TXF News: Can banks reverse the widening trade finance gap?

According to The Asian Development Bank, the trade finance gap widened this year to $1.7 trillion – from $1.5 trillion in 2018 – with many businesses unable to access the funding they need. Reducing this gap is crucial to ensure global trade thrives but it’s a persistent challenge and a worrying symptom of a sector under increasing pressure.

The problem is banks are having to do more with less in the face of capital constraints, so affecting change means first resolving this fundamental imbalance. Understandably, regulation is a major contributing factor – particularly Basel III, which requires banks to put aside more capital when lending. As a result, global banks active in trade finance have had to raise capital requirements and reduce their standardised risk weights.

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