blockchain technology through the lifecycle of the trade are in constant development.

Read article now

Day 10

#ChooseToChallenge – A catchy tagline, but what does it actually mean? On the 10th day of Christmas we reflect on the most inspirational women in trade.

Earlier this year, TFG celebrated the economic, cultural, political, and social achievements for women, because an equal world is an enabled world.

Find out more

Day 9

Sustainability isn’t just for Christmas. The ICC published a new report setting out proposals to tackle the challenge of defining and setting common standards for sustainable trade and trade finance.

Read more

Day 8

Did you get your Christmas presents in time? This festive season, we’ve seen global supply chains deeply impacted by the changes that have taken place in the last 12 months. 

From the Suez canal blockage to the shortage of HGV drivers in the UK, it is fair to say that the industry is still facing significant challenges.

Listen now

Day 7

What better way to celebrate this festive season, than sharing free education to all? The second year of the International Trade Professional’s Programme (ITPP). 


The cohort worked closely with TFG’s editorial team to plan, scope, and produce a journalistic piece of content on a pre-agreed topic within international trade and finance.

Find out more

Day 6

On the 6th day of Christmas, we look forward to a 2022 packed with digital trade.

Digitising global trade has been a tough challenge since before the COVID-19 pandemic, but pandemic-induced closures and remote working norms have vastly accelerated its need. 


With this in mind, ITFA and TFG released a new whitepaper on Digital Negotiable Instruments.

Read more

Day 5

Our Christmas highlight today looks back at Sibos! We went live with Bank of America on the future of global trade and supply chain finance.

Watch now

Day 4

Did someone say sustainable trade?

During COP26, we published a brand new hub on Sustainable Trade Finance – a content area dedicated to market insights on ESG, sustainability, climate change, and decarbonisation in relation to trade finance.

Read More

Day 3

TFG released an interview series with ITFA, giving you a helicopter view – in just 13 minutes – of everything happening in the trade finance space.

Watch Now

Day 2

Our last issue of Trade Finance Talks

All I want for Christmas… is the latest issue of Trade Finance Talks! We cover the acceleration of trade digitalisation, taking a deep dive into commodities, transport, and the role of trade finance in financing the green transition.

Read the Issue

Day 1

We released a brand new, completely free app!

Today we unwrap our first present – your free trade finance app. Join the community now on TFG’s new app!

Gain access to award-winning, trusted content by the Trade Finance Global editorial team, and keep up with the latest developments in trade, receivables and supply chain finance.

Download the app

Happy Holidays from Trade Finance Global – See you in 2022!

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Trade Finance Global’s Year in Review https://www.tradefinanceglobal.com/posts/trade-finance-globals-year-in-review/ Wed, 22 Dec 2021 16:00:00 +0000 https://www.tradefinanceglobal.com/?p=54514 It has, once again, been a tumultuous year for global trade and finance…

Here we reflect on our most popular topics, hottest headlines, and key themes of 2021.

Thank you to all of our readers, viewers, listeners, followers, and subscribers!

🚨 Top highlights of 2021

📈 Most trending hubs and topics on TFG

  1. Incoterms
  2. Standby Letters of Credit
  3. HS Codes
  4. SWIFT MT Release
  5. Master Participation Agreements
  6. Certificates of Origin
  7. Supply Chain Finance
coronavirus trade finance

🚢 Coronavirus – popular topics relating to trade

  1. Force majeure
  2. LIBOR delay
  3. Supply chain crisis
  4. Letters of credit and PPE
  5. Global freight crisis

🔊 Top trade stories and headlines

  1. SWIFT Standards goes live in November 2021
  2. LIBOR transition – priorities for trade finance
  3. Bringing negotiable instruments into a digital world
  4. FCI reports 6.6% drop in global factoring
  5. Importance of URDG rules during the pandemic

🎧 Top 5 podcasts

  1. The LIBOR transition and trade finance
  2. Standby Letters of Credit (SBLCs) and their role in International Trade
  3. Electronic Documents and English Law: the roadmap to digital trade documents
  4. Voice of the CBI: What is the UK’s Independent Trade Agenda?
  5. Sustainable Trade Finance

Seasons Greetings, and Happy New Year from the TFG Team. See you in 2022!

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In conversation: New Enigio CEO Patrik Zekkar talks about the journey to a digital future for trade finance https://www.tradefinanceglobal.com/posts/in-conversation-new-enigio-ceo-patrik-zekkar-talks-about-journey-to-digital-future-for-trade-finance/ Tue, 21 Dec 2021 11:18:19 +0000 https://www.tradefinanceglobal.com/?p=54509 In October this year, Patrik Zekkar was appointed as the new chief executive officer (CEO) of Enigio by the company’s board of directors. 

Zekkar is bringing his experience from the banking sector to Enigio, having previously worked as head of trade finance and working capital management at Nordea. 

He also has experience in scaling and growing businesses within the trade and supply chain technology area, and experience as a board member in commercial blockchain initiatives and industry-interest organisations.

Enigio sees Zekkar’s appointment as a key step in its aim to become the leading technology provider of the global standard for freely transferrable digital original documents. 

This month, Trade Finance Global (TFG) Editor Deepesh Patel spoke with Zekkar to find out more about his journey to Enigio, his new role, and his outlook on digitalisation in trade and supply chain finance.

Journey to Enigio 

What are the biggest inefficiencies/opportunities around trade finance processes and operations, based on your previous role? 

I would like to start on another level than trade finance processes and operations, as all parties in trade are interconnected through the required documents, so each part in a supply chain has dependencies downstream – including, but not limited to, banks with the trade finance documents.

Without doubt the lack of digital creation at source, and interoperability between all parties in the supply chain, are the root cause of inefficiencies, and therefore by far the biggest opportunities.

Having been around and worked in several banks, I must say that much improvement has been made in the trade finance units over the years, and, therefore, continuing to improve business process management (BPM), ad hoc robotics, and similar efforts do not do the big trick anymore. 

Real process and operation levers, for all parties in a supply chain, are made when addressing the end-to-end (e2e) trade digital business model. Hence, digital creation at source and interoperability.

What are the biggest pain points when it comes to trade digitalisation at the bank? 

The documents, of course – this has been well known for ages – and the banks cannot change that themselves. 

But, they can play a part and contribute to the required changes to address the root causes. 

The documents in a trade transaction originating from banks, or banks’ customers on request by the bank, are within the banks’ control. 

Such documents will have to be digitally created and delivered digitally downstream, not as paper, as is done today. 

If each party in the chain took such responsibility, they should, in return, get major efficiency and security benefits. 

It’s fully possible with the technology of today, and legislation is rapidly and firmly catching up, i.e., under the Model Law on Electronic Transferable Record (MLETR). 

Leaving banking for tech 

Why leave a good job at a major international trade bank for a job at a tech company? 

When introduced to Enigio’s freely transferrable digital original document (trace:original), it actually took me a while to realise it’s a workable key component for digitalising the trade domain by addressing the paper, by being the digital paper 2.0.

With the ability to fully digitalise the original paper documents, which will carry any content, data structure or structures, and being machine-readable, there is no barrier to an e2e truly digital business model for every party throughout the entire supply chain. 

We don’t need to change, re-build, or massively invest any further, irrespective of the type of claim document, transport document, or other documents.

I like tangible, real solutions to major real problems. This is really what this is about, and therefore, it was impossible for me not to be part of this change.

Some countries still need to adopt technology-neutrality for adoption of highly-regulated documents to be digital. 

Thus, these types of documents are limited, and if that takes one year for some countries and five years for others, it’s negligible in the bigger picture. 

We have been waiting for more than 200 years for this to finally happen, and it will also need time to be adopted across industries and across geographies. 

Digital islands and holy grails 

Do we have a digital island problem (too many platforms, too many siloes)? 

Absolutely, and if we continue as-is, it will be a major blocker going forward. 

The lack of network effects is the biggest single issue hampering the development and higher adoptability of platforms.

Thus, I don’t think there are too many, and it is important to remember that all the platform initiatives are the reason for reaching this far in industry developments. 

I see no negatives here, rather the opposite. The platforms are part of an evolution, and now, in the next step, the focus needs to be on connecting the dots. 

If we don’t manage to connect the dots then we have failures and waste, with siloes and potentially investments in vain.

digitalisation trade

Is standardisation the holy grail for trade digitalisation? 

Let’s not believe that standards are all equal to one. We may have 36 different standards, and it is still standardisation, and that is what technology needs to be able to handle. 

You can put as many formats as you like in an Enigio trace:original document, so each party in the supply chain may extract data in their preferred format automatically. That is interoperability. 

The holy grail with standardisation is rules and regulations, if we want a global trade network. 

Contractual agreements, which have governed the digitalisation initiatives so far, are limited to the parties signed on to them – law is applicable to everyone. 

Due to the ongoing changes led by the G7+ countries, with impressive pace and support, to adjust laws in a structured way to enable a fully digitalised global trade network, it will happen.

Enigio, its friends, and its competitors 

Looking at how digitalisation is evolving in the industry, how do you see Enigio’s role compared to the many platforms and closed ecosystems being rolled out? 

Enigio is not a platform, but a utility solution that can be used by any platform and between platforms to solve the interoperability challenge.

Since you can add anything in the digital original document – data structure, terms and conditions, you name it – to complement or replace the shortcomings of platform and ecosystems, this enables cross-fertilisations between platforms and ecosystems.

Also, as Enigio´s freely transferrable digital original document, trace:original, is fully compliant with the demands of the MLETR and the International Chamber of Commerce Digital Standards Initiative (ICC DSI), it works both now and is fit for future. 

fintech

How can other fintechs work together to ensure cooperation and collaboration rather than competition? 

We have to cooperate and collaborate if we want to obtain the scale and thereby the return on investments required.

From a customer perspective, you don’t want to buy bits and pieces from various suppliers: you want a relevant package. 

As Enigio provides a component we, for example, partner with workflow system providers to secure customers, and get the solution bundled with its workflow system as a package.

Silo approaches are narrow-minded and will not take anyone or the industry to the next level, and will not capture the market demand and potential. 

The sharing of information is an important part of collaboration to ensure that we co-create and leverage on each other’s strengths, as well as being cost-efficient. 

There are examples from other industries where it works, so I don’t see why it shouldn’t work in trade.

For non-negotiable trade documents – for example, guarantees or other contractual documentations – there are no known legal restrictions. 

For negotiable trade documents – for example, bills of exchange and promissory notes – the governing law needs to be technologically neutral. 

That’s what the UN’s MLETR is addressing, and what countries are adjusting towards. 

Legislation in this field is as old as 150 years plus, and at that time it was not predicted that original documents would be digital in the future.

It is not the biggest hindrance, it’s a timeline thing, and it will be changed stepwise over the next coming years. 

Some major trading nations are expecting to correct their law already in 2022, so I am more stressed that the trade industry will not move fast enough to be fit for the future.

Thus, the biggest hindrance right now is that important stakeholders like banks take a “wait-and-see” approach, due to being unsure about how this will play out after monitoring the respective platform developments and interoperability issues. 

We hope to be able to support by giving comfort on the interoperability concerns.

digital future

Future plans at Enigio 

What are the next steps in your new role at Enigio? 

For Enigio, it’s about scaling-up the business in the focus areas in and around the trade supply chain, i.e. trade finance, transport and logistics, and certificates. 

We need to keep a high activity level in our engagement with customers and stakeholders, and ensure that we contribute to making the industry future-proof. 

The parties that do not leverage or comply with MLETR, ICC DSI, or similar measures will find themselves lagging, and that is not the situation you want to find yourself in.

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Short-term, low-risk, self-liquidating – Santander’s Alberto Amo on trade finance as an investable asset class https://www.tradefinanceglobal.com/posts/short-term-low-risk-self-liquidating-santanders-alberto-amo-on-trade-finance-as-investable-asset-class/ Mon, 20 Dec 2021 12:59:30 +0000 https://www.tradefinanceglobal.com/?p=54442

Having joined Spain’s Banco Santander in 1997, Alberto Amo spent eight years as a corporate banking director before gravitating towards trade finance.

After two years as head of cash management products for global transaction banking (GTB) in Spain, Amo’s knowledge of the regulatory landscape in GTB led him to the post of head of supply chain finance in 2007.

Since then, trade finance has always been a focus for Amo, especially in his current role as global head of trade assets solutions for GTB, which he has held since 2014.

A native of Spain, Amo said his journey at Santander has been shaped by his broad understanding of a wide range of products and innovations.

“Because of the needs of the different products and teams, I became someone with some depth in regulatory matters,” he said. 

“First for banking, and then mainly on capital markets for different asset classes, which is what I’m doing now – quite broadly.”

Asset classes in GTB at Banco Santander

Under the remit of GTB, Santander’s main activities are focused on export credit agency (ECA) financing and structured trades.

“A big chunk of what we do is receivables and payables, open account trade finance, and some of the regular trade business,” said Amo.

“Additionally, we take care of leasing, some lending, and so on. And outside of GTB, I also work with other asset classes, always in the illiquid space and structure.”

An important part of Amo’s work at Banco Santander involves securitising and distributing trade finance risk between multiple financial institutions.

As Amo points out, this is a complex process that is shaped by the relative position of the institutions involved.

“At the end of the day, the raw material for any kind of banking activity, but also for trade finance, is capital, liquidity, and credit related to capital,” said Amo.

“So it would depend on what the institution is looking for and then what restrictions they have – if they have restrictions with leverage ratio, or liquidity.

“For instance, in ECA financing, we play very much in the cover bond space, because we are looking for long- term liquidity, and we are not restricted by any kind of leverage ratio.”

In trade finance, Amo said that Santander seeks to maximise return on equity (ROE) versus return on assets (ROA), as is the case for American firms.

He also said that short-term trade finance transactions are pursued when appropriate.

“In short-term trade, we play more like credit relief,” he said. 

“Capital relief is tricky for low-density assets like short-term trade finance – it can be done, but you have to fine-tune the structure and the pricing that you pay for the coupon.

“So it depends on the relative position of the bank.”

UK prepares to launch new trade deal negotiations with Canada and Mexico

Trade finance as an investable asset class

As one of the founders of the International Chamber of Commerce (ICC) Trade Register, Amo makes a strong case for trade finance as a uniquely low-risk and investable asset class.

Among its advantages for investors, trade finance is typically short-term, self-liquidating, and it boasts incredibly low default rates – a metric that can be gleaned from the ICC Trade Register.

“It is not that trade finance is a better asset class per se: it’s because of the characteristic of being self-liquidating, short-term, and so on,” said Amo.

“We have early warning signals, and we can manage our positions in advance.

“So when the default is occurring, we may be out. It’s not that trade finance bankers are smarter: it’s that they have the chance to take measures and do management of the assets.”

Among institutional investors, however, Amo believes that trade finance as an asset class is still poorly understood, and that there is a need for greater education.

“For institutional investors, it’s difficult to see the way you manage the assets and the servicing, and how you mitigate the risk, because of those early warning signals, so they need the right counterparty to be able to invest,” he said. 

“Having said that, I think that there has been a revolution in the last four or five years, and more and more insurance companies, and some pension funds, are becoming interested in trade finance, and they are learning.

“It’s still not large amounts in terms of what they invest, but it’s growing.”

The evolving regulatory landscape for trade finance

Finally, Amo also has a unique understanding on the complexities and nuances of the trade finance regulatory landscape, having worked on the capital relief and regulatory requirements with regards to Basel III reform and the Capital Requirements Directive (CRD) IV for banks who are financing trade.

Both regulations have impacted access to finance for small and medium-sized enterprises (SMEs), but nonetheless, Amo still believes that one of their defining features is the fact that few market participants understand the full implications of them.

“I think that not many people know the small details that are embedded in the regulation when it comes to trade finance,” he said.

“In CRD IV, there are a number of features: the one-year maturity floor, also in the liquidity coverage ratio.

“But there was something very specific, which was that the former definition of trade finance was really cross- border. We changed that, and then domestic trade finance was also considered real trade finance.

“That had a huge impact on the capital weights and the liquidity ratios of the financial institutions to be able to support SMEs.”

With SMEs now a much clearer focus for trade finance portfolios at major institutions, Amo said he expects their importance in the market to grow, even despite being disproportionately impacted by the COVID-19 pandemic.

“At the end of the day, SMEs are a growing force in international markets, but they tend to be domestic at this stage,” he said.

“They were not as constrained as they might have been by regulatory changes, so we keep growing this kind of domestic trade finance together with cross-border trade finance.”

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TFG Weekly Trade Briefing, 20th December 2021 https://www.tradefinanceglobal.com/posts/tfg-weekly-trade-briefing-20-12-2021/ Mon, 20 Dec 2021 10:24:27 +0000 https://www.tradefinanceglobal.com/?p=54419 Your Monday morning coffee briefing from TFG:

The UK has signed its first from-scratch free trade deal of the post-Brexit era with Australia.

The Bank of England has raised rates from 0.1% to 0.25% amid decade-high inflation and Omicron uncertainty.

Willis Towers Watson’s Chris Hall discusses ITFA expansion, trade credit, and non-payment insurance.

The ICC has launched a Legal Reform Advisory Board to support harmonisation of the Digital Standards Initiative (DSI).

And 1 in 3 UK small businesses are planning to cut staff, during the worst year for ports since 1983.

‘More than Australia has ever offered’ – UK signs first from-scratch free trade deal of post-Brexit era with Australia

Announced by the UK’s Department for International Trade (DIT), the deal will set new standards in digital and services trade between the two countries, and will create new work and travel opportunities for both Brits and Australians. Read more →

Bank of England raises rates from 0.1% to 0.25% amid decade-high inflation and Omicron uncertainty

The BoE’s Monetary Policy Committee (MPC) voted overwhelmingly for the rate hike in an 8-1 vote. Read more →

VIDEO: Willis Towers Watson’s Chris Hall on ITFA expansion, trade credit and non-payment insurance

Like many organisations during the COVID-19 pandemic, the International Trade and Forfaiting Association (ITFA) has had to adapt to a changing business landscape. Read more →

CASE STUDY: Swiss export credit agency, SERV, co-insures €130m of €1.5bn Turkish infrastructure project

SERV, the export credit agency of the Swiss government, has successfully co-insured part of a major Turkish infrastructure project worth €1.5 billion. Read more →

ICC launches Legal Reform Advisory Board to support harmonisation of Digital Standards Initiative (DSI)

In a press statement, the ICC said the move is part of its drive to promote inclusion and create opportunity for all parties involved in international supply chains. Read more →

Stagflation: 1 in 3 UK small businesses planning to cut staff, worst year for ports since 1983

New data from the UK has revealed yet more evidence that stagflationary clouds are gathering on the horizon, as both ports and small businesses struggle to recover from the COVID-19 pandemic. Read more →

New APAC free trade agreement covering third of global economy will eliminate 90% of tariffs, says UNCTAD report

The Regional Comprehensive Economic Partnership (RCEP), as the agreement is officially known, will come into force on 1 January 2022, and will create the world’s largest trading bloc by combined GDP, according to UNCTAD. Read more →

Gunvor secures $1.13bn LNG syndicated borrowing base facility with emissions measurement commitments

In what Gunvor believes is a first-of-its-kind agreement, the LNG facility will include measurement commitments on Scope 1, 2, and 3 emissions, as per the Enterprise Carbon Accounting (ECA) taxonomy. Read more→ 

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VIDEO: Willis Towers Watson’s Chris Hall on ITFA expansion, trade credit and non-payment insurance https://www.tradefinanceglobal.com/posts/video-willis-towers-watsons-chris-hall-on-itfa-expansion-trade-credit-and-non-payment-insurance/ Fri, 17 Dec 2021 14:08:01 +0000 https://www.tradefinanceglobal.com/?p=53944

Like many organisations during the COVID-19 pandemic, the International Trade and Forfaiting Association (ITFA) has had to adapt to a changing business landscape.

And despite a great deal of disruptions and restrictions that have affected global trade over the last two years, ITFA has nonetheless made considerable progress in its regional expansion efforts.

One ITFA member who has stewarded this transition during the pandemic is Chris Hall, head of regions at ITFA, who was first elected as an ITFA board member in 2015.

An insurance broker by trade, Hall is also an executive director for financial solutions at UK-based firm Willis Towers Watson, which he joined this year, and where his role focuses on developing credit and political risk businesses for financial institutions.

Prior to joining Willis Towers Watson, Hall was a senior underwriter at Liberty Speciality Markets from 2018 to 2021, and head of trade asset management at Lloyds Banking Group from 2015 to 2018.

Regional expansion 

As head of regions at ITFA, Hall oversees and coordinates with each of ITFA’s 11 regional committees. 

His aim is to ensure that members’ needs are represented no matter their location, and to advocate for consistent policy and best practice in global trade and forfaiting markets.

“What we try and do is make sure that we are servicing all of those respective needs that the members have in the regions,” said Hall.

“That can be through organising events, educational seminars, it could be webinars – as has often been the case in the last 18 months or so. 

“But in essence, it’s trying to make sure that ITFA’s central mandate of trying to bring together the trade and forfaiting world in a global sense continues.”

ITFA-ATFA merger

On December 31, 2019, ITFA launched its merger with the US-based Association of Trade and Forfaiting in the Americas (ATFA). 

“The Americas is an area where historically ITFA hasn’t played too much of a role,” said Hall.

“And conversely, the rest of the world is the area that the ATFA team were not, so there’s a real synergy to be gained from coming together.

“Many ITFA members are also ATFA members, historically, and of course vice versa.”

In September this year, the newly formed ITFA Americas Regional Chapter (AMRC) held its first event in the almost two-year period since its launch, with an in-person get together in New York City.

“We have a real opportunity to leverage their expertise locally, and obviously throughout the rest of the continent,” said Hall.

“It’s really been great to see the energy that they had in the room and hearing some of the stories – it brings back ITFA’s raison d’être, which is networking and bringing people together, and that’s what it’s all about.

“Our coming together enables them to leverage some of our scale, and also give access to the global nature of the business.”

Short-term trade credit insurance

Meanwhile, in Hall’s other role at Willis Towers Watson, his focus has been on short-term trade credit insurance, which has also been impacted by the pandemic.

“The role is supporting predominantly bank clients, who are internally supporting their own exporting clients by mitigating their risk in transactions,” he said.

“And that might be by enhancing their balance sheet, treatment of a transaction, it might be around capital utilisation, or it could just be around limits.”

Hall said the short-term credit insurance market had seen a reduction in capacity during the pandemic, but that capacity is now returning, and could even be back at pre-pandemic levels.

“Pricing spiked for a while, but then came back down again – all driven by banks and their exporting clients and what they’re willing to pay,” he said. 

“Inevitably, supply and demand come into play, and if you can’t make the two match then you don’t really have a business model.

“At Willis Towers Watson, we are very much trying to bring banks to the market, help our clients find the right sort of underwriting capacity, and really be that conduit between the two.”

Non-payment insurance

Another product that Hall believes is bouncing back from the pandemic is non-payment insurance.

In the non-payment insurance market, Hall believes that underwriters are returning to their usual style of considering a potential trade transaction on its own merits, rather than focusing on circumstantial risk factors, as was the case during the pandemic.

“As I say, capacity and interest had probably retrenched somewhat during the first part of the pandemic,” said Hall, “and underwriters were being less open to taking on more difficult risks than they might have been. 

“I would say that’s probably returned back to a more normal situation where underwriters are looking at transactions on their merits.

“They’re trying to understand: does this fit within their agreed parameters within their portfolio requirements?”

With this shift, Hall expects that non-payment insurance will steadily return to its pre-pandemic market dynamics, in which the flow of business – and the interest in that flow of business – will find itself back at 2019 levels.

Willis Towers Watson offers insurance-related services through its appropriately licensed and authorised companies in each country in which Willis Towers Watson operates. For further authorisation and regulatory details about our Willis Towers Watson legal entities, operating in your country, please refer to our Willis Towers Watson website (https://www.willistowerswatson.com/en-GB/Notices/global-regulatory-disclosures). It is a regulatory requirement for us to consider our local licensing requirements.

The information given is believed to be accurate at the date of publication but may have subsequently changed or have been superseded and should not be relied upon to be accurate or suitable after this date.

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