Banks examine the bigger trade picture

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21 April 2010

Banks involved in trade finance and trade services report a continued climb out of the global financial crisis with trade provision leading the way. But what lessons have been learned and will the examination of trade finance lending lead to changes in practices? Michele Martensen assesses the scene.

In the past six months market indicators would suggest a bouncing back from the depths of the economic crisis. Pricing has come down fairly dramatically. Capacity has come back on-stream both in the primary and secondary markets. The flight back to letters of credit (LCs), that was anticipated at the beginning of the crisis, has not manifested itself as strongly as was expected. And the push towards open account – which has been on hold over the past two years – has returned in some markets, albeit with more structured solutions.

Trade financiers report an increasing confidence among customers. Some are starting to see longer-term more strategic planning coming back into discussions; not just short-term tactical issues that were prevalent 12 months ago. While the market may be picking up – and “strongly” say some – trade is ultimately driven by the larger recovery in the global economy, so robust and stable...

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