GTR’s annual Asia trade leaders roundtable discussion, held on the sidelines of the GTR Asia event in September, gathered senior trade finance bankers in Singapore to talk macroeconomic volatility, trade digitalisation, sustainability and shifting supply chains.


Roundtable participants:

  • Anoushka Dua, head of trade, Asean, Citi
  • Kai Fehr, global head of trade and working capital, Standard Chartered
  • Belinda Han, head of transaction banking Asia Pacific, MUFG
  • Rakshith Kundha, head of trade and supply chain finance, Asia Pacific, Bank of America
  • Matthew Moodey, head of structured trade Apac, Deutsche Bank (host)
  • Iain Morrison, head of global trade and receivables finance, Singapore, HSBC
  • Sriram Muthukrishnan, group head of GTS product management, DBS
  • Eleanor Wragg, senior reporter, GTR (moderator)



GTR: Trade in Asia has a lot to contend with amid headwinds from the war in Ukraine, the continued impact of the pandemic, and tightening global financial conditions, as well as reduced demand from Europe and surging commodity prices. What impact are you seeing on flows, and what have been the stand-out trends – both positive and negative?

Moodey: There are three major trends to focus on here. The first is the evolving regulatory environment and new sanctions. This has changed established trade routes across Russia, and that is something our clients have had to take on board.

The second has been the increase in commodity prices, which has had a positive impact on our business. We saw the size of shipments and cargoes increase dramatically, and this allowed us to increase our volumes and increase the size of the shipments that we were financing. That was very positive for us from a business perspective.

The conflict also shut down a lot of the Asia to Europe trade routes since a lot of overland trade would previously go through Russia or Belarus. As a result, trade had to move further south to other, less established routes. In Germany, our home market, the fairly dry season reduced river levels and the ability to carry large barge loads. This led to increased costs of shipments and redirected trade routes, and we have had to adapt to all of that as well.

There are also a few other trends at play, whether that be the growing focus on environmental, social and governance (ESG) questions or the nationalisation of supply chains.

Fehr: We are going through an interesting period of observing how the banking community adopted the change from Libor to SOFR. There was a period of instability in pricing, and different banks had different methodologies. Organisations like Baft and others came together to help our clients compare like-for-like propositions, but I found it quite interesting that although everybody knew about the transition, we struggled a little bit as a banking community to move consistently out of the blocks at the beginning of 2022. However, it has now settled down, and we are back to business as usual with a level playing field.

Dua: What we are seeing increasingly, particularly with larger corporates in Asia, is a focus on supply chain diversification. This theme started even before the pandemic; it was triggered by geopolitical and economic factors such as the ‘China plus one’ diversification trend. However, the pandemic and the war in Ukraine have accelerated this trend, and clients are really focused on resilience in the supply chain. The focus now is on building much stronger operating models, and this may provide incremental opportunities for trade finance banks in Asia, where we are already engaging with our clients much earlier on. As clients plan their redistribution strategies going into the Southeast Asian market, for example, we are seeing a lot more demand for efficient working capital and balance sheet solutions to navigate through supply chain disruptions.

Han: The Russia-Ukraine situation represents another supply side shock for the global economy, on top of the one introduced by Covid-19. A consequence of these shocks has been different types of supply chain shortages. For example, semiconductors are particularly vulnerable as a result of the Russia-Ukraine conflict because of Ukraine’s outsized proportion of noble gas exports – neon, krypton and xenon – which are key components of the chipmaking process. Ukraine supplies around 70% of the world’s neon gas. While South Korea is ramping up production of neon gas now, other suppliers such as China will take another one to two years to increase production. The lag time between ordering a chip and accepting delivery is now even more severe.

Another example is that some governments have reduced or stopped exports, such as the ban by the Indian government on the export of wheat. As a result, we are now seeing a situation where our clients are starting to think about where to find alternative supplies, and they are asking us for advice around how to support their sourcing from new countries and new suppliers.

Kundha: On the positive side, most large economies in the region have recovered from a consumption perspective, and there is a growing realisation that you need local production capacities for local consumption. On the flip side, as referenced by some of my colleagues, we’re seeing softening demand in western markets, China’s Covid lockdowns, as well as geopolitical volatility, all of which are negatively impacting sentiment.

Morrison: 2022 started with a very strong post-pandemic rebound, but that softened on the back of higher commodity prices. That was due to the economic impact of the West filtering through. We have seen a bifurcation in the market in commodities; at the top end, the cost of finance has been extremely competitive on a back of a flight to quality in terms of risk appetite. In addition, the larger shipment values have been a challenge for many traders, especially in LNG where individual cargoes at one stage exceeded US$200mn-plus. That also pushed availability of finance into a very narrow space. At the other end of the spectrum, credit appetite in the market has been constrained and pricing correspondingly higher. I don’t see that gap between the haves and have-nots materially closing in the short term.

Muthukrishnan: 2022 has been a tale of two halves. The first half was that despite the uncertainty from the Ukraine conflict, banks did well in terms of business volumes, due primarily to commodity prices. There were concerns in the early part of the year about the potential for credit losses, but thankfully they didn’t bear out. The second half has been characterised by the macroeconomic environment and runaway inflation, which is leading to both demand and supply shocks, and we’re watching that very closely.


GTR: Supply chain shifts, friend-shoring and regionalisation have been perennial topics of conversation, spurred on by various factors, starting with the US-China trade war through to Asean integration and the Regional Comprehensive Economic Partnership (RCEP), and pandemic-led changes to supply chain dynamics. What are you seeing here? Is there any evidence of greater regionalisation of supply chains, or moves towards different sourcing markets?

Morrison: This type of supply chain shift is evident with certain clients in specific markets, where there is existing capacity that can be expanded, for example, electronics in Vietnam. However, when it comes to from-scratch shifts in production, we’re not seeing too much of that, essentially because there is still a high cost to move and time required to reach the same level of efficiency as existing production. Just to add on the resilience point, it’s more micro than it used to be. The understanding of where components come from and the dependencies are far more granular than they used to be.

Muthukrishnan: Globalisation has gone into a coma. Given geopolitical tensions, nobody’s talking about globalisation in the old way anymore. It’s much more about how to maintain supply chains in friendly countries. Moreover, there has been a rise of nationalism, with countries putting curbs on exports of food items, or changing how they are looking at their own energy security, or the tariff structure, in terms of making sure that things are made in their country rather than elsewhere.

Kundha: This is a trend we’ve been hearing about for a few years now in different forms. However, at the heart of it, you will generally find a conversation around efficiency and/or resilience. There is a cost to both and many times one may be at the cost of the other. Lack of supply chain efficiency is a very direct cost: you have an inefficient supply chain and that costs you money. But supply chain diversification, or the lack thereof, only hits when there is a disruptive event.

Post the Covid experience, clients are looking to build resilience in their supply chains. This can happen in many ways – be it diversification of production or just by increasing inventory in the short run.

Han: Nearshoring and reshoring take time and can be highly capital intensive. When it comes to shifts, Asia continues to enjoy a pre-eminent position in global supply chains. While we do see companies taking a more serious look at a ‘China plus one’ approach via diversification into countries like Vietnam, India and so on, Asia continues to be at the centre of their supply chain strategy. Hence, it’s more a case of diversification within the region rather than large-scale nearshoring happening amongst the buyer markets. We have an important role to play in terms of advisory, funding and risk management to support clients’ supply chains and working capital management.

Moodey: The situation in Europe highlighted the energy security topic, and so the conversations we’re having are about how to ensure this security. How do we get access to commodities? How do we get access to key metals such as copper, and all these things that we will need for future industries and electrification? We’ve certainly seen an increased focus from multinationals around shoring up their access to what they see as essential commodities for the future, but at the moment, they’re just trying to get through the winter.

Fehr: As this diversification happens, new opportunities are emerging for trade finance banks to support their clients. The story so far in Asia has been to some degree lending straightforward debt to fund working capital, be that via overdraft or short-term lending products. What we are seeing now are new mandates for supply chain finance, and these new entrants are not the usual European players whose treasurers already know the technique. Increasingly, our clients in Asia are becoming more sophisticated in managing their receivables book, monetising assets and then also working with the balance sheet on the payables side. This level of sophistication is increasing, and there’s a role here for banks to provide more advisory in the region.


GTR: From a product perspective, many of the banks around the table have mentioned that they have brought their working capital proposition into the trade business, and we’re also increasingly hearing about the growing demand for inventory finance. What trends are you seeing around what clients are asking for?

Dua: It really boils down to the fact that there are now a lot more discussions happening around the supply chain. Supply chain shifts before the pandemic were primarily driven by the cost factor, and the reason it didn’t gain as much momentum was because it was really down to the economic factor with labour costs rising in China. The disruptions that have been brought about by the pandemic and now macroeconomic and geopolitical challenges have shifted that focus. Corporates are looking at different strategies to create stronger operating models, and at smart supply chain management solutions, and this is triggering conversations around supply chain finance.

Asia still is the dominant production house of the world in terms of goods, and that’s why the discussions on supply chains are much more compelling. Banks like us are taking a whole ecosystem view, going down to the tier one and tier two suppliers and tying in an end-to-end working capital solution.

To the point on inventory finance, the supply chain model has shifted from ‘just in time’ to ‘just in case’, and corporates are building inventory buffers. This therefore necessitates inventory finance solutions to better manage capital and balance sheets. There are interesting conversations not just around inventory finance, but also leveraging a lot of the traditional and established trade finance instruments as well.

Moodey: Every client wants inventory financing during this period of time, whether it be ‘just in case’ or just because of the circumstances around building up inventory. For commodities, there’s often a tradable market behind that, so we are happy to provide inventory financing. But when you go into a pure definition of what other companies such as general manufacturing businesses want, what they’re looking for in terms of actually buying that inventory and putting it back on their balance sheet is more difficult. What we’re talking about here is accounts receivable and accounts payable, which is not really the pure definition of inventory financing. That solution seems to have gone more to fintech or other non-bank providers who may not have the same regulatory constraints we do.

Muthukrishnan: There are several reasons why inventory finance has come back into fashion. If you look at the energy sector, in the past traders were the big players and they had sufficient liquidity, so it was mainly about managing market pricing arbitrage. In the current scenario with oil and gas prices going through the roof, this impacts liquidity and working capital requirements. As a result, the conversation around traditional commodity inventory financing has come back into play. And it’s not just the energy sector. The chip sector was going through a similar situation, where at the beginning of 2022, auto manufacturers couldn’t source enough chips to power their cars. There was a huge shortage and cost was going up, and we started having a lot of conversations about how to manage this inventory. Supply chain finance also lends itself to this context. Clients are saying, ‘I’m concerned about the supply chain disruptions’, or ‘I’m finding new partners in new countries, and they don’t know me’, so if you give them the ability to participate in a supply chain finance programme where they can get paid faster, that helps build the relationship.

Morrison: I think the conversation around supply chain finance is now aligning somewhat. We started off many years ago with essentially interest margin arbitrage, the ability to access finance that’s cheaper. That has now evolved into making sure finance is available so people can actually supply, so there’s now a resilience element to it. Then you’ve got sustainability, meaning the ability to influence where something comes from through price. Those conversations are now all coming together. What the client wants is end-to-end visibility, and supply chain finance is helping drive these three objectives of cost, resilience and sustainability.

As a result, we are speaking to a broader population in the company. It’s not just the CFO; procurement and logistics as well as the broader C-suite are involved.

On the energy side, we have seen an increase in traditional trade structures – letters of credit and so on. The large producers have incredibly robust risk management, and even for their largest counterparts, when limits are reached, bank surety is required. The flight to quality issue in commodities referenced earlier has triggered some of these limits.


GTR: The trade finance gap remains stubbornly high, with much of it in emerging Asia. What will it take to move the needle on this? What are the opportunities for deep-tier and long-tail supply chain finance and has anyone cracked this yet?

Muthukrishnan: It’s easy to get into the financing business as a small outfit. A lot of fintechs have fantastic ideas, and they are also willing to take on outsized risks simply to make a proof of concept happen. But their solutions are not scalable, partly because they don’t have the capital, but also because some of the credit models they follow are not sustainable. It is up to banks to partner with these great idea generators to bring in the responsibility around capital and scalability. Having said that, banks need to step up their game. They can’t be following traditional credit models and asking for the usual balance sheet collateral if they want to get into financing the e-commerce market, for example.

Lending based on transactional data is where the next frontier lies, where you’re able to leverage data on platforms and make sense of it to be able to lend and collect against that.

Fehr: We are live with our own deep-tier financing for domestic supply chains in China in partnership with Linklogis, and in one instance we have reached level 11 of the supply chain. Where banks traditionally have financed the first level, which is the supplier, token technology now gives you the opportunity to travel deep into the supply chain. The next step for us is to bring it to the international market, because currently it’s a domestic solution for China.

Dua: Citi is working with Stenn, a global platform providing SME funding, as part of the expansion of its global trade payables finance product suite to include deep-tier supplier financing; helping to provide access to funding across global supply chains. Stenn’s online platform provides SMEs with financing opportunities to help support their international trade needs and transactions.

Historically, deep-tier suppliers, typically SMEs, have had less access to credit. Financing options available in the market have been limited or may come at a high cost. The offering extends the benefits of Citi’s supply chain finance programmes by providing financing to the suppliers of the supplier, which has previously been an underfinanced area, ultimately completing the client value chain. Deep-tier supplier financing will also help deliver growth to economies whereby financing is made available directly to the manufacturer of goods, as well as to suppliers.

Partnerships multilateral agencies can also contribute to reducing this gap. As an example, Citi partnered with the International Finance Corporation to provide McCormick & Company’s herbs and spices suppliers in select markets with financial incentives linked to improvements in measures of social and environmental sustainability. This enabled financing for tail-end suppliers that we may not have directly been able to finance, and injected liquidity into the company’s supply chain while contributing to a broader sustainability agenda.

Kundha: In addition to credit, another important aspect to consider is the cost of onboarding a supplier as a customer. What you would traditionally see is that banks who have significant scale in a particular market across the entire wholesale and retail product suite find it easier to make relationships profitable in that market, especially considering the requisite robustness of the onboarding and KYC process from a regulatory perspective. That’s where you would see a lot of alternative providers being successful, because they can look at it as a transactional relationship, as opposed to banks, who would need to look at it more holistically.

The legal entity identifier (LEI) is one way where we may find answers to this problem. However, it is yet to reach its full potential. Accordingly, we would need to solve for both the credit and onboarding aspects of the equation.

Morrison: There’s a hybrid world of traditional on-the-ground financing and digital financing – we still need both. Being on the ground and providing supplier finance is still the predominant source of supply chain finance in many markets. However, we’ve seen that growing digital piece where you can leverage data not only in post-shipment supply chain finance programmes, but also pre-shipment. We’ve been doing work on digital decisioning for credit, and have excellent examples in Hong Kong and China where we can give almost real-time digital decisioning in a scalable manner, using alternate data for credit assessment. We see real growth potential in this. Deep multi-tier financing is an interesting development, however in the short term we feel the supply chain finance gap will be narrowed by a combination of support for suppliers in their markets, combined with pre and post-shipment programmes in the first tier, leveraging data to expand and expedite decisioning.

Fehr: I subscribe fully to the view that this has to be data driven, meaning our credit models have to change. I also agree that we need better technology to onboard faster, and this is where the platforms can help. But the third piece is credit appetite. You can have the data, you can have the ease of use with onboarding capabilities, but you still need to find the credit appetite. I don’t think this can only be the banks; this has to be the banks plus one, because the risk in deep tier and pre-shipment finance is much higher than what we usually tend to finance. Let’s say our credit appetite stops at 300 basis points, but the risk required is 600 to 900 basis points. The data and the platform and the ease of use won’t help to channel the financing to where it’s needed. This is where I believe you need a different group of investors who play in the 600 to 900 basis point range.

Dua: Perhaps it is time to relook at the way that trade risk gets distributed in the secondary market and make it more scalable. If we had to create trade funds where you then start risk tranching, for the really deep end you can bring in alternative investors who have the risk appetite. Once you start recycling that risk through the creation of trade funds in the secondary market, that will then give an impetus to originate at the tail end.

Han: If you look at deep-tier financing, basically we’re talking about two types. One is about looking at anchor clients’ credit risk. Through tokenisation, through collaboration with fintechs, not only tier-one suppliers, but the deep-tier suppliers of anchor clients can be financed to increase the resilience of the supply chain. Another type of deep-tier financing is about whether banks can go down the credit curve to not only look at anchor clients’ credit risk, but provide pre-shipment financing to SME suppliers. On our side, we have close collaborations with our partner banks. Since 2012, we have invested more than US$14bn into four strategic regional banks in Asia: Krungsri, Bank Danamon, Vietin Bank and Security Bank. Through this MUFG plus partner bank value proposition, financing is provided to SME buyers and sellers of anchor clients in the form of distributor finance, pre-shipment finance, and so on.

Meanwhile, we increasingly see greater interest from the likes of asset managers and hedge funds in trade finance assets. Given the nature of trade finance: short-tenor, self-liquidating and low correlation to capital markets, another angle is to treat trade finance as a different type of asset class for asset managers, who can act as strong counterparty risk partners for banks.

On the other hand, KYC and AML requirements have increased the cost for banks to provide trade finance and funding support. A more automated AML and KYC process via digitalisation can bring down the cost of providing trade finance to SMEs.


GTR: Corporates are facing a tough macroeconomic environment with inflation at 40-year highs and a global recession. Do they still have the resources available to put into ESG, or are people thinking more short term around immediate concerns?

Fehr: The feedback from our clients, in particular the European clients, is that they are deeply interested in getting their supply chain right because it’s what the consumers want. In five to 10 years, you won’t be able to sell your product just on the basis of good marketing and quality; you will need to have evidence of a sustainable design and sustainable sourcing. We have clients who are working with us on sustainable physical supply chain visibility, and overlaying this with financing the supply chain. This is not a trend; this is here to stay, and that is where we are putting a lot of emphasis into the framework we are adopting from a financing perspective.

Moodey: I think there has been a bit of a pause at the moment because Europe, which was one of the major pushers of the ESG debate, is now ramping up its use of fossil fuels to address immediate energy shortfalls. I think once we get through this difficult period, the ESG focus will resume.

Morrison: It’s absolutely still front of mind, but let’s not underestimate how capital intensive it is for clients to make their supply chains sustainable. From the sustainability-linked financing perspective, distribution will be interesting especially when investor demand for sustainable assets becomes a pull factor. It’s still very early days but when that evolves and real liquidity gets targeted to green trade, it will be game changing, because then you’ll also be originating to distribute to investor demand. When that investor base really kicks in at scale for ESG, it’ll be a real Kodak moment for sustainable finance, but it’s not quite there yet.

Kundha: Several governments around the world have set very defined timelines around net zero and corporates would need to follow suit. That is giving a further impetus to the focus on ESG, especially in the wider supply chain. Until now, companies traditionally used to leverage buying power to ensure suppliers complied with emissions standards. What sustainable supply chain finance gives you is a carrot to incentivise your suppliers.

Muthukrishnan: In spite of all the optimism around sustainability in trade, I see a lot of issues. The biggest one is the lack of common standards and definitions, which leave the industry open to the risk of greenwashing. The second issue is around those incentives. Who is paying the incentive tax, and how sustainable is it to continue to incentivise supply chains to be green? Whether sustainable trade will be as ubiquitous as we would like it to be, I think time will tell. But these problems need to be solved in order for it to happen.

Han: While banks like us have started to roll out ESG trade finance products, the lack of industry wide norms is a major issue we need to address. It also goes back to the data. Better sustainability data is needed to support financing decisions.


GTR: Asia remains a hotbed of digitalisation activity, from the first Model Law on Electronic Transferable Records (MLETR)-compliant transaction between Singapore and Abu Dhabi at the end of 2021 to the launch of SGTradeX, but the adoption of electronic documents and other paperless trade solutions by corporates and SMEs remains in the single digits. What needs to happen for trade digitalisation to break out of the echo chamber of industry enthusiasm and become a reality?

Fehr: I am a bit of a contrarian. Everybody is bullish on digital trade, but I will probably have retired before documentary trade is fully digital. It’s not so much a technology question; it’s adoption you need in local law and regulations. Where I’m a lot more bullish is in the open account space. For us, digital translates into platform strategy, and we are absolutely doubling down on our platform strategy. The idea is to invest into the marketplaces that our clients are using for their procurement and sales, and financing those ecommerce spaces. It all goes back to ease of use. If you’re the treasurer of a multinational corporate, you don’t want to have a fishbowl of tokens in front of you to access 12 bank channels. What you want is to be live on your payables or receivables platform, and have the banks onboard that.

Morrison: In terms of documentary trade, it is moving, but I think the main point is that the way banks interact with their clients on the banking side changed exponentially during Covid. Whether it’s straight-through processing, hosted solutions, or API connectivity, the ways of interacting and collaborating digitally have completely transformed from two years ago.

Dua: The pandemic emphasised the need for greater digitalisation in trade. We are now at a stage where we’ve confirmed the viability of technology and are focused on making it mainstream and scalable.

New platforms using blockchain technology are allowing corporates, banks and other participants to access data and documents remotely, in real-time and more securely. The interoperability of platforms, including between proprietary and industry platforms, will also be key to making digital trade mainstream. Clients will strongly value doing trade in a much simpler and more straightforward manner. Citi is an investor and participant in Komgo and Contour and we have conducted transactions on both platforms. We have also completed a transaction using an electronic bill of lading on a multinational blockchain-based shipping platform. Complementing our partnerships, we continue to build out our proprietary platforms to make trade finance more accessible and simpler for our clients.

Muthukrishnan: Trade is not homogeneous. Open account trade and supply chain finance is extremely digital already. Our supply chain finance book is about 98% end-to-end digital, and that’s true for a lot of other banks. If you look at other forms of trade finance, so long as it is bilateral, whether it’s invoice financing or receivables financing, any of that can be fully digitalised, so more than 60% of the rest of our book is digital today. We also need to talk about digitising internally, and this is where the banks still have some work to do. You can always ask for API integration, where a customer’s enterprise resource planning system gives you a transaction, but if you don’t give them that end-to-end digital experience, what is the benefit for the customer?

I talked a little bit disparagingly about fintechs in the context of their ability to scale, but banks are learning a lot from them when it comes to UX and UI in the context of trade finance. That is simply because the paradigm has shifted. After all, customers are used to a digital experience in their personal lives, and they now want the same thing in trade.

Kundha: Different players in a trade are at different stages of their digitisation journey. What we as banks need to do is provide hybrid models that consider the heterogeneity of the trade ecosystem and the different levels of digital maturity. Simultaneously we need to continue to leverage technology to drive efficiencies whose impact is felt by the client, therefore spurring more digitisation. All of this is not going to be sorted out in the next 12 months, but we need to focus on solving for today while anticipating and building for tomorrow.