Trade and export finance products are low credit risk offerings compared with similar asset classes according to the International Chamber of Commerce's (ICC's) latest survey.

The 2017 ICC Trade Register also identifies letters of credit (L/Cs) as the lowest risk product or asset class in banks' trade finance portfolios.

Low risk

Default rates for a range of trade finance products ranged from 0.03 per cent to 0.24 per cent, demonstrating the extremely low level of credit default risk such activities present banks and other financial institutions, according to the register.

It says the credit default risk for export L/Cs of 0.03 per cent is the lowest of all. For import L/Cs, the credit default risk is 0.07 per cent, presenting a lower risk than all non-L/C trade finance products or asset classes.

Recovery time

The 2017 Trade Register also found that time to recovery - the period it takes banks to recover their loans - is exceptionally short for trade finance products.

The average time to recovery for trade finance products is 120 days, compared to 437 days for other asset classes.

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