Jean-Francois Denis, BNP Paribas’ Global Head of Trade Solutions and Network Management, shares his views on how the fast-changing nature of world trade is shaping the way that banks facilitate and finance the market, outlining some of the themes that are likely to be key areas of interest for the industry over the course of the year.


Q: It’s been four years since you took up the position of Global Head of Trade Solutions: what has changed since then in terms of the evolution of the market as well as that of trade finance products?

Denis: It’s always good to reflect on what has happened. Going back four years ago, the world was heading towards peak globalisation. The market – although not entirely stable given the start of the US-China trade war – was relatively benign, as was the economic environment, with interest rates at extremely low levels.

In terms of trade finance and its support of the economy at that time, the more traditional trade finance products such as letters of credit were becoming less common in many jurisdictions – aside from Asia – and being replaced by a rise in open account financing.

Fast forward four years, and it’s a completely different situation. The pandemic, the war in Ukraine and other well-documented factors have led to significant disruption, supply chain issues and overall economic instability.

As a result, there has been a marked increase in the need for solutions that mitigate the many risks that cross-border business faces today. We see this clearly in the heightened demand from our clients for all the trade finance products that we provide: documentary credit, guarantees or the different variants of financings. Corporate financing requirements are being driven not only by the need to bridge difficult periods but also to build resilience in supply chains – including through the financing of suppliers. All this is happening in a rising interest rate and inflationary environment.

Moreover, compared to four years ago, there is today an established recognition of the importance of environmental, social and governance (ESG) efforts, which are finally making their way into industry objectives and plans. This is a topic at the very heart of BNP Paribas’ strategy. We are, after all, ‘the bank for a changing world’ and are well-equipped to accompany our clients on all these fronts: risk mitigation, financing and improving ESG performance.


Q: The world of trade has been turned upside down by disruptive events and economic pressures. How much more can companies endure? In what ways is the ongoing supply chain volatility driving their working capital needs? What should they be thinking about as they head into 2023?

Denis: The companies that will endure a bit better will probably be those with good visibility of their ecosystem and of their internal way of working, and with the ability to analyse the impact of these changes for them to ultimately adjust their financial and treasury setup in a flexible and nimble way.

This need for visibility is relevant to the physical supply chain as corporates balance ‘just in time’ with ‘just in case’ inventory strategies, which in turn impacts their working capital needs and their anticipation of what those needs might be. It also feeds into companies’ supply chain management strategies as they seek to optimise their payment terms without impacting their suppliers’ cash flow and efficiency.

To gain a better overview of future performance and to optimise efficiencies, corporates are also working to establish greater visibility across the different business units and geographies within their own organisations.

For some corporates, this often translates into a level of centralisation of their trade operations. Certainly, many corporates are already very centralised – but usually more so in the cash management and treasury operations, rather than trade finance.

It’s an important developing trend and one which will drive corporates’ ability to optimally forecast and manage their overall working capital needs.


Q: One of the biggest areas of concern over the last few years has been the treatment of trade finance under the Basel III reform package. Together with other industry players, BNP Paribas has taken a central role in responding to stakeholders in the European Union to ensure that planned amendments do not push up financing costs for businesses. Why is it important for the market to challenge the regulators on some of these issues?

Denis: As we all know, the overall aim of the Basel agreement, and its implementing act in Europe, the Capital Requirements Regulation and Capital Requirements Directive, is to strengthen the resilience of the banking sector and ensure that banks continue to finance economic activity. Whereas we’re all in agreement that this is an important objective, as with everything, the devil is in the detail.

Within trade finance, broadly speaking, we’re concerned about the proposed hike in the required credit conversion factor for off-balance sheet trade finance products, such as technical guarantees, which would essentially limit access to trade finance resources. We’re also concerned about ambiguities in the text that may force banks to apply a fixed 2.5-year maturity on all loans to large corporates – even for short-term self-liquidating instruments– which would undoubtedly drive up the cost of trade finance.

Working together with other industry stakeholders, banks and some large corporates under the auspices of an ICC working group, BNP Paribas has dedicated a lot of effort over the last year to put together a co-ordinated market response and ensure that the regulators and politicians are well aware of these issues and their impact on banks’ ability to finance trade.

It’s essential for all industry participants – banks as well as corporates – to get out in front of legislative and regulatory proposals such as this so that we’re able to collectively identify and anticipate any changes that may have adverse unintended consequences for economic growth. There needs to be a realistic equilibrium between regulatory expectations for banks and the role that they play in sustaining the economy. It has to be balanced and it has to make economic sense.


Q: The digital trade ecosystem continues to evolve, with different organisations, consortia and fintechs pushing out various solutions and frameworks. How important are standardisation efforts? What role can and should established market utilities such as SWIFT play to improve alignment?

Denis: Focusing on developments in the financial supply chain, and the corporate-to-bank space specifically, it is critical for corporates to be able to work with their various banks across the geographies in which they operate with some level of standardisation.

This is something that is already happening in cash management, an area which has achieved a high degree of standardisation and – as a result – end-to-end digitisation. In the trade finance space, there are still a lot of improvements to be made on that front.

SWIFT has a pivotal role to play. We’re starting to see some good take up of SWIFTNet for Corporates for trade. It’s still trailing cash management in terms of product coverage and onboarding, but the numbers are growing.

The work that SWIFT is doing in partnership with fintechs and financial institutions to develop global API standards is important to all industry stakeholders. The benefits of standards to address the fragmentation in this space cannot be underestimated given all of the many solutions that are being brought to the market.

As SWIFT works on these developments, we encourage it to ensure that trade is high on its agenda going forward. With more than 11,000 banks, financial institutions and corporates, there is no network like it in the world, and the time is ripe to harness the power of that network to drive progress in the trade finance space. The market is ready.


Q: How significant are partnerships in driving the future of trade finance, both at an industry level and for the bank itself? What’s changed in this regard over the last four years, and what will we see going forward?

Denis: Over the last few years, there has been good collaboration amongst stakeholders, which has led to the establishment of industry networks, addressing specific areas, solutions or processes. These networks drive essential improvements in the market and are critical to our collective success. As industry participants, we should continue identifying and supporting the most promising initiatives.

At the individual bank level, partnerships are equally key to driving improvements in offerings and solutions. BNP Paribas has been collaborating with software providers and fintechs for some time. For example, recently, the bank announced the acquisition of Kantox, a global leader in currency management automation that helps businesses optimise their entire FX workflow.

Another critical area of collaboration is the partnerships that we have with our clients. At BNP Paribas, co-creation is vital, and we try to involve clients as often as we can, as soon as we can, in the solutions we design.

One such example is our Connexis Guarantee solution, which we launched two years ago. It’s a front-end tool that enhances the issuance and reporting capabilities of bank guarantees. Collaboration with our clients has been essential to ensure we best match their needs across industries, and as a result, we’re now seeing rapid adoption across our client base. We value this type of approach and will continue to work this way to create shared value and scalability.