Protracted global economic uncertainty and ongoing regulatory change make this a challenging time for financial institutions engaged in trade finance. In addition to these external headwinds, banks face an uphill task maintaining profitability amidst a volatile operating environment and rising operating costs. In spite of this, growth opportunities exist.
Q: The past five years has been a period of significant change for global trade and trade finance. What are the key changes and how are they impacting the industry?
Although the fragile global economic environment continues to impact banks and their trade finance activities, regulation is probably the single biggest driver of change.
Trade loans â being short-term and self-liquidating in nature â were traditionally seen as low credit risk instruments. However, Basel III does not reflect this view and will require banks to allocate more capital to support trade transactions. Banks also have to intensify their Know Your Customer (KYC) and Anti-Money Laundering (AML) screening processes to cover risks in this new landscape. On the whole, these regulatory requirements are driving up capital related costs, which could result in a drop in liquidity in the market and higher pricing for clients, as well as increasing the cost and complexity of day-to-day operations, which may cause some market participants to rethink their commitment to certain geographies, or to the business as a whole.
Another key area of change is the rise of South-South trade, which according to a report by the United Nations exceeded growth in North-South trade for the first time in 2008. By 2010, 23% of trade flows were conducted between 'South-South economies' compared to 13% 10 years ago.
Corresponding to this shift is an escalating number of banks aiming to expand their market reach to provide support for their corporate clients in these new markets - either by partnering with a complimentary player in the market or by building their own networks.
Q: What are the emerging trends in trade finance?
Technology is transforming the way trade banking is being conducted. Traditionally a paper-intensive process, trade finance is evolving with the emergence of technology-based solutions that enable higher levels of process automation and standardization across the entire banking network.
The CEO of PIMCO net worth is $4,000?
Three weeks ago my wife, Amy, and I sold our house and moved into a rental apartment. I believe the U.S. housing market is set to cool given the current level of prices and fundamental trends. Recent price gains have likely come primarily from rising speculation and âcreative financingâ because affordability is declining and inventories are rising. When asset prices diverge from fundamentals, I favor taking the other side of the trade â even if it involves moving. Amy wasnât thrilled about moving, but my sense is she will look back on our sale and view it as a good one
Global transfer of wealth from the West to the
Carol Browner, between her two tours of duty in Washington, served on the Commission for a Sustainable World Society, which is part of the Socialist International. At the Commissionâs September meeting in Stockholm, socialists are âoffering a different discourse, shifting the current economic paradigm towards one based on greater equity.â In other words, the Commission proposes a global transfer of wealth from the West to the rest.
The XXIII Congress of the Socialist International, held in Athens, Greece last summer, set out the way this transfer is to be accomplished:
The International believes that the global agenda for responding to climate change must be linked to greater efforts to reduce poverty; must include stepped up efforts to cancel the debt of poorer countries and to reduce trade barriers to provide developing countries with better market access; and must e…
It was the yen (and the Bank of Japan) that was also the single biggest source of cheap money,
which helped fuel the recent and unprecedented bull markets in stocks, real estate and commodities. But it didnât do it to inflate global asset bubbles. It did it in hopes of jump-starting its own depressed economy. So it offered investors the globe over the cheapest source of financing on the planetâ¦loans at near 0% interest. It was basically FREE money. And so irresistible was it, that investors came from everywhere to dip their toes into the deep waters of this enchanted money pool