Fourteen financial institutions have come together to promote common standards for trade finance in a bid to make it more appealing as an asset class for institutional investors.
ANZ, Crédit Agricole CIB, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation are among the banks backing the Trade Finance Distribution Initiative (TFD Initiative).
The TFD Initiative intends to use the Tradeteq distribution platform to initially focus on creating common data standards and definitions to improve operational efficiency and risk management.
The objective is to attract alternative non-bank investors into the market by unlocking the positive returns that can come from helping exporters and importers cover mismatches between payment obligations and payment receipts.
Surath Sengupta, global head of trade portfolio management at HSBC says trade finance represents a compelling multi-trillion dollar investment opportunity for institutional investors seeking sources of attractive risk-adjusted returns with low correlation to stocks or bonds.
"While trade finance is currently an attractive asset class for banks, we believe technology will unlock investment from non-bank investors by removing complexity and making the underlying asset data both more structured and accessible,” he says.
Nicolas Langlois, managing director and global head of trade d& Liability and RWA optimization CSDG & transaction banking at Standard Chartered, adds: “Closing the financing gap in trade finance is about providing financing to small and medium sized enterprises. This requires developing new digital solutions to package those portfolios in a standardised format accepted by a broad range of investors and to achieve speed of execution.”
Reflecting the initiative's attempts to achieve a broad reach across the industry, the International Chamber of Commerce (ICC) United Kingdom and the International Trade and Forfaiting Association (ITFA), have each accepted invitations to join TFD Initiative as an observer.