HSBC announced at the ‘Sibos’ financial services conference in Geneva today that it has built a multi-hub capability to enable investors such as pension funds, asset managers and insurers to participate in the global financing of cross-border trade.
As part of a USD10 million investment in people and systems, trade ‘risk distribution’ specialists are now integrated into HSBC’s Global Trade and Receivables Finance (GTRF) teams in London, Singapore and New York. Their role is to increase access to trade finance for investors seeking relatively low risk assets that have traditionally been traded between banks, and they can structure investments based on ‘single name’ trade finance contracts or on packages of contracts involving multiple customers.
GTRF originated more than USD550 billion of documentary trade finance for customers in 2015, helping make HSBC the leading international trade bank.
“The ability we now have to originate and distribute trade receivables simultaneously in Asia, EMEA and the Americas is beneficial to our customers, to investors and to HSBC,” said Surath Sengupta, Global Head of Trade Risk Distribution. “For certain non-bank investors it means access to a new asset class that offers better risk-adjusted returns than many other securities. Driven by demand from our customers, it also enables us to take on larger deals than we might otherwise have done, meaning they only need to work with one bank to cover their trade finance needs.”
The World Trade Organisation estimates that as much as 90% of global trade is supported by some form of trade finance. Whilst growth in global trade volumes is expected to remain sluggish in the near term, demand for trade finance outstripped supply by USD1.6 trillion last year, according to the Asian Development Bank.
Trade assets are typically short term assets that self-liquidate, covering transactions between exporters and importers. Analysis by the International Chamber of Commerce shows their average default rate to be 0.02%.