Investment Operations

Financial Institutions Launch Drive to Develop Multi-trillion Dollar Trade as an Asset Class

Fourteen leading global financial institutions have launched a drive to use technology and standardization for the wider distribution of trade finance assets. 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).

TFD Initiative is powered by Tradeteq, the global trade finance distribution platform that analysts say allows banks and institutional investors to efficiently connect, interact, and transact. The International Chamber of Commerce (ICC) United Kingdom and the International Trade and Forfaiting Association (ITFA), the leading international association for banks and financial institutions involved in cross-border trade and forfaiting, have each joined TFD Initiative as an observer.

“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,” said Surath Sengupta, Global Head of Trade Portfolio Management at HSBC.

Trade finance is private financing that helps businesses cover mismatches between payment obligations and payment receipts resulting from the buying and selling of goods and services. It is a vital piece of the financial sector that supports importers and exporters as they conduct their trade activities. Trade finance presents a compelling multi-trillion dollar investment opportunity for institutional investors seeking sources of attractive risk-adjusted returns with low correlation to stocks or bonds. TFD Initiative will initially focus on creating common data standards and definitions to enhance operational efficiency and improve risk management, creating a blueprint for global trade finance asset distribution.

Industry observers note that 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 standardized format accepted by a broad range of investors and to achieve speed of execution.” Said Nicolas Langlois, Managing Director and Global Head of Trade Distribution & Liability and RWA Optimization CSDG & Transaction Banking at Standard Chartered Bank.