Trade finance gap widening, compliance costs partly to blame

BNY Mellon, with support from the International Chamber of Commerce, has conducted a global survey entitled Overcoming the Trade Finance Gap: Root Causes and Remedies.

It found that the trade finance gap is widening and the trend for banks in less developed economies to be marginalised in the global banking system is continuing.

Compliance costs for banks in less developed economies is a major factor behind the trade finance gap widening according to the report.

100 bank survey

Carried out between April 2018 and January 2019, the survey asked more than 100 global bankers, regional and domestic banks, specialist trade providers and other market participants from around the world to help pinpoint the factors that are prising the gap open and what might be done to address them.

As well as analysing overall outcomes of each factor, the report drills down into the results according to type of institution in order to identify institution-specific trends and patterns.

Compliance costs

Although credit was cited as an issue, the survey supports existing findings that compliance costs are a key, though by no means the sole contributor, to the volume of rejected trade finance transactions.

The report revealed that trade finance rejection rates accelerated in a third of institutions surveyed during the previous year.

This is a worrying trend, and emphasises the very real need for effective action to help narrow the gap and ensure it does not widen further the report concluded.

BNY Mellon’s report, ‘Overcoming the Trade Finance Gap: Root Causes and Remedies’ can be found here.


Categories: Trade Based Financial crimes News

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