Survey participants were asked to identify the top challenges currently faced by operations units within trade finance businesses. The results, whilst not particularly surprising, are very useful for those involved in the processing of trade.
Over 23% identified cost control pressures as the main challenge. This is certainly not a new challenge and should not actually be regarded as an absolute negative. By focussing on cost, banks should be able to bring about greater efficiencies, which can subsequently be passed on to clients in the pricing of trade products.
Of more concern is the response that over 20% of respondents are seeing a reduction in the global pool of senior technical specialists in trade operations as the greatest challenge. This has long been recognised as a problem that would arise. A greater focus by banks on this area is essential in order to ensure that they can, in the future, support their clients in the trade arena.
We will certainly continue to concentrate our efforts, both online and face-to-face, to provide affordable training in support of trade practitioners on all sides - bank and corporate.
It was also identified by 18% of correspondents that traditional technologies are causing limitations. One would hope that those banks facing this problem have budgeted for new technology and have appropriate plans to introduce updates. If not, it is the clients that will suffer.
Very positive news is seen in the performance in terms of operational risk and error rates compared to 2015. Over 57% of respondents reported a marginally or significantly improved performance, with only 2.7% reporting a slightly reduced performance. This reflects the increased focus in banks on these issues and is to be applauded.
Looking at the service most requested by clients in 2016, at the top, as perhaps expected, is favourable pricing, followed by greater risk appetite and market coverage. Conversely, only 4.8% indicated increased transactional efficiency - despite the fact that this would, in fact, lead to improved pricing.
Although over 26% of respondents have seen a reduction, in percentage terms, in the refusal rate for first presentation of documents under documentary credits, almost 60% have seen no change and over 12% have seen an increase. This is an improvement on 2015 but is still nowhere near optimal. Such a high refusal rate must be addressed and it is hoped that the ICC will focus on this issue as part of their work pursuant to the decision not to revise UCP 600.
Unfortunately, and as mentioned in the survey, the news is not so good in respect of questionable/spurious discrepancies raised under documentary credit presentations. 21.9% of respondents reported an increase in the trend as opposed to 18.5% in 2015. However, 21.3% did report a decrease against 20.6% in 2015. We support the survey's conclusion that continuing focus by the ICC, and others, in enhancing knowledge of international standard banking practice must continue apace to improve these percentages. As mentioned above, we certainly intend to continue our efforts.
Two positive trends are stated: 24.1% of respondents reporting a decrease in claims under Guarantees and Standby LC's (as opposed to 21.5% in 2015), and 20% reporting a decrease in the number of court injunctions (as opposed to 8.8% in 2015).
https://iccwbo.org/publication/2017-rethinking-trade-finance/