Though evidence suggests there is no longer a trade finance gap in Europe, the Asian Development Bank’s estimate that a global funding gap of $1.5 trillion still remains, makes it clear that this is not the case at a global level. One proposed solution is to create a deep secondary market for trade finance assets – enabling banks to provide more funding in the knowledge they can sell on excess debt on their books.
Commenting in Euromoney’s ‘Trade Finance Survey 2018’, Luca Corsini, global co-head of global transaction banking at UniCredit explains why the argument for institutional investors to play a more prominent role in the trade finance market is compelling.
“Trade finance has a much lower risk profile than traditional assets, yet the Basel III and Basel IV capital requirements do not fully recognise this in their risk-weighting specifications, meaning banks cannot extract their full value. In contrast, institutional investors can take advantage – either by using trade finance assets as low-risk ballast to offset-riskier investments as part of a balanced portfolio, or by simply extracting the inherent value of such a low-risk profile.”
To read the full article, please click here