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How the supply-chain crisis is changing banking

Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles
Photo: Reuters

Global supply-chain bottlenecks have profound implications for how and where companies will fund their operations in the future. As the lines of ships lengthen outside ports, there’s a macroeconomic cost for banks weighing on loan demand and perhaps asset quality. However, some trade and logistics financing businesses that were previously on the margins of banking are now seizing their moment.

Supply-chain bottlenecks have become one of the defining features of the Covid era. This is a problem for both the global economy and the global financial sector. And with new strains of the coronavirus continually emerging, it could get worse.

The impact is felt throughout the banking system, firstly by pulling down what might otherwise have been a relatively vigorous appetite for new loans among business clients. Thanks to loan moratoriums and other government support, banks have got through the last two years relatively unscathed. But supply-chain issues, even at the margin, could reverse this.

The hope remains that these issues will be temporary and that demand for loans will eventually accelerate. There were some signs of an easing of constraints during the second half of 2021.

However, transport and logistics experts warn that global supply chains won’t be returning to their smoother and cheaper pre-pandemic forms anytime soon, especially given fears about the new Omicron Covid strain.

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EMEA editor
Dominic O’Neill is EMEA editor. He joined Euromoney in 2007 to cover emerging markets, focusing on central and eastern Europe, Middle East and Africa, and later on Latin America. Based in London, he has covered developed market banking since 2015.