The ICC Banking Commission conducted its final meeting of 2024 virtually via Teams on 20-21 November. Four separate portions of the event open to Banking Commission members and ICC National Committee representatives took place.
It has been more than 18 months since the Association of Banks in Singapore (ABS) published the “Code of Best Practices” in November 2020 for guidance to its member banks involved in commodity financing with a view toward enhancing transparency of the transactions and preventing frauds. The Code of Best Practices is not a mandatory requirement for banks to comply and is not a case of where one-size-fits-all.
According to one local specialist in Singapore who provides consultancy services to SME commodity traders, the impact of the Code of Best Practices varies from bank to bank. Among the more established commodity banks, the impact is minimal as these best practices are already embedded in their business and credit policies. For banks with smaller portfolios of commodity clients, their changes may not be encompassing all recommended best practices under the Code as each bank decides on its own what are relevant, practical, and effective. Therefore, one can conclude that the Code of Best Practices has not standardized and harmonized practices among banks involved in commodity financing.
Additionally, the Code of Best Practices has not instilled a high degree of confidence in banks to lend to SME commodity traders seeking much-needed financing who have been facing a credit crunch for the last two years. However, some Japanese banks are seen coming back to the market to fill the vacuum for financing large traders with the exit of Societe Generale and ABN AMRO and other financial institutions such as BNP downsizing its portfolio, while Rabobank is now focusing on commodity financing in the agri sector.
