European banks appear to be increasing lending to commodity trading firms that are facing unprecedented liquidity needs due to extreme commodity price volatility. However, as a research note published by Fitch Ratings in March notes, much of the lending is to top-tier firms that operate with large liquidity buffers and diverse funding pools.
John MacNamara, chief executive of Carshalton Commodities – a commodity trade finance veteran and chair of the London Trade Roundtable – notes that there is indeed a steady flow of new funds investing in trade finance.
“However, they don’t add up to anywhere near the $13 billion ABN Amro alone took off the trade table when it pulled out of the sector in 2020,” he points out.
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