Trade finance is emerging as a key part of the Latin American banking business model and is bound to be a hot topic on the agenda at this year's Felaban annual meeting being held in Colombia in November. Ahead of this, The Banker speaks to experts about the challenges and opportunities that this growing business line is creating in the Latin American market.
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With heavy state involvement and the occasional scandal, China’s trade finance sector may not be perfect. But significant change is under way as government policies facilitate growth and diversification in the country’s industry and financial sector.
Over the past decade, the International Finance Corporation's short-term finance programme has facilitated billions of dollars of trade finance, and the programme's Americas head, Antonio Alves, is confident about its continued success.
After years of neglect, the Iraqi banking sector offers promise once again. Mobile banking, trade finance and infrastructure financing opportunities are proving attractive to existing lenders and the wave of new entrants looking to break into the market. But, before the tide can finally turn, there are regulatory issues that need addressing.
In response to restrictive regulation, trade finance securitisation deals are starting to materialise and, with these deals structured in such a way that they reduce risk weighting, lower leverage and increase liquidity, appetite for them is growing.
With the US and European crises behind them, South American trade figures are back on an upward slope. Local banks are paving the way for improved relations with China, and Chinese banks are increasing their presence in the region. Even the proximity of the US could have its benefits.
The economic changes that have taken place over the past few years have forced banks to fine-tune their business and expansion strategies, not just to stay competitive – or regain their competitive advantage – but to also keep abreast with new technologies and changing demands from clients.
As Basel III regulations come into play, banks looking for a quick fix to bulky balance sheets are divesting their trade finance assets, creating a gap in the market that investor groups and other alternative financiers are keen to fill.
A focus on individual key strengths, both in terms of products and geographical footprint, is the driving force behind big banks’ global transaction banking business strategies as they search for a unique selling point in an increasingly competitive market.
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