World's Best Trade Finance Banks 2007

Article excerpt

Global Finance selects the leaders in a specialized area of finance that is changing rapidly.

Global trade finance has become an extremely competitive business, mainly suitable for financial institutions with economies of scale or special expertise. Most international trade is now done on an open-account basis, as corporations have come to know their suppliers better and are less willing to pay the fees associated with letters of credit (LCs) and other forms of bank guarantees.

While open-account trading is the least secure method for exporting, it represents about 70% of world trade, according to a report by Boston-based Celent, a research and advisory firm that helps banks develop business and technology strategies. Only about 15% of trade is done with the safety net of an LC, with the remainder relying on various documentary collection and related techniques.

"Since the trade finance business is globally flat, the best way for leading players In trade finance to increase their volume of business is to acquire market share from the competition," according to Celent. In order to benefit from the consolidation in the industry, the leading banks are centralizing trade finance operations in regional hubs, investing in technology and providing outsourcing services to other banks.

Cash management and trade finance products are being integrated with working capital management and supply-chain services. At the Sibos meeting in Sydney last October, bankers were eagerly anticipating the launch of the Trade Services Utility, or TSU, a bank-to-bank central matching and rules-based engine. TSU operates under SWIFTNet's messaging system and could help banks automate trade processes and reduce back-office costs. …