A recently released global report has confirmed that trade finance products continue to present banks with low levels of credit risk.
The International Chamber of Commerce (ICC) Banking Commission’s 2017 Trade Register report—Global Risks in Trade Finance - reveals the low-risk nature of transactions that support global trade and shows that trade finance products maintain their favourable credit risk profiles compared to similar asset classes due to low default rates and relatively short time to recovery.
According to the report expected losses have fallen or remained flat, with already low default rates dropping across most products – in line with an uptick in global GDP improving the overall credit profile of trade finance.
The 2017 report, produced with support from ICC’s project partners – The Boston Consulting Group and Global Credit Data – draws on information from 22 member banks to present a global view of the credit risk profiles of trade and export finance transactions.
It is based on over US$10.5 trillion of exposures and more than 20 million trade finance transactions from 2008 to 2016.
The trade finance products in the register are import letters of credit (L/Cs), export L/Cs, loans for import/export and performance guarantees.
“The 2017 Trade Register reiterates what we have seen year on year since the project was initiated in 2009: that trade finance is a reliable and low risk asset class and should be looked upon favourably by regulators, industry stakeholders and institutional investors,” said Daniel Schmand, chair of the ICC Banking Commission.
