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Trade finance: How to stay ahead in a changing world

20 May, 2020Juno Baker

The Covid-19 pandemic is changing the world of trade finance so quickly that it almost seems impossible to keep up. We look at key developments and give details of a new series of free webinars that will help you stay ahead.

Connected-earthDocumentation and digitalisation

Trade finance still relies on paper documentation, which has to be couriered around the world. This is because, in law, e-documents won’t do. In particular, it is paper bills of lading that give title to goods.

Because of coronavirus, many couriers cannot operate as normal and banks have had to use workarounds, such as emails and follow-up phone calls. That means the digitalisation of trade is speeding up. There is a push to have the law on e-docs changed.

For example, the International Chamber of Commerce (ICC) called on governments to void the legal requirement for paper-based documentation in trade finance and to adopt the Model Law on Electronic Transferable Records (MLETR).

Open account financing and supply chain finance

Lockdowns have hit all sectors, with factories and many businesses around the world closed or going bust.

Supply chains have shown themselves to be fragile and unpredictable. And some countries are becoming more protectionist. All of that means increased levels of risk.

Will the demand for trade finance instruments grow? And what will happen to supply chain finance?

Liquidity

Responding quickly to the pandemic, central banks increased liquidity with:

  • ultra-low interest rates
  • a relaxation of capital rules and
  • in some cases, monetary financing.

A few developing markets, particularly in East Africa, are using digital currencies such as Ripple to get around the cost of accessing dollars.

But the crunch problem isn’t cash – it’s the slowdown of goods.

Regulation

Many governments have temporarily eased financial regulations – for example requirements for capital buffers – to make it easier for banks to lend to businesses.

And to save businesses and jobs, some governments have increased the export credit guarantees they supply through export credit agencies.

But banks and regulators are staying tough on compliance – because banks have a central role to play in preventing trade-based financial crime.

How can banks stay on top of ‘know your customer’ (KYC) and anti-money laundering (AML) during lockdown?

Trade Finance Webinar Series

In this fast-paced world, you need to keep up to date with the latest thinking – from subject matter experts in the industry.

Our Trade Finance team has organised a series of free webinars over the next few weeks. Each session will be informative and interactive, and you can earn continued professional development (CPD) points for attending.

Dates for your diary, so far are: 

  • 27 May: An Introduction to Demand Guarantees with Andrea Hauptmann
  • 3 June: Core Principles of Trade Finance with Dave Meynell
  • 10 June: Introduction to Documentary Credits with Gary Collyer
  • 17 June: Exploring Trade Based Financial Crime with Alex Gray
  • 1 July: The Evolution of Payments CertPAY

Register for An Introduction to Demand Guarantees on 27 May

Register for the Core Principles of Trade Finance on 3 June

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