International Chamber of Commerce (ICC)

Banking Commission

THE WORLD BUSINESS ORGANIZATION

The World’s Essential Rule-Making Body for the Banking

Industry

Gerardo Gutierrez-Olvera

President of Trade Finance Committee, ICC Mexico

Mexico City, 6 October 2015

ICC Global Survey on Trade & Finance

2015

Key Findings

ICC has hundreds of thousands of members in 130

countries:

Companies of all sizes and from all sectors

Chambers of commerce, national and local

Business associations

Privileged partner of intergovernmental bodies

UN, WTO, G20, MDBs

ICC is the world business organization:

Its mission is to promote cross-border trade and investment

THE WORLD BUSINESS ORGANIZATION

SERVING WORLD BUSINESS

ICC is the premier provider of services to world business

– World Chambers FederationA global forum for chambers of commerce

– Commercial Crime ServicesFighting fraud, maritime piracy and commercial crime

– CommunicationsVoicing business positions through traditional and social media

channels media and the ICC website

– Publications Publishing business books

– Training and ConferencesOrganizing and hosting events, training seminars and

workshops of topical interest

THE WORLD BUSINESS ORGANIZATION

SERVING WORLD BUSINESS

ICC formulates business policy and builds consensus

ICC keeps pace with the changing business environment, formulating

policy in the following areas, according to the needs of its members:

Digital Economy

Environment and Energy

Intellectual Property

Marketing and Advertising

Taxation

Trade and Investment Policy

THE WORLD BUSINESS ORGANIZATION

POLICY

Arbitration and ADR

Banking

Commercial Law and Practice

Competition

Corporate Responsibility and Anti-

Corruption

Customs and Trade Facilitation

ICC BANKING COMMISSION

REACH AND GLOBAL NETWORK

Asia

Africa

Caribbean

Europe

Middle East

North America

Pacific

South America

A truly representative global forum

600+ institutional members spread over + 100 countries

THE ICC BANKING COMMISSION

A leading and trusted rule-making body for banking

and trade finance

Rules & Guidelines Market Intelligence

Policy

& Regulatory

Dispute

Resolution

+ Training & Certification

SPECIALIZED TRAININGS AND EVENTS

November 2015

Paris, France

- ICC Banking Commission Technical Meeting

January 2016

Singapore, Singapore

- Supply Chain Finance Summit

April 2016

Johannesburg, South Africa

- ICC Banking Commission Annual Meeting

ICC BANKING COMMISSION – PROVIDER OF

LEADING MARKET INTELLIGENCE

ICC Trade Register ICC Global Survey ICC/IMF Market Snapshot

on Trade & Finance

Measuring Global Risks

in Trade Finance Markets

Measuring Performance and

Shifts in Trade Finance

Markets

Snapshot of the Current

Status of Trade Finance

Markets

ICC Market Intelligence Products help leaders make informed

decisions on World Trade Finance

ICC GLOBAL SURVEY ON TRADE & FINANCE

2015

ICC GLOBAL SURVEY ON TRADE & FINANCE

2015

• 7th edition

Well-established market intelligence tool for the whole trade & finance

industry, expanding year by year in scope, worldwide representation and

relevance

• 482 Survey respondent banks across 112

countries +60% in participation compared to 2014

broad geographical reach enhances the richness of the data collected

• 16 institutional and contributing partners

Industry actors from around the world pool their knowledge to develop a

valuable global view on the pressing issues of today in trade finance and

beyond

• Report released 29 September 2015

2015 Global Survey at a glance

GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE

• Trade finance overall on the rise - Respondents reported an

increase in the demand for

traditional trade finance

instruments to cover the

potential risk of default under

commercial contracts

- 63.3% of respondents have

reported an increase in overall

trade finance activity

- 61.2% of banks have increased

their capacity to meet trade

finance demand

- 25% of respondents consider

trade finance significantly less

risk than conventional lending

• Refusal rates under L/Cs falling

- 65.6% of respondents did not experience an increase in refusal rates of documents

under L/Cs in 2014

- 67.8% of respondents expect the downward trend in refusal rates of documents under

L/Cs to continue

GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE

• Global trends in trade finance – Asia strong despite

slowing trade growth

- 25.2% of respondents indicated that their main centres

for trade processing were in Asia, followed by Europe

with 21% and then North America with 14.1%

- 39% of the trade finance transactions concluded by

respondents so far in 2015 have been driven by

Asian markets

GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE

• Trends across Latin America

- Overall, Latin America reported a trade deficit for the

second consecutive year in 2014

- Latin American trade deficit is mainly due to the fall in the

trade surplus in Argentina, Chile, and Venezuela, and the

widening of the trade deficits in Brazil, Columbia, and

Peru

- De-risking and regulatory changes are adversely

affecting trade finance flows and financial inclusion,

particularly in higher risk emerging economies in Latin

America

- According to the Florida International Bankers

Association (FIBA): Basel III reforms have created some

unintended consequences in Latin America, where a risk

weight of up to 150% may be required on short-term

loans related to trade finance. By comparison, the risk

weight for developed countries runs closer to 20%

GLOBAL AND REGIONAL TRENDS IN TRADE FINANCE

IMPACT OF COMPLIANCE

• The impact of compliance – widening the trade finance gap

- 46% of banks surveyed terminated correspondent relationships due to

the cost or complexity of compliance

- 70% of respondents reported declining transactions due to AML/KYC

- Almost all respondents expect compliance requirements to increase

during 2015

- 80% of respondents cite anti-

financial crimes compliance

requirements as a significant

impediment to trade finance –

compared to 69% last year

TRADE FINANCE GAPS

• SMEs continue to be disadvantaged in trade finance transactions

SMEs account for 53% of all rejected trade finance transactions. By contrast, 79% of

the trade finance transactions for large corporates are accepted

TRADE FINANCE GAPS

• SMEs are a key part of the economy

- SMEs constitute over 95% of all firms, and account for

approximately 60% of employment globally

- The top priority for SMEs is access to information

about export opportunities

- The productivity gap between small and large firms is

particularly large in developing countries Small firms in

Germany, for instance, achieve around 70% of the

productivity of large firms. In Brazil, small firms realise

less than 30%

Research conducted by International Trade Centre (ITC)

TRADE FINANCE GAPS

• Filling the trade finance gap

- ICC encourages new or alternative financiers to support trade

- ECAs and MDBs have been filling the trade finance gap (often through Trade Facilitation

Programs)

SWIFT TRADE FINANCE MESSAGING VOLUMES

• Overall SWIFT trade finance messaging volumes decreased

• In 2014, SWIFT trade volumes

decreased by 1.79% – compared to a

decrease of 0.65% in 2013

• In 2014, the average value of an LC

(MT700 only) decreased by

US$10,000 to US$643,000 – from

US$653,000 in 2013

SWIFT TRADE FINANCE MESSAGING VOLUMES

• Asia-Pacific dominates global SWIFT trade finance messaging

volumes

- Asia-Pacific continues to register a great volume of MT 700 (used by banks when issuing an LC)

with 70% (import) and 76% (export) of the world traffic in 2014 – most of which is intra-regional

SWIFT TRADE FINANCE MESSAGING VOLUMES

• Elsewhere the picture varies

- The region that shows the highest annual decrease in export trade traffic is Africa,

where it has decreased by 18.74%. This is followed by Central and Latin America,

where export trade traffic has decreased by 6.4%, and North America, which is

down by 6.05%

- The Chinese RMB is the second most used currency, having represented 10.17%

of the total value in 2014, an increase compared to 9% in 2013 (US$ was the

currency that represented 80% of the total value of LCs issued via SWIFT).

KEY TRENDS IN EXPORT FINANCE

• Export finance proving profitable

Export finance remains a profitable

business for the vast majority (79%)

of those in the industry

The majority of respondents surveyed

(35%) believe the export finance

market will grow by 1-10% in 2015

Research provided by TXF for the ICC Global Survey

on Trade Finance

KEY TRENDS IN EXPORT FINANCE

• The export finance industry observed a significant decrease in pricing

and fees in 2014

- Only 10% of export financiers

reported an increase in fees

over the past year

- Only 12% reported an increase

in pricing

Research provided by TXF for the ICC Global Survey

on Trade Finance

KEY TRENDS IN EXPORT FINANCE

• Legal and regulatory hurdles the biggest to export finance

• Most financiers do not

believe Basel III will have

an impact on their

competitiveness

• Legal and regulatory

hurdles are the biggest

obstacle to conducting

export finance in new

markets

• 42% of export financiers

believe a lack of

understanding of the

product and associated

risks is withholding more

institutional investors from

entering into export

finance

Research provided by TXF for the ICC Global Survey

on Trade Finance

KEY TRENDS IN EXPORT INSURANCE

• Business trends in export insurance

• The volumes of export credit insurance reported for 2014 reached a total amount of

US$1.875 trillion – an increase of 4% from the previous year

• Of this total, more than US$1.7 trillion represented short-term (ST) export credit

insurance, while medium and long-term (MLT) cover provided by official export credit

agencies (ECAs) amounted to just over US$166 billion

• Claims paid to customers by ECAs under MLT transactions amounted to US$2.427

billion in 2014

• The highest amount of claims paid per country were due to defaults in: Iran (US$916

million); Russia (US$296 million); Ukraine (US$187 million); USA (US$172 million);

Kazakhstan (US$97 million)

Research conducted by Berne Union

KEY MESSAGES ON TRADE FINANCE IN LATIN AMERICA

• The impact of regulation across Latin America

- De-risking and regulatory changes are adversely affecting trade finance flows and

financial inclusion, particularly in higher risk emerging economies in Latin America

- In Latin America, a risk weight of up to 150% may be required on short term loans

related to trade finance. By comparison, the weight for developed countries runs

closer to 20%

- SMEs have been most severely impacted – given they represent approximately

80% of companies involved in trade in Latin America, but account for less than 15%

of total trade financing

KEY MESSAGES ON TRADE FINANCE IN LATIN AMERICA

• The Latin American trade deficit continues

- Latin America reported a trade deficit for the second consecutive year in 2014

- Imports of Latin American goods by the region’s three main trading partners have

declined during the first trimester of 2015:

China – by 28%

US – by 6%

EU – by 3%

- The weakening of commodity prices has been severely felt across Latin America

- Oil prices dropped drastically between June-October 2014 – falling by 20%

KEY MESSAGES ON TRADE FINANCE IN LATIN AMERICA

• Positive performances across Latin America

- The only commodity that had a positive performance was coffee – with price

increasing by 40% through October

- Tech revolution has prompted an increase in the trade of mobile technology

- Brazil exported US$300 million worth of mobile equipment in the first quarter of

2015

- Peru exported more than US$160 million of mobile equipment over the first quarter

of 2015

THANK YOU!

ICC Banking Commission

The leading and trusted

authority for trade finance