International trade finance is beginning to stabilise says a new survey conducted by the Bankers’ Association for Finance and Trade (Baft), in co-operation with the International Monetary Fund (IMF). The survey also indicates that significant challenges still remain.
The cautious optimism voiced by survey respondents suggests that recovery is underway in some regions, but the trade finance markets that fuel global trade have not fully bounced back. The level of activity in the trade finance markets is crucial to global economic recovery, as limited access to trade finance results in significant reductions in import/export activity which drives economic growth.
Howard Bascom, chairman of Baft and managing director for global trade finance and credit services at The Bank of New York Mellon, says: “The survey indicates that there appears to be a slight improvement in credit availability from the last survey, but the state of the global economy remains weak, further affecting trade.”
Donna Alexander, president of Baft, notes: “While the survey contains some encouraging information, the data also indicate that considerable issues still exist in the international trade finance arena and must be addressed through public/private sector coordination. With global trade estimated to contract by as much as 10% in 2009, it is imperative that stakeholders and policymakers work together to help stem further contraction. Global trade cannot recover if financing for trade transactions is not available.”
The survey is the third in series from Baft/IMF, with the first survey conducted last December and the second survey conducted in March. Taken in sum, the three surveys represent the leading data on the global trade finance markets.
“As with our prior surveys, the information in this survey will be useful to policymakers as they consider ways to provide enhanced support for international trade finance,” says Alexander.
Respondents were asked to address how the total value of their trade finance activities changed from Q4 2007 to Q4 2008, and from Q4 2008 to Q2 2009. Representatives from 88 banks in 44 countries completed the questionnaire.
According to results, nearly two-thirds (62%) of banks surveyed reported a drop in total value of trade finance activities from Q4 2008 to Q2 2009. A total of 86% of respondents indicated that the decline is due to a fall in the demand for trade activities. Compared to the previous survey, notably fewer respondents thought the value of transactions had declined due to credit availability at the banks.
The overwhelming majority (89%) of respondents indicated that at least a portion of their trade finance activities are focused on emerging Asia, followed by emerging Europe (43%) and developing Asia (36%). Nearly three-fourths of respondents hail from banks with less than US$100bn in total worldwide assets.
The survey was created to provide insight on global trade finance markets. Baft and IMF worked with FIMetrix, a market research firm and Baft member, on the survey. Collaborative input was obtained from the banking commission of the International Chamber of Commerce, and help in distribution of the online questionnaire was provided by the Asian Development Bank, the European Bank for Reconstruction and Development, and the Latin American Federation of Banks.
Reader Comments