A mood of cautious optimism has spread across the U.S. and into the world of international trade as a new survey indicates that stability in the trade finance sector is beginning to increase despite some notable remaining weaknesses. Conducted by the Bankers' Association for Finance and Trade (BAFT), in cooperation with the International Monetary Fund (IMF), the survey noted that global access to credit has increased and recovery is underway in some regions, although some significant challenges linger.
"There appears to be a slight improvement in credit availability from the last survey, but the state of the global economy remains weak, further affecting trade," said Howard Bascom, BAFT chairman and managing director for Global Trade Finance and Credit Services at the Bank of New York Mellon. The most recent survey was the third in a series from BAFT/IMF that originally began in December. Eighty-eight banks from 44 countries completed the questionnaire, which asked how the total value of the participating banks' trade finance activities changed from fourth quarter 2007 to fourth quarter 2008 and from fourth quarter 2008 to second quarter 2009.
When compared to previous surveys, notably fewer respondents thought that the decline in value of their transactions was due to credit availability. Other portions of the survey, however, were much less optimistic: nearly two-thirds (62%) of banks surveyed reported a drop in total value of trade finance activities from the fourth quarter 2008 to second quarter 2009 and 86% of respondents noted that a lack of demand for trade activities was responsible for the decline.
"While the survey contains some encouraging information, the data also indicate that considerable issues still exist in the international trade finance arena and must be addressed through public-/private-sector coordination. With global trade estimated to contract by as much as 10 percent in 2009, it is imperative that stakeholders and policymakers work together to help stem further contraction. Global trade cannot recover if financing for trade transactions is not available," said Donna Alexander, president of BAFT. "As with our prior surveys, the information in this survey will be useful to policymakers as they consider ways to provide enhanced support for international trade finance."
Regionally speaking, an overwhelming majority of participating banks noted that at least a portion of their trade finance activities were centered on emerging Asia (89%), followed by emerging Europe (43%) and developing Asia (36%). The survey was sent to an array of differently-sized banks, nearly three-fourths of which had less than $100 billion in total global assets.
Jacob Barron, NACM staff writer. Follow us on Twitter at http://twitter.com/NACM_National.