GTR Deputy Editor Shannon Manders reminds us all that forecasts are something to be cherished (and then forgotten about before they’re proved horribly wrong).


Blast from the past

The future of trade finance looks increasingly unpredictable: the Basel Committee is set to present its recommendations in November, the eurozone crisis remains a key concern, and the impact of sovereign downgrades are spreading into the trade finance market.

Now more than ever there is a growing need to have a degree of foresight into what the future holds. Historically, the industry has relied on rating agencies, industry experts and the media to provide forward-looking insights as to what we can expect to see. But even the most experienced of us tend to get these predictions wrong….

In the spirit of comparing old and new, we at GTR have enjoyed a retrospective overview of some of our past issues, to compare what experts were saying back then, to what we know to be true today.

[When referring to regulations] “The current frameworks are by and large effective,” said one trade finance banker in early 2007, naturally oblivious of the proposed Basel III regulatory requirements on bank liquidity and leverage.

“I would describe Kazakhstan as a real success story, because we have capitalism but with oriental features. Yes we still have corruption, but overall the growth is obvious,” assumed a banker in 2007, blissfully unaware of the impending troubles for Kazakh banks…

“Clients only want to insure exports made to the worst buyers,” a broker complained in the pre-crisis heyday of 2006.

“It is, frankly, bogus and self-serving for ECAs to argue that only they can service the SME sector,” said an industry expert in 2003, who could not have foretold the sudden increased need for ECAs in the years to come, nor how many of them now strive to finance SMEs.

Global credit quality has seen moderation in the current year, with a steady deceleration in the share of downgrades to total rating actions each quarter,” read a 2004 report released by a rating agency, which could not have known about the looming downgrade of the US top-tier credit rating.

In early 2006, a member of GTR’s editorial staff described trade finance as being as “safe as houses”, forgetting, of course, that trade deals do sometimes go wrong…

Are any of your trips down memory lane similarly incongruous with what you’re seeing in the market today?