SMEs squeezed by compliance measures in trade finance

Survey conducted by the International Chamber of Commerce (ICC) Banking Commission.

Powered by automated translation

Trade finance is growing for banks and financial institutions but small and medium-sized enterprises (SMEs) are being affected because of stricter compliance measures, according to a survey conducted by the International Chamber of Commerce (ICC) Banking Commission.

The body sets rules and guidelines for international banking practices.

About 72 per cent of the survey respondents said they had witnessed an increase in trade finance net income last year, and 63 per cent reported an increase in overall trade finance activity.

The survey, released on Tuesday in Dubai, covered 482 respondents from 112 countries.

SMEs, however, make up nearly 53 per cent of all rejected trade finance transactions, while 79 per cent of proposals for larger corporates are accepted.

Seventy per cent of respondents said declined transactions were because they did not comply with anti-money laundering regulations. Forty six per cent of respondents said termination of correspondent relationships was because of related costs and complexities.

“Going forward, it is worrying to observe that 91 per cent of respondents expect compliance requirements to increase over the next year, up from the 81 per cent in 2014,” said Vincent O’Brien, chairman of the ICC Banking Commission Market Intelligence Group.

“Compliance is now part of the global financial system but difficulties remain due to differing standards being applied – 53 per cent of respondents consider that the lack of compliance harmonisation between jurisdictions is a great challenge to the trade finance industry.”

Follow The National's Business section on Twitter