SINGAPORE: Some of the world’s biggest banks in commodity trade finance are creating a digital trade finance registry in Singapore to reduce risk of trade fraud and boost transparency after losing billions of dollars due to a spate of defaults.
Banks have pared their commodities business this year following collapses, including that of Singapore oil trader Hin Leong Trading, which shocked lenders after instances of financial wrongdoing were laid bare by the coronavirus crisis.
According to a joint statement issued on Tuesday, DBS Group and Standard Chartered are leading a group of 12 banks in Singapore to create and conduct a central database to access trade transactions financed across banks.
“A digital trade registry strengthens trade financing banks’ ability to avoid duplicate financing, and facilitates more sustained credit flow in trade financing,” said Ho Hern Shin, an assistant managing director at the Monetary Authority of Singapore.
The move comes after investigations into commodity trading firms revealed that multiple layers of financing from different lenders were obtained for the same inventory.
Eugene Tarzimanov, a senior credit officer at Moody’s Investors Service, said the latest move was “credit positive” for banks as it will reduce the risk of fraud seen in recent years.
“Moreover, the registry will make it easier for smaller commodity traders to access bank credit in Singapore, as their lenders will be more confident that the collateral is really there,” he told Reuters.
Reuters first reported in July that commodity trade financiers are teaming up in the city-state to strengthen lending practices and improve transparency.
