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Trade finance industry urges action over Basel III rules

Thursday 14 October 2010 - by Nicola York

The International Chamber of Commerce and the Asian Development Bank are urging the Basel Committee to rethink the Basel III rules on trade finance.

In a meeting with the Basel Committee yesterday, the ADB and ICC stressed that current and proposed rules impose capital requirements on trade finance that are disproportionately high considering the safety of such financing.

Banks say that these rules force them to lock up funds that could be used to support trade, and discourage them from extending more. Banks provide the finance for a third of world trade.



Kah Chye Tan, chairman of the ICC Banking Commission, said: “Yesterday’s meeting with the Basel Secretariat was very constructive and informative. We believe this meeting represents the beginning of a dialogue with the Basel Committee on a number of fronts in relation to Basel III, including potential unintended consequences on global trade as well as methodologies to refine collection of data to demonstrate what we all know intuitively: that trade finance carries relatively low risk.”

ADB head of trade finance Steven Beck said: “There is broad support for Basel’s work in tightening capital requirements to make the global financial system more robust.


“However, Basel rules should not treat trade finance the same as other riskier products, otherwise global trade, especially in emerging markets, will suffer. That means slower economic growth and fewer jobs, and makes it harder to achieve Millennium Development Goals on poverty reduction."




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