Transparency trumps demand concerns for supply-chain finance
Most leading providers of trade finance have welcomed changes to disclosure rules despite research suggesting they could negatively impact demand.
Increased transparency requirements introduced by the Financial Accounting Standards Board (FASB) in 2022 have had a mixed reception among professionals working in trade finance.
Demica’s 2023 benchmark report for banks in trade finance shows that 92% of respondents working in payables teams don’t expect the new accounting disclosure rules to change the nature of the payables finance products they offer, with just 5% saying that changes to the requirements were presenting big challenges when setting up payables transactions.
Yet more than a quarter of the supply-chain finance professionals surveyed expected the changes to disclosure rules to negatively impact demand for payables finance products and lead to fewer payables transactions, compared with just over one-fifth who expected demand to increase for the same reason.
The change in disclosure requirements is important because it will help to ensure that companies are not using supplier finance arrangements to disguise financial problems, states Michael Sugirin, global head, open account – trade product management at Standard Chartered.
“By requiring companies to disclose more information about these arrangements, it will be more difficult for companies to use them to potentially mislead investors and creditors,” he says.