Liquidity provided by trade finance is, said one commodity trader at a recent ICC Banking Commission conference, “the lifeblood of trade and essential facilitator of our business”.
But keeping that liquidity flowing has had its challenges during a year that revealed the US$38 barrel of crude and soaring financial crime prevention costs.
With the pulse of global trade growth having slowed up to the tune of around 1.7% for 2016(according to World Trade Organization estimates), the preference for de-globalisation from certain nationalist governments hardly suggests that the only way is up in 2017. Brexit with all its uncertainties surrounding a “hard” or “soft” withdrawal of the UK from the EU, and US president-elect Donald Trump’s determination to renegotiate the 22-year-old North American Free Trade Agreement (NAFTA), are just two examples. In fact, according Deutsche Bank’s capital markets strategist Tom Joyce, “Trump’s rejection of the Trans Pacific Partnership is a watershed moment in US trade policy, as the US has never previously failed to ratify a major trade agreement.”
While the peak era of large-scale multilateral free trade deals may well be behind us, there are opportunities to be had from a plethora of bilateral ones that look set to emerge instead. This means financiers need to be more responsive to sudden market changes as this will impact client demand.
“Faced with this challenging scenario, we need to keep working hard to help facilitate trade. We need to ensure trade continues to open up new opportunities, for more people, and that trade is a factor for growth and development in smaller economies,” reflected WTO director general Roberto Azevêdo in December 2016.
Sustaining trade finance provision is a vital part of trade facilitation – and it cannot all be left to the development banks whose function is to encourage and guarantee commercial lending. According to the ICC 2016 Annual Trade Register, the default rate for export letters of credit stands at a miniscule 0.04%. The register is now in its sixth year and logs trade activity from across the world, covering US$9.1trn of exposures and 17 million transactions. “The Trade Register,” said Daniel Schmand, chair of the ICC Banking Commission (and Deutsche Bank’s global head of trade finance), confirms that trade finance should be increasingly recognised as a reliable asset class by institutional investors, with scope for high yields and low volatility”.
Trade finance award
In a climate where expecting the unexpected seems to be business as usual, it was therefore reassuring to receive the news that Deutsche Bank clients have voted us for the third year running Best Global Trade Finance Provider in the Euromoney Trade Finance Survey 2017. Consistency of provision, reliability and footprint were all important contributory factors.
The bank received a total of 17 number one wins, including No.1 leader in North America and Asia Pacific for the third year running. A total of 4,040 valid votes were cast by clients and the readers of Euromoney magazine in the fourth quarter of 2016 – a 77% increase on the 2015 survey.
“These are impressive accolades for our business demonstrating that we continue to provide best-in-class products and services for our clients within all the major regions that we operate, and once again underlines our position as a core business within the Bank,” said Michael Spiegel, global head of trade finance and cash management corporates.
Best Trade Finance Provider: by region
Global: No.1 (3rd time running)
North America: No.1 (3rd time running)
Asia Pacific: No.1 (3rd time running)
Best Trade Finance Provider: by country
Germany: No.1 (5th time running)
Spain: No.1 (2nd time running)
United States of America: No.1 (4th time running)
Brazil: No.1 (2nd time running)
China: No.1 (2nd time running)
Hong Kong: No.1 (2nd time running)
India: No.1 (3rd time running)
Indonesia: No.1 (3rd time running)
Malaysia: No.1 (3rd time running)
Philippines: No.1 (2nd time running)
Singapore: No.1 (2nd time running)
South Korea: No.1 (3rd time running)
Sri Lanka: No.1 (3rd time running)
Thailand: No.1 (2nd time running)
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