THE WORLD BUSINESS ORGANIZATION International Chamber of Commerce (ICC) Banking Commission The World’s Essential Rule -Making Body for the Banking Industry ICC Global Survey on Trade & Finance 2015 Key Findings Gerardo Gutierrez-Olvera President of Trade Finance Committee, ICC Mexico Mexico City, 6 October 2015
THE WORLD BUSINESS ORGANIZATION SERVING WORLD BUSINESS ICC is the world business organization: Its mission is to promote cross-border trade and investment ICC has hundreds of thousands of members in 130 countries: Companies of all sizes and from all sectors Chambers of commerce, national and local Business associations Privileged partner of intergovernmental bodies UN, WTO, G20, MDBs
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ICC GLOBAL SURVEY ON TRADE & FINANCE 2015
ICC GLOBAL SURVEY ON TRADE & FINANCE 2015 2015 Global Survey at a glance 7 th edition • Well-established market intelligence tool for the whole trade & finance industry, expanding year by year in scope, worldwide representation and relevance • 482 Survey respondent banks across 112 countries +60% in participation compared to 2014 broad geographical reach enhances the richness of the data collected • 16 institutional and contributing partners Industry actors from around the world pool their knowledge to develop a valuable global view on the pressing issues of today in trade finance and beyond • Report released 29 September 2015
GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE • Trade finance overall on the rise - Respondents reported an increase in the demand for traditional trade finance instruments to cover the potential risk of default under commercial contracts - 63.3% of respondents have reported an increase in overall trade finance activity - 61.2% of banks have increased their capacity to meet trade finance demand - 25% of respondents consider trade finance significantly less risk than conventional lending
GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE • Refusal rates under L/Cs falling - 65.6% of respondents did not experience an increase in refusal rates of documents under L/Cs in 2014 - 67.8% of respondents expect the downward trend in refusal rates of documents under L/Cs to continue
GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE • Global trends in trade finance – Asia strong despite slowing trade growth - 39% of the trade finance transactions concluded by respondents so far in 2015 have been driven by Asian markets - 25.2% of respondents indicated that their main centres for trade processing were in Asia, followed by Europe with 21% and then North America with 14.1%
GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE • Trends across Latin America - Overall, Latin America reported a trade deficit for the second consecutive year in 2014 - Latin American trade deficit is mainly due to the fall in the trade surplus in Argentina, Chile, and Venezuela, and the widening of the trade deficits in Brazil, Columbia, and Peru - De-risking and regulatory changes are adversely affecting trade finance flows and financial inclusion, particularly in higher risk emerging economies in Latin America - According to the Florida International Bankers Association (FIBA): Basel III reforms have created some unintended consequences in Latin America, where a risk weight of up to 150% may be required on short-term loans related to trade finance. By comparison, the risk weight for developed countries runs closer to 20%
IMPACT OF COMPLIANCE • The impact of compliance – widening the trade finance gap - 46% of banks surveyed terminated correspondent relationships due to the cost or complexity of compliance - 70% of respondents reported declining transactions due to AML/KYC - Almost all respondents expect compliance requirements to increase during 2015 - 80% of respondents cite anti- financial crimes compliance requirements as a significant impediment to trade finance – compared to 69% last year
TRADE FINANCE GAPS • SMEs continue to be disadvantaged in trade finance transactions SMEs account for 53% of all rejected trade finance transactions. By contrast, 79% of the trade finance transactions for large corporates are accepted
TRADE FINANCE GAPS • SMEs are a key part of the economy - SMEs constitute over 95% of all firms, and account for approximately 60% of employment globally - The top priority for SMEs is access to information about export opportunities - The productivity gap between small and large firms is particularly large in developing countries Small firms in Germany, for instance, achieve around 70% of the productivity of large firms. In Brazil, small firms realise less than 30% Research conducted by International Trade Centre (ITC)
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SWIFT TRADE FINANCE MESSAGING VOLUMES • Overall SWIFT trade finance messaging volumes decreased • In 2014, SWIFT trade volumes decreased by 1.79% – compared to a decrease of 0.65% in 2013 • In 2014, the average value of an LC (MT700 only) decreased by US$10,000 to US$643,000 – from US$653,000 in 2013
SWIFT TRADE FINANCE MESSAGING VOLUMES • Asia-Pacific dominates global SWIFT trade finance messaging volumes - Asia-Pacific continues to register a great volume of MT 700 (used by banks when issuing an LC) with 70% (import) and 76% (export) of the world traffic in 2014 – most of which is intra-regional
SWIFT TRADE FINANCE MESSAGING VOLUMES • Elsewhere the picture varies - The region that shows the highest annual decrease in export trade traffic is Africa, where it has decreased by 18.74%. This is followed by Central and Latin America, where export trade traffic has decreased by 6.4%, and North America, which is down by 6.05% - The Chinese RMB is the second most used currency, having represented 10.17% of the total value in 2014, an increase compared to 9% in 2013 (US$ was the currency that represented 80% of the total value of LCs issued via SWIFT).
KEY TRENDS IN EXPORT FINANCE • Export finance proving profitable The majority of respondents surveyed Export finance remains a profitable (35%) believe the export finance business for the vast majority (79%) of those in the industry market will grow by 1-10% in 2015 Research provided by TXF for the ICC Global Survey on Trade Finance
KEY TRENDS IN EXPORT FINANCE • The export finance industry observed a significant decrease in pricing and fees in 2014 - Only 10% of export financiers reported an increase in fees over the past year - Only 12% reported an increase in pricing Research provided by TXF for the ICC Global Survey on Trade Finance
KEY TRENDS IN EXPORT FINANCE • Legal and regulatory hurdles the biggest to export finance • Most financiers do not believe Basel III will have an impact on their competitiveness • Legal and regulatory hurdles are the biggest obstacle to conducting export finance in new markets • 42% of export financiers believe a lack of understanding of the product and associated risks is withholding more institutional investors from entering into export finance Research provided by TXF for the ICC Global Survey on Trade Finance
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