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Global Banking and Finance: Bridging the trade finance gap
Published on:
December 9, 2021
Many businesses struggle to secure trade financing from banks and it’s a persistent problem that has led to the widening of the trade finance gap – the shortfall between supply and demand. Research from the Asian Development Bank found that the gap increased this year to a worrying $1.7 trillion, up $200 billion from 2018.
At the heart of the problem are capital constraints resulting from stricter regulation, which continue to restrict banks’ ability to lend. Basel III, in particular, requires banks to put aside more capital for trade finance deals, meaning they have had to raise capital requirements and reduce their standardised risk weights.
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