The outlook for global trade is improving as the world economy recovers, and trade bankers are gearing up to handle the growing volumes while helping their customers introduce new efficiencies in their global supply chains. Some 90% of world trade involves some type of credit, insurance or guarantee, according to the World Trade Organization.Lack of financing was part of the reason for a decline in world trade last year, the first time global trade shrank since 1982. Normally, structured trade finance is countercyclical. When the economy slows and liquidity dries up, traders demand letters of credit to lower the risk of doing business. This time around was different in some important ways, however, due to the scope and severity of the financial crisis.
Before the crisis hit, it was normal to treat credit as a commodity that was available when needed at an affordable price. With the popping of the credit bubble following the bankruptcy of Lehman Brothers, liquidity became scarce, and financial institutions became fearful to lend. Banks and corporations became extremely cautious about whom they chose to do business with.Emerging markets were especially threatened when the withdrawal of trade credits in late 2008 severed their lifeline to the global markets. Trade finance pricing went through the roof, and a lot of transactions did not get done because credit was simply not available.
Major trade banks, working with export credit agencies (ECAs) and multilateral institutions, such as the International Finance Corporation (IFC), developed innovative financial products and stood behind their customers during the credit crunch. They found new ways to lower risks, restore trust and accelerate trade cash flows for their customers.Global Finance editors, with input from industry analysts, corporate executives and technology experts, selected the best trade finance providers in 71 countries or regions. Criteria for choosing the winners included transaction volume, scope of global coverage, customer service, competitive pricing and innovative technology.
