The Global Trade Finance Environment Is Still Deteriorating.

In April 22, 2010, the International Chamber of Commerce released a survey report entitled "2010 trade finance rethink", which covered the findings of 161 banks from 75 countries.

The report is entrusted with the task of the WTO world trade finance expert group to track developments in the field of trade.

The report points out that trade volume fell by 12% in 2009, the most serious decline since World War II.

Worldwide, the export of durable goods is most seriously affected, rather than the trade in durable consumer goods, including clothing and food.

The International Chamber of Commerce says trade decline is not so significant in Asia.

China's trade partners benefited from the government's fiscal stimulus plan, and imports of Chinese products began to rebound.

According to the report, the 2010 survey confirmed that the current global financial crisis has continued to affect the world's financial institutions and markets. The current economic environment is extremely challenging, and the volume of trade may be further affected in the coming months. From the global perspective, the expectations for the 2010-2011 years are still cautious.

According to the International Chamber of Commerce, the environment for trade finance is still deteriorating worldwide.

Specifically, the scale of trade financing is still suppressed by the financial crisis. The SWIFT information data of banks reflect this change. In 2008, the amount of SWIFT information in the bank was 46 million, and in 2009 it dropped to 42 million.

From the survey, 60% of respondents said that trade financing activities decreased in 2008 and 2009; 43% of financial institutions said that the volume of business using letters of credit was decreasing, while 26% of respondents said that the amount of letters of credit used for imports decreased.

However, 84% of respondents said they expected increased demand for traditional trade financing tools, such as commercial letters of credit, standby letters of credit and guarantees.

Although most of the respondents (96%) indicated that losses under traditional trade financing products were equal to or lower than those under other products, banks were still cutting the trade financing credit lines of enterprises or financial institutions.

Demand for bank support is still very strong. 50% of respondents said that the demand for traditional trade financing instruments by enterprises or financial institutions is increasing.

But at the same time, the price of products is rising.

30% of respondents said that the prices of products such as letters of credit, standby letters of credit, and guarantees increased in 2009.

At the same time, it is also worrying that banks' scrutiny of documents is more stringent. 34% of respondents said that the number of rejected applications for trade financing in 2009 increased by 30%.

Suspicious or forged discrepancies remain high. 44% of respondents said they had experienced many such cases, but the ratio was 48% when the financial crisis was most serious.

The report cautioned: "these alleged discrepancies are virtually unfounded, and this trend is worrisome, which may have a harmful effect on trade documents, and documentary credits are a viable means of international trade settlement."

In addition, the ICC said Basel's New Capital Accord framework will further restrict global trade financing activities.

The London summit of the group of 20, held in 2009, agreed to inject $250 billion into trade finance in two years, and played a positive role in reducing the impact of the financial crisis.

However, in order to strengthen the regulation of global capital and liquidity, Basel's New Capital Accord framework calls for capital adequacy mechanism.

The bank supervision committee of Basel also called for increasing the risk weight of trade financing to limit bank leverage.

In accordance with the current Basel Capital Accord, the amount of financing under letters of credit and guarantee is weighted by about 20% and 50% respectively, while the Basel New Capital Accord framework requirements are accounted for by 100%.

This makes trade financing business more expensive for banks' capital adequacy ratio.

According to ICC, the risk of trade financing business is significantly lower than that of traditional credit business of banks. When calculating risk weights, the two party is regarded as very improper. This approach will have a significant negative impact on trade financing activities.