The value of letters of credit (L/Cs) in the marketplace has been steadily increasing for nearly a year according to SWIFT

The interbank financial messaging group also reckons banks can capture a bigger share of the multi-trillion-dollar trade finance market according to a senior official.

Constant L/Cs

According to the head of it's trade and supply chain team, Andre Casterman, trade finance business through SWIFT has been increasing patchily since early last year, with a drop between June and September for example.

But the value trend of L/Cs has increased since March 2009 without these ups and downs Casterman says.

Concerns

SWIFT says it is working with the International Chamber of Commerce (ICC) and banks on several initiatives to enable banks to write more trade finance business and convince regulators that trade finance is less risky than its current treatment suggests.

Some US$1.5 trillion worth of trade finance instruments such as L/Cs go through SWIFT each year via a cooperative of over 8,300 banks in 209 countries.

But SWIFT is concerned that these bank-mediated instruments are in decline as corporates move towards open account arrangements within supply chains.

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