NEW YORK, April 15, 2019 /PRNewswire/ -- BNY Mellon today released its "Overcoming the Trade Finance Gap: Root Causes and Remedies" report, which finds that the trade finance gap remains a significant issue for global trade, according to 100 global, regional, and domestic banks, specialist trade providers and other market participants responding to its survey. The $1.5 trillion global trade finance gap is affecting development and investment flows and financial inclusion, and businesses appear to be facing an increasingly uphill struggle in accessing the resources and support needed to fulfil their trade needs.
The report conducted between April 2018 and January 2019, found that trade finance rejection rates accelerated in more than one-third or (33%) of institutions surveyed in the past year. Additionally, nearly three-quarters or (71%) of respondents cited compliance constraints and the inability for applicants to provide quality know your customer (KYC) as a key factor influencing the volume of rejection rates. As a result, banks have had to be more selective in who they do business with and subsequently move away from geographies and sectors that appear to hold greater risk for less reward.
"Our survey has shown that a significant proportion of institutions are increasingly unable to provide trade finance due to heightened regulatory requirements as well as several other trends," said Joon Kim, Head of Global Trade Product and Portfolio Management, BNY Mellon Treasury Services. "This could have serious implications such as potentially widening the trade finance gap, compounding the lack of access to finance already being experienced by many businesses in emerging markets, and impacting the strength of global trade."
Further, participants identified technology and regulatory revision as two potential approaches that could help to narrow the trade finance gap. Specifically, centralized KYC databases could provide a technology-based solution, according to nearly two-thirds or (61%) of respondents, while regulatory revision would most benefit from greater collaboration between banks and regulators, according to more than half or (55%) of respondents. Additionally, risk sharing partnerships with correspondent banks is seen as the most effective way of encouraging additional financing capability, while educating local banks and acting as advocates for trade finance are also key roles for correspondent banks in helping to alleviate the gap.
Paul Camp, Chief Executive Officer, BNY Mellon Treasury Services, confirms that "addressing the trade finance gap is a priority for the industry, and it is important that we work together to find the solutions that will be most effective in achieving this. There are efforts underway, but more work is required to ensure significant progress is made. We hope our survey will serve as a catalyst for driving further industry discussion and help to identify the areas of focus that will allow us to make tangible steps towards improving financial inclusion – and closing the gap."
Note to Editors:
BNY Mellon Treasury Services offers its clients solutions in global payments, trade services, cash management, and foreign exchange. It operates in 36 countries, helping clients optimize cash flow, manage liquidity, and make payments more efficiently in the currencies of more than 160 countries. Its services help organizations conduct payment operations, ensure adequate liquidity, and manage risk.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of December 31, 2018, BNY Mellon had $33.1 trillion in assets under custody and/or administration, and $1.7 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
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SOURCE BNY Mellon