ICC Trade Register report 2018: Global risks in trade finance
The ICC Trade Register is indispensable for global banking and policymakers. The information is vital to closely monitor and manage risk in the sector because the scale and speed of regulatory change is unprecedented.
Partnering with the ICC Banking Commission on this market-leading project immensely improves the quality of trade finance credit data for the industry. This helps banks better understand risks and comply with regulatory rules such as the Basel Framework.
The ICC Trade Register provides a factual overview of worldwide export finance markets and market evolution. By integrating non-OECD ECAs and Multilaterals in the scope, this next report will provide a widened landscape.
The ICC Trade Register has been instrumental in fostering dialogue with regulators on a global scale. The integrity of the data is proven and is a strong incentive for other banks to participate.
There is a critical link between the availability of affordable trade finance and the conduct of international trade. The ICC Trade Register has been instrumental in promoting dialogue and advocacy around trade finance as an asset class.
Supply chain finance is one of the fastest growing trade products. It is thus great to see that payables finance is reflected in the project. Users will benefit from the broadened product scope of the Trade Register.
Daniel Schmand
Chair, ICC Banking Commission and Global Head of Trade Finance, Deutsche Bank
Philip Winckle
Senior Advisor, GCD
Catherine GOUPIL
Chief Operating Officer of Export Finance, Société Générale
Krishnan Ramadurai
Global Head of Capital Management HSBC and Chair ICC Trade Register
David Bischof
Senior Policy Manager, ICC Banking Commission
Christian Hausherr
Product Manager, Deutsche Bank

What is the ICC Trade Register?

The ICC Trade Register is an unparalleled instrument to measure global risk in trade and export finance facilitated by the International Chamber of Commerce (ICC) and the world’s leading banks.

The ICC Trade Register aims to provide:

  • An objective and transparent view of the credit risk profile and characteristics of trade, supply chain and export finance with the intention of contributing to informed policy and regulatory decisions.
  • Access to high-quality and up-to-date data on trade, supply chain and export finance, which can be incorporated as an integral component of annual credit risk factor reviews and model calibration for trade finance.
  • A common understanding of the international regulations affecting bank capital requirements for trade and export finance as part of ICC’s commitment to effective and collaborative advocacy.

Project scope

The scope of the ICC Trade Register has continued to evolve over the recent years to include, for example, an expanded geographic reach, number and diversity of contributors, volume and quality of data, and alignment of analytical methods to the Basel Approach.

The product scope includes short-term traditional trade and supply chain finance products as well as medium to long-term export credit agency (ECA) backed export finance loans. Short-term products are instruments with a typical maturity of less than one year and with a clear link to a specific underlying trade transaction.

Note: Performance Guarantees and Standby L/Cs have maturities greater than one year.

For the first time this year, the Trade Register has also included Supply Chain Finance (specifically Payables Finance) within the study. Hence, the ICC Trade Register analysis focuses on credit-related risk across the following products:

  • Trade Finance
    • Import and export letters of credit
    • Loans for import/export
    • Performance guarantees and standby letters of credit
  • Supply Chain Finance
    • Restricted to “payables”, part of supply chain products and solutions
  • Export Finance
    • Export Loans backed by OECD/non-OECD ECAs and multilaterals for commercial and/or political risk

Highlights

Overview of findings in 2018 report:
Default rates and expected losses remain low for trade finance products (2008-2017)

Exposure
at default

Product/Asset class

Import LC 100%
Export LC 100%
Loans for import/export 100%
Performance Guarantees (applying CCF to EAD) 7.6%
Performance Guarantees (applying CCF to LGD) 100%

Exposure-weighted
default rate

Product/Asset class

Import LC 0.07%
Export LC 0.03%
Loans for import/export 0.19%
Performance Guarantees (applying CCF to EAD) 0.25%
Performance Guarantees (applying CCF to LGD) 0.25%

Loss given
default

Product/Asset class

Import LC 30%
Export LC 36%
Loans for import/export 36%
Performance Guarantees (applying CCF to EAD) 41%
Performance Guarantees (applying CCF to LGD) 3%

Exposure-weighted
Expected loss

Product/Asset class

Import LC 0.02%
Export LC 0.01%
Loans for import/export 0.07%
Performance Guarantees (applying CCF to EAD) 0.01%
Performance Guarantees (applying CCF to LGD) 0.01%

Trade finance products have favorable risk profiles…(2008-2017)

Obligor-weighted
default rate

Product/Asset class

Import LC 0.37%
Export LC 0.05%
Loans for import/export 0.76%
Performance Guarantees 0.47%

Loss given
default

Product/Asset class

Import LC 30%
Export LC 36%
Loans for import/export 36%
Performance Guarantees 3%

Obligor-weighted
Expected loss

Product/Asset class

Import LC 0.11%
Export LC 0.02%
Loans for import/export 0.27%
Performance Guarantees 0.01%

Time to Recovery

Product/Asset class

Import LC 184days
Export LC 111days
Loans for import/export 123days
Performance Guarantees 61days

…compared to non-trade asset classes (2008-2017)

Obligor-weighted default rate

Asset class

SME 1.62%
Banks & Financial Institutions 0.25%
Commodities Finance 0.68%

Loss given default

Asset class

SME 27%
Banks & Financial Institutions 28%
Commodities Finance 24%

Obligor-weighted Expected loss

Asset class

SME 0.44%
Banks & Financial Institutions 0.07%
Commodities Finance 0.16%

Time to Recovery

Asset class

SME 393days
Banks & Financial Institutions 427days
Commodities Finance 350days

Supply chain finance represents similar or lower risk than other trade products (2008-2017)

Exposure-weighted
default rate

SCF Payables Finance 0.11%
Import LC 0.07%
Export LC 0.03%
Loans for import/export 0.19%
Performance Guarantees 0.25%

Obligor-weighted default rate

SCF Payables Finance 0.11%
Import LC 0.37%
Export LC 0.05%
Loans for import/export 0.76%
Performance Guarantees 0.47%

Transaction-weighted default rate

Import LC 0.11%
Export LC 0.01%
Loans for import/export 0.23%
Performance Guarantees 0.17%

Medium to long-term trade finance default rates remain low with small increases in corporate and sovereign rates


Members

The ICC Trade Register project was established in 2011 with 7 banks. Since then, membership has grown to 22 banks across Europe, Africa, North America, Asia and Australia. ICC Trade Register members are ‘owners’ of the project and have a prominent role in steering the strategic direction. This ensures that its activities are member-centric driving the ‘by banks for banks’ credo.

ICC Trade Register membership is open to any bank that has a demonstrable capability to collect and deliver data. Membership is currently only available for regulated banks.

  • Number of members today: 22 banks
  • The information on trade finance products, gathered from member banks, includes approximately 35% of global traditional trade finance flows, excluding loans for import/export.

Member distribution across the globe:

Regional Distribution

  • Western Europe
  • Africa
  • Asia Pacific
  • North America

Member benefits

  • Access to exclusive content
  • Regulatory updates from around the world
  • Policy and advocacy dialogue
  • Gain access to members-only meetings
  • Unique partnership opportunities
  • Personalised benchmarking with peers

For more information on how to become a member and membership fees


Global Strategic partnerships

The Trade Register’s high standard is ensured by a strategic partnership forged between the International Chamber of Commerce (ICC), Boston Consulting Group (BCG) and Global Credit Data (GCD).

Boston Consulting Group:

The Boston Consulting Group (BCG) operates as a knowledge partner, benefitting the project with support in producing the annual Trade Register Report and strengthening its strategic relevance to the industry.

Global Credit Data

The project is strengthened with the risk analytics expertise of Global Credit Data (GCD), a not for profit initiative owning the world’s largest database of defaults and probability of default estimates for banks. GCD assists ICC with collection and aggregation of data and preparation of the ICC Trade Register report.

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