An international lawyer says he is seeing traditional trade finance products, including the letter of credit (L/C), making a comeback.

The resurgence of the L/C he says is bolstered by the new rules and procedures introduced in Uniform Customs and Practice for Documentary Credits (UCP 600).

Structured products

Robert Parson, an international lawyer specialising in trade finance at Clyde & Co, says tried and tested trade finance products, such as the L/C and bill of exchange, are becoming more popular.

"There is a trend back towards more tightly structured trade finance products, and the L/C that was looking for a boost after many years of pulling up," he told a Dubai-based newspaper.

UCP 600 benefits

According to the Khaleej Times, Parsons reckons the introduction of UCP 600 in July 2007 has helped the L/C regain its position.

The new rules and procedures have "ironed out a number of inefficiencies in the operations of the L/C and the time taken," he told the paper.

Insurance growth

The lawyer says another area of potential growth he sees is the insurance sector, which he feels can provide support to the trade finance industry.

"I see this area offering huge growth. Partly as a result of tighter rules on credit and as a result of recent financial turmoil, the availability of the insurance sector as a potential bolster for liquidity and for covering credit risk could provide some very interesting opportunities," he says.

Trading returns

Parsons also told the newspaper that to meet demands for liquidity, there has been "a huge expansion in the commodity trade finance department of banks."

Many banks are moving back into trade finance after an absence of about 10 years he says and that "many local banks are gearing up" to do business in the sector.

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