Video interview: Basel III will not kill trade finance
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Tan Kah Chye says the Basel Committee is not discriminating against trade finance with its proposed Basel III capital requirements, and that with time and more patience, things will change for the better.The proposed Basel III regulations will not kill the trade finance business, says Tan Kah Chye, global head, Corporate Cash and Trade, Transaction Banking, Standard Chartered.
Some estimates suggest that the proposed Basel III requirement's capital treatment of trade finance letters of credit could take out USD 300 billion worth of trade flow if capital requirements are so restrictive that banks no longer see it as an attractive business.
According to a McKinsey report on Basel III and European banks, specialised lending, including trade finance, are among the worst affected by the proposed capital requirements with an estimated increase of 60 basis points due to the leverage ratios that are applied to off balance sheet items such as letters of credit and trade guarantees.
But in a video interview with financial-i, Kah Chye says the regulators are not discriminating against trade finance, but added that some of the policies may have a negative impact. As the bank chair of the International Chamber of Commerce, which has produced statistics to try and demonstrate to the Basel Committee the low rate of default on trade finance loans, Kah Chye says businesses, the banks and the regulators need to have an ongoing open dialogue. "Let's get together and have a chat. That's what's needed to for us to close the gap in terms of understanding and expectations."
Date Posted:2nd December 2010