Euromoney Trade Finance survey 2011: Banks face up to emerging trade dilemmas
Competition is intense in trade finance banking while the funds banks need to engage in it are harder to raise, reducing margins. Basle III will probably only make things more difficult. So, paradoxically, fierce rivalry runs parallel to collaboration and increased risk sharing. Laurence Neville reports.
TRADE FINANCE BANKS face multiple challenges. The intense focus of global trade on emerging markets is requiring some banks to devise new business models. Meanwhile, the entire banking industry is undergoing change as regulators devise new structures to guard against a recurrence of the financial crisis.
"International banks face a dilemma as trade flows shift to emerging markets," says Tan Kah Chye, global head of corporate cash and trade at Standard Chartered, ranked sixth globally in Euromoney’s Trade Finance 2011 survey. "If they can’t capture both legs of a transaction, they’re disadvantaged. Equally, in the next 10 years it is inevitable that more trade flows will be priced in renminbi: a bank without that capability will not be able to compete effectively. Everyone’s aware of that: however, the requirement is to walk the talk."
At a simple level, the shift towards emerging markets means that greater expertise is needed in those countries. "Historically, all roads lead to Rome," says Tan. "Now, all trade corridors lead to Asia.