Singapore's largest bank, DBS, has said that its oil and gas loans, which include a substantial number of letter of credit (L/C) backed loans, is the most exposed portion of its portfolio of loans to industries suffering severe difficulties as a result of the negative impacts of the coronavirus pandemic.

The sector is also under severe pressure due to record low oil prices as a result of a fierce price war between Saudi Arabia and Russia while concerns about the industry have been heightened by the collapse of one of Singapore's largest oil traders.

Loan exposure

DBS says that its US$23 billion oil and gas portfolio holds its single largest loan exposure to pandemic affected impacted industries.

Concerns about exposures related to oil traders meanwhile are particularly high at the moment because of the sudden collapse of Hin Leong Trading, the Singaporean oil trading giant that appointed advisors last month and filed for protection from creditors (DC World News, 15 April 2020) and is now accused of not disclosing US$800 million worth of trading losses.

L/C concerns

Several banks are believed to have filed claims related to L/Cs extended in favour of Hin Leong (DC World News, 21 April 2020).

Some 50 per cent of DBS' total US$5 billion loans to oil traders are backed by L/Cs the bank has said.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.