The International Chamber of Commerce (ICC) Banking Commission has published its annual Global Survey on Trade Finance, which contemplates the "long-anticipated disappearance of the documentary letter of credit (L/C)."

The annual report, subtitled Rethinking Trade Finance, found that 80 per cent of respondents in the survey expected little or no growth in L/C usage.

Open account migration

The report found that L/Cs will continue to be important for a still sizeable 10 per cent of global merchandise trade, but that banks around the world are looking beyond them.

Meanwhile the migration to open account trading that began a decade ago shows no sign of abating and is expected to continue according to the ICC survey.

It found that 2016 was a flat year for global trade. This accounted for the 4.72 per cent decline in electronic trade finance messages sent over the SWIFT platform.

Trade finance gap

The report also discusses the trade finance gap on the basis of survey results that revealed that 61 per cent of banks thought there was an excess of demand over supply for trade finance.

Rethinking Trade Finance contemplates the trade finance gap in the now familiar contexts of the costs and risks in compliance and regulation and the continuing trend of international banks severing correspondent banking relationships.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.