Trade and supply chain finance
Trade and supply chain finance are key catalysts of international trade expansion, allowing companies to mitigate risks in the import and export of goods and services, and operate with security and predictability.
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Tomasch KubiakPolicy Manager | Global Policy Team | Banking CommissionContact by email
Why are rules and guidelines necessary for banks and other financial institutions to facilitate world trade?
Banks and other financial institutions help companies engage in world trade, mitigating risks so that goods and services can flow across the globe in a smooth and secure manner, which is especially fundamental for small-medium sized enterprises (SMEs).
ICC produces universally accepted rules and guidelines to help business access the financing needed to advance the necessary funds to import or export valuable goods on their own. These include documentary credits, forfaiting, demand guarantees, bank payment obligation and dispute resolution that help ensure access the to finance and level the playing field.
In providing this common framework, ICC allows companies and governments around the world to speak the same regulatory language without burdening banks with red tape that could keep them from financing valuable trade opportunities.
Access all ICC trade finance rules on ICC Knowledge to Go
What is the role of global rules in trade?
Banking plays an indispensable role in making trade work for all. It is especially essential for small businesses enable them to take risks in expanding to international markets. Banks need common rules and guidelines for clarity and to avoid confusion that comes with varying national rules.
Having the same guidelines levels the playing field for companies and encourage inclusive trade by making opportunities accessible to small- and medium-sized enterprises to integrate foreign markets and global value chains.
ICC’s global rules for documentary credits were established in the 1930s—a time of growing nationalism and protectionism – and has since become the most successful privately drafted rules for trade ever developed. It has remained adaptable over time to reflect the changing nature of banking in trade.
In addition, ICC also develops guidelines for fields, such as forfaiting, demand guarantees and supply chain finance—all ways that banks work with companies to mitigate the risks involved in trade.
Furthermore, ICC’s expertise helps parties resolve disputes around trade finance documents without going to court, concluding in a rapid, fair and cost-effective manner. In this spirit, ICC has developed rules for documentary dispute resolution (DOCDEX), where parties are provided with a specially appointed panel of experts that deliver a decision within 30 days of receiving the necessary documents.
How does access to trade finance contribute to world trade?
Trade finance has been a catalyst of international trade in the past century by mitigating risks for businesses that paves the way for a predictable and secure flow of world trade. Small- and medium-sized enterprises (SMEs), as the backbone of the global economy, depend on access to banking services in order to expand to new markets, further promoting inclusive economic growth.
Robust regulation is crucial for banks but it is equally essential that rules do not hamper banks’ ability to help businesses get financing. Towards this end, ICC publishes an annual Global Survey on Trade Finance which provides an in-depth analysis on trends and the impact of policies that helps determine where the rules could further improve.
The 2020 ICC Global Survey report was based on exclusive information from nearly 350 respondents in more than 80 countries with nuanced contributions from the Asian Development Bank (ADB), AUSTRAC, Boston Consulting Group (BCG), Coriolis Technologies, HSBC, Kountable, SWIFT and TXF. It reflects the evolution and greater receptiveness to innovation in the financing of international trade, whether through traditional techniques or emerging mechanisms in Supply Chain Finance (SCF), which, along with digital trade are key growth priorities for banks, with 86% and 84% of respective respondents calling them an ‘immediate or near-future priority’.
Furthermore, ICC’s Customer Due Diligence Guidelines provides a suggested template that aims to promote sustainability in trade finance by identifying high environmental, social or governance (ESG) risks associated with commodities or other goods and services produced by a bank customer or within its supply chain, and available mitigants.
How do anti-money laundering and compliance protect world trade?
Financial crimes activities including money laundering, the financing of terrorism, financial fraud and other financial crimes severely undermine the integrity and stability of financial institutions and systems, discourage investment into productive sectors, distort international capital flows. It impedes the capacity of financial institutions at country level to conduct normal business activities, significantly impacting SMEs in the less developed and emerging markets where there is perception of financial crime risk is higher.
ICC has made the fight against money laundering and terrorist financing a major priority, leveraging our position as the leading global rules writer for international trade finance to develop guidance for banks and industry. We also lead industry dialogue with national and international regulators on all topics related to financial crime risk issues