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Next Generation Innovations in Trade Finance: North and Latin America

Recent trade finance developments, particularly in the wake of the global financial crisis,   benefit   corporates in developed markets…

By Sponsor: Deutsche Bank | Updated on May 08, 2012
Recent trade finance developments, particularly in the wake of the global financial crisis,   benefit   corporates in developed markets and those based in burgeoning growth areas such as export-driven Latin America. Jon Richman, Deutsche Bank’s Head of Trade Finance and Financial Supply Chain, Americas and Burkhard Ziegenhorn, Latin America Regional Head of Global Transaction Banking, Deutsche Bank, discuss trends in both regions, and consider the future of global trade finance.

Global trade was once predominantly conducted on letter of credit (LC) terms. LCs, though expensive and comprising a largely inefficient, paper-based process, were favored because of the security and bank credit support they offer.

Times have changed. The march of globalization, the rise of the emerging markets and the pre-crisis free-flowing of liquidity led to a shift away from the LC towards open account (OA) trade. OA offers more efficiency through lower fees and paperwork, making it an attractive way for trusted counterparties to conduct business, provided they can get comfortable with the issues around higher counterparty risk and reduced access to finance.

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