The head of the International Chamber of Commerce (ICC) Banking Commission has said the body will focus on education and simpler procedures after members voted against a revision of the almost 100-year-old documentary trade finance rulebook.
In two surveys in recent months, the ICC national committees voted overwhelmingly against a revision of the Uniform Customs and Practice for Documentary Credits (UCP), which was last reformed almost 19 years ago.
The UCP is a lynchpin of the documentary trade finance system, having first been published in 1933. But it has been criticised for being too complex – including immediately after the last revision in 2007 – and requires a system of ICC interpretations to keep up with developments in trade and banking.
The debate over complexity also feeds into doubts about the future of the global workforce whose job is to understand and comply with the rulebook. Proponents of AI vendors say their platforms can easily learn the UCP 600, the current version, and make judgments that have long been the domain of trade operations experts.
Florian Witt, chair of the Banking Commission since September 2024, said a growing sentiment of complexity within trade finance is unsurprising given that the world is becoming more complicated.
“Why is it getting more complicated? Because there are more interests that are being expressed and more interests want to be reflected,” Witt said in a March interview with GTR, following a Banking Commission meeting in Paris.
“The feeling that it gets more complicated cannot be the UCP 600, [because there’s been] no change. But the interpretation around it has become more complicated because there are more questions on some topics; how to consider a particular question in a situation where we have a war.”
“For a very long time, war was nothing we had to interpret,” he said. “There are regions where there was war, but they were not, in terms of trade and trade finance, really relevant. Now we have a situation where we have parts of the world that are very relevant to trade impacted by war. So of course, there are more questions about how to interpret the UCPs now.”
In the survey on potentially creating a UCP 700, 21 ICC national committees rejected a revision, including major banking hubs such as Japan, Germany, Switzerland and the UK. However, other major economies and letter of credit markets, such as Bangladesh, China, France and Singapore, voted in favour of reform.
The 2010s were the first decade since the 1950s in which the UCP was not revised, according to the ICC website.
Witt, also head of international and corporate banking at Franco-German lender Oddo BHF, said the survey results showed that while there wasn’t an appetite for change, members want the current rules to be easier to understand and information about interpretations to be more readily available.
“Can we do it better by streamlining procedures, by streamlining communication of the results? Yes, that’s what the feedback of the survey was, and where we think that we need change to make it more convenient for the members to understand the UCP 600 in the current environment.”
In place of revision, the Banking Commission has established four working groups to try to address national committees’ concerns, according to an action plan shared with GTR.
One of those will address ambiguities in the rulebook highlighted by ICC members through briefings and guidance notes, and another will address recurring drivers of discrepancies in documents.
The Banking Commission regularly issues technical advisories and opinions, typically in response to queries from practitioners about how to apply a particular rule to a novel or emerging market practice.
Last week it issued a guidance on applying trade finance rules while trade is disrupted by the US-Israeli war on Iran and closure of the Strait of Hormuz, including how to handle growing declarations of force majeure.
“Holding a public good”
Witt said the Banking Commission has been restored “as a voice” in trade finance after the disruption of the Covid-19 pandemic, following which its regular in-person summits were paused.
“Because [we are] different to other associations who are in this universe of trade finance, we are the ones that are holding a public good that exists now for 100 years – that’s the UCP, and that’s so strong, I don’t see anybody else who has that.”
“I never feared [for] that, but of course, what you could observe is that we were not that present, like we were before Covid, and that was something we had to get back.” He also thanked the previous chair, now-retired ING banker Lynn Ng for stabilising the Banking Commission “in a time of huge transformation”.
In addition to overseeing the trade finance rulebooks, the ICC also produces an annual Trade Register charting activity and, crucially, rates of default across several main products.
But the organisation has long struggled to broaden participation beyond European lenders and therefore compile a truly global data set.
Witt said the “large majority” of participating banks are in the Global North, but the Banking Commission is partnering with development finance institutions to pilot new markets for the Trade Register in Africa and Asia. The pilot markets will be those that have strong banking regulation and an active ICC committee, he said.
