Gloomy outlook for trade finance: study
Demand for trade finance products will slow down globally in 2012 due to liquidity shortage of banks resulting from the recent debt crisis in the eurozone, according to a study released yesterday.
It said the factors contributing to the negative outlook were primarily financial constraints which were reducing the availability of trade finance.
The International Chamber of Commerce (ICC) and the International Monetary Fund (IMF) conducted the study based on inputs received from 337 financial institutions.
About 90 percent of respondents indicated that “less credit or liquidity available at counterparty banks” would affect their trade finance activities either to a “large extent” or to “some extent.”
This share is substantially higher than the just over 50 percent that noted the same during the 2008-2009 financial crisis, according to the study.
The findings also show a two-speed financial system: For emerging Asia the outlook is the strongest, while the Euro area is the weakest, ICC said in a statement.
“Around 60 percent of the respondents indicated the demand for trade in Asia will show improvement in this year, while close to 50 percent of respondents predicted a further deterioration for the Euro area,” said Thierry Senechal, ICC's senior policy manager for banking.
“Recent developments in European financial markets and their impact on global trade finance called for a market snapshot survey,” said Ranil Salgado, division chief for trade, institutions, and policy review of IMF.
“Joining force with ICC has produced first rate market research to help both the industry and policymaking communities to monitor emanating risks and provide timely input into ongoing regulatory and G20 discussions,” he said.
The financial constraints appeared to reflect the large share of trade finance coming from Euro area banks. The survey showed that European bank deleveraging has led to tighter lending guidelines and reduced availability of credit/liquidity.