Commonwealth Bank of Australia (CBA), ABN Amro, London Forfaiting Company, Crown Agents Bank and Natixis have joined the Trade Finance Distribution Initiative (TFD Initiative).
They join ANZ, Crédit Agricole CIB, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation as members.
The TFD Initiative is an industry-wide drive to use technology and standardisation for the wider distribution of trade finance assets. Since launching earlier this year, a growing number of banks, institutional investors, trade associations and trade finance service providers have joined as members.
Trade finance presents a compelling multi-trillion dollar investment opportunity for institutional investors seeking sources of long-term, low-risk returns based on the tangible flows of goods and services. However, there is no scalable market infrastructure in existence to facilitate the exchange of trade finance assets between banks and institutional investors.
This has led to the creation of the TFD Initiative. Its members will work together to utilise and adopt a common infrastructure powered by Tradeteq, the global trade finance distribution platform. Tradeteq’s technology allows banks and institutional investors to efficiently connect, interact and transact. It uses machine learning technology for supply chain predictive analysis, transaction level credit scoring, risk management, reporting and portfolio composition.
Why these institutions joined the TFD initiative:
- Sylvain Labattu, Executive Director in Global Commodities & Trade team at CBA, said: “We view the TFD Initiative as a crucial process in the opening up of risk distribution in the trade finance asset class. Staying at the forefront of industry-wide technological and process developments enables us to better connect with and serve both our domestic and global corporate client base through excellence in structuring and distribution, access to data and analytics, and best in class corporate digital offering.
- Duarte Pedreira, Head of Trade Finance at Crown Agents Bank, said: “The TFD Initiative has the potential to reshape the trade finance market. By opening up the asset class and making it more accessible outside of the traditional banking world, the TFD Initiative is, in essence, creating a fairer playing field, where non-bank investors can also benefit from the excellent risk/reward opportunities presented by trade finance assets. Crown Agents Bank is proud to work alongside our peers to optimise the benefits of trade finance to our clients.”
- Anne-Cécile Delas, Global Head of Trade & Treasury Solutions at Natixis, said: “The distribution of our trade finance assets is key to better serving our clients. Networks like the TFD initiative, gathering banking, regulatory and buy-side sectors, will help to make trade finance assets more accessible to a wider range of investors, in a standard and processed way.”
Future of trade finance as an asset class
To address the world’s trade finance gap, estimated at US$1.5tn in 2017, the WEF recommended a four-pronged approach: (1) building local regulatory capacity; (2) establishing a regional initiative for trade financing; (3) better tailoring the international regulatory dialogue to the needs of local stakeholders; and (4) fostering new and innovative solutions.
André Casterman, Board Member at Tradeteq and Chair of the Fintech Committee at the International Trade and Forfaiting Association, commented: “The existing trade finance infrastructure that institutions rely on is outdated, and the industry is on the cusp of change. This is a truly international, collaborative effort that includes the banking community, institutional investors, trade associations and other service providers.”
CTMfile take: How long it will be before Trade Finance becomes a generally recognised asset class?
Trade finance network options increasing and overlapping
Trade Information Network launched by seven banks to transform trade finance
New trade finance deals and developments at SIBOS
Voltron on R3 formal launch; Commerzbank improve trade finance processing; PrimeRevenue new comprehensive reseller programme for banks
Making trade finance an asset
Fourteen banks and financial institutions launch TFD Initiative to develop multi-trillion dollar trade as an asset class