The world faces continued turbulence and uncertainty, and Russia, being the largest country in terms of landmass and holding the fourth-largest FX reserves, is no exception. Evgeny Kravchenko, Head of Trade Finance at Sberbank and Chairman of the Board of Directors of Sberbank (Switzerland) AG, provides an account of his experience of running a trade finance business in Russia.


Q: What are some of Sberbank’s trade finance business highlights?

Kravchenko: I am pleased to report that Sberbank Group’s trade finance business encompasses a vast range of products, including letters of credit (LCs), letters of guarantee (LGs), irrevocable reimbursement undertakings (IRUs), commodity trade finance, escrow accounts related to international and domestic transactions, export credit agency and EXIAR-covered financing, and others.

Sberbank Group’s annual business turnover of trade finance deals and documentary operations amounted to more than US$40bn in 2020, surpassing the previous year’s results.

We have executed cross-border trade finance deals with companies and contractors representing key industries from more than 80 countries. Our trade finance services are available across the countries of the Group’s presence, including Switzerland, where Sberbank (Switzerland) AG actively develops our commodity trade finance business.


Q: What are Sberbank’s expectations for its trade finance business in 2021?

Kravchenko: There has been a broad slowdown across the global economy. In the current climate, all businesses need to reduce their risk to survive this economic storm. One way to do this is to leverage financial instruments, like LCs, which minimise risks for both buyers and sellers. Buyers feel safe in the knowledge that their goods are shipped and the delivery is duly documented. In turn, sellers are confident that they will receive payment from the buyers. The increase in risk of non-payment and non-shipment may potentially become one of the main growth drivers for the trade finance market in the near future.

LCs and other trade finance products can help overcome the challenges that we’re encountering today. Sberbank, as a recognised leader in trade finance in Russia and the CIS, offers a wide range of products to support Russian exports.


Q: Could you tell us more about Sberbank’s commodity trade finance business?

Kravchenko: Commodity trade finance (CTF) is a strategic business of Sberbank (Switzerland) AG. As of November 2020, Sberbank had financed more than 20 million metric tons of commodities worth over US$7bn. Within the framework of CTF, clients are afforded the opportunity to attract financing secured by the exported goods with the subsequent repayment of the loan from the proceeds of the sale of the goods. CTF provides clients (exporters or traders) with access to financial resources even before the buyer pays for the goods, which allows them to fulfill their obligations without significant diversion of their working capital.

Due to our wide geographical coverage – we are represented in 18 countries and have an extensive network of branches within Russia – Sberbank can finance the entire supply chain, from the purchase of raw materials and components to the sale of finished products and receipt of payment from the end customer.

Commodity trade finance products like prepayments for Russian exporters are sought after by many industries: chemicals, oil and gas, agriculture, metals and mining and others. Switzerland is the main hub for these transactions. At Sberbank (Switzerland) AG, our dedicated team is tasked with meeting the growing demand from clients. To give an example of our scope, almost every second ship with grain that sailed through the Bosphorus Strait in 2018 was financed by Sberbank.

Sberbank’s obvious strength in CTF services is our excellent knowledge of Russian exporters in the domestic market. This allows the bank to accurately assess the risks, advise accordingly and offer the most flexible conditions to its clients.


Q: What are the key factors driving disruption in the trade finance industry?

Kravchenko: We are convinced that the industry will change in the future because of the digital technologies that are evolving very quickly. Paper-based trade finance sometimes takes weeks to get approval from banks, but if you use digital trade finance processes, you could make significant savings.

That is why Sberbank’s trade finance priorities include the development of specialised digital services and remote channels for interaction with our clients. For instance, 100% of Sberbank’s clients in Russia transact with LCs without any need to physically visit the bank’s office. LC application can be drafted electronically, signed with e-signature and automatically submitted for issue within minutes. Once the LC application has been issued, a beneficiary may submit the required documents to receive payment online. The whole process is fast and simple and helps our clients to better manage liquidity without additional costs.

In addition, Sberbank continues to improve our IT solutions based on SberBusinessAPI (Application Programming Interface), which allows customers to integrate their internal systems with Sberbank services and automatically transmit the information necessary for remote execution of documentary transactions to the bank. SberBusinessAPI for letters of credit was launched in 2019.

Similarly, Sberbank has built an API solution for escrow accounts in real estate deals. This will result not only in a reduction of risk for the parties involved, but also of the time to secure the deal, which will decrease from several days to several clicks. Such unparalleled speed has been welcomed by the market.

These solutions drastically help companies improve the customer experience in the execution of their business transactions.


Q: How is Sberbank realising potential opportunities that harness blockchain technology?

Kravchenko: Utilising blockchain is the next step in the trade finance evolution. Blockchain has the potential to disrupt the trade landscape by making it easier to reduce disputes and fraud, provide delivery and payment certainty, enable the transparency of trade asset movement, and facilitate the flow of trade receivables.

Sberbank is striving to build robust and synergetic trade finance ecosystems and platforms that substantially increase the efficiency of trade processes.

Blockchain technology allows stakeholders to control a deal in real time, offering the transparency that commodity trade requires. That is why Sberbank (Switzerland) AG has joined commodity trade finance blockchain platform komgo, which enables participants to quickly exchange data in a digital, secure and decentralised way. The platform provides a wide range of solutions that facilitate trade finance between participants and increase the speed of transactions. The bank’s customers will truly appreciate the enhanced efficiency of their operations due to komgo’s convenient and high-tech solutions.


Q: How do you see the future of trade finance business playing out in Russia?

Kravchenko: As a result of Covid-19, companies lack staff and deliveries are delayed, meaning that documents are getting held up on their way to the next stakeholder. Reports show immediate and significant issues with deal origination and distribution, negotiable instruments, document transmission, authorised signatures and shipping. Moreover, if remote work is on its way to becoming mainstream, it is essential to transform processes in order to make them compatible with the new economic conditions. Sberbank is ready to successfully overcome all these obstacles due to the rapidly developing high-tech frameworks.

Moreover, during such times of economic upheaval and uncertainty, normality disappears, and once reliable customers start canceling orders and asking for extended payment terms. In these conditions, securing the risks of both the seller and the buyer is in high demand, as is demonstrated by the growing volume of Sberbank’s trade finance deals in 2020 in comparison with the previous year for both Russian and international segments of the business.