In an article for leading publication, Trade & Forfaiting Review, Richard Jones, CEO of Crown Agents Bank, explains that a strong commitment to trade finance in developing economies – combined with adequate investment in due diligence – can help mitigate the unintended consequences of regulatory compliance.
The article, ‘Counting the Cost’, stresses that new regulatory legislation aimed at the banking sector is essential for clamping down on financial crime, and preserving trust and safety in the global monetary system. Yet Jones points out that as regulation becomes ever more stringent, and senior managers become more risk averse, the sheer cost of compliance is putting pressure on trade finance and correspondent banking partnerships – particularly in emerging markets. He notes that this inadvertent trend is coming at perhaps the worst possible time – just as global deficits of unfinanced trade are widening.
Jones notes that trade finance offers both low default rates “consistently well below 1%” and an “extraordinary track record” of spurring growth in developing economies. He therefore looks to those financial institutions that can help to bridge the trade finance gap: from multilateral lenders and specialist or alternative providers, to those banks that have the means to stay the course as others scale back.
The article can be read here (with a subscription).