Features: World’s best trade finance banks 2009

ANNUAL SURVEY / BEST TRADE FINANCE BANKS

Trade finance banks are enjoying rising demand for basic risk management services as world trade faces a difficult period.

Global trade is expected to decline in 2009 for the first time since 1982, according to the World Bank, but trade finance services are in growing demand as exporters and importers seek to manage their risks more effectively. Cross-border traders are turning to banks for conventional letters of credit (LCs) and other risk management tools to make sure they get paid for the goods and services they sell to overseas buyers.

While trade finance has long been countercyclical, the increase in the LC issuing and confirming business also reflects the beginning of a new era of diminished trust and increased reliance on third parties to verify the creditworthiness of counterparties. Trade finance is an attractive business for bankers who are looking for relatively safe, self-liquidating transactions as they seek to boost lending. The financiers are also limiting their own risks and are getting better deals for their clients by taking advantage of programs offered by export credit agencies such as the US Export-Import Bank.

Global Finance editors, with input from industry analysts, corporate executives and technology experts, selected the best trade finance providers in 67 countries or regions. Criteria for choosing the winners included transaction volume, scope of global coverage, customer service, competitive pricing and innovative technologies.

Most banks integrate trade finance services with cash management and foreign exchange advisory services. Besides issuing documentary credits and guarantees, banks lend against invoices, issue packing credits, handle credit inquiries from overseas parties and offer many other trade-related services.

World trade has long been an engine of growth for the world economy, and it could play an important role in pulling the world out of recession. That will depend, however, on the continued availability of affordable trade finance. The International Finance Corporation, the private sector arm of the World Bank, plans to double its Global Trade Finance Program to $3 billion in the next three years. While this is a drop in the bucket compared to the $14 trillion of international trade conducted annually, it will help some of the world’s poorest countries to sell their goods to foreign buyers. Meanwhile, avoiding backsliding on free trade will require the Group of 20 to uphold its pledge to refrain from raising new barriers in the face of stalled talks on further trade liberalization.

Banks are doing their part to grease the wheels of world trade by providing innovative, as well as traditional, trade products and services. They are continuing to work more closely with freight forwarders and transportation companies to track the flow of goods around the world and to make financial and physical supply chains more efficient. The best trade finance banks use their global networks and knowledge of local markets to provide a valuable service to their clients and to the suppliers and consumers of the world, who also benefit.

Gordon Platt