The latest ICC Global Survey, based on information from 210 banks in 94 countries, revealed some intriguing facts about the state of trade finance following the global downturn. Some excerpts follow:

"Trade finance demand was sustained in 2010

According to respondents, trade finance is still very much in demand.

- 83% of respondents indicated they had experienced an increase in demand for the issuance of bank undertakings during 2010, a considerable increase on the 2009 figure of 50% and further evidence of the continued increased security sought by exporters for their shipments;

- 73% of respondents that had experienced an increase in demand reported they had been able to satisfy their customers' needs to a large extent; and

- 74% of respondents reported they had experienced an increase in L/C confirmation requests in 2010.

Traditional trade finance instruments gained prominence

Many respondent banks to the ICC Survey continued to report an increase in demand for documentary credits. These instruments are considered to substantially reduce risks for both exporter and importer...

Affordability of trade finance

The 2011 Survey continued to address issues related to pricing.

- Around 75% of respondents indicated that their fees for issuing bank undertakings had not changed in 2010. Where fees had changed (decreased or increased), this was mainly confined to a range of 1-25%.

- 78% of respondents anticipated that their fees for the issuance of bank undertakings would not rise in 2011.

- Nonetheless, 12-15% of respondents indicated an increase in fees for commercial letters of credit, standbys and guarantees.

Last year's Survey reported that 23% of respondents had seen an increase in the number of court injunctions barring payment under letters of credit. At the time, some respondents also reported intense scrutiny of documents by some banks, eventually leading to higher rates of rejection of trade documents under L/Cs for minor or non-existent discrepancies.

From the 2011 Survey, we conclude that these problems still persist.

- 34% of respondents (same as in the 2010 Survey) experienced an increase in the number of refusals by issuing banks in 2010;

- When acting in the capacity of a nominated bank, 85% of respondents (up from 71%), reported they had experienced an increase or no change in the number of spurious/questionable refusals; and

- Some 5% of respondents (down from 11%) had taken their own decision to refuse and return documents without seeking a waiver from their clients. The same respondents indicated that on average they had taken this course of action less than ten times in 2010. This compares with the 11% who, in the 2010 Survey, reported they done so less than five times in the previous three years...

The 2011 Survey also showed that 26% of respondents (up from 23%) had experienced an increase in the number of court injunctions stopping payment under bank undertakings. This indicates that parties are seeking legal remedies to opt out of their obligations under a sale or performance contract.

40% of respondents (down from 44%) reported an increase in the number of claims received under standby letters of credit and guarantees...

ICC has demonstrated to regulators that trade finance is safer than they thought

The ICC Register looking at the default risk of trade finance instruments between 2005 and 2009 - and pooling trade finance performance data covering a total of 5.2 million transactions with a total value of over USD 2.5 trillion - found that off-balance sheet trade finance transactions had an average tenor of just 80 days and an insignificant incidence of default. Even during the global economic downturn these transactions experienced relatively low levels of default, with fewer than 500 defaults for 2.8 million transactions. For written-off products, recovery rates averaged 60% for all product types."

The full text of the ICC Global Survey can be obtained from