In 2024, the Asia-Pacific region (APAC) continued to be a significant hub for trade finance, despite facing regulatory changes, geopolitical tensions, and shifts in business practices. Global trade volumes were lower than anticipated, influenced by geopolitical conflicts and regulatory uncertainties such as Basel IV’s impact on bank capital requirements. These challenges have cast a shadow over banking operations in the region.
However, APAC remains a key player in global trade finance due to its strong fundamentals, expanding domestic market, and role in diversified supply chains. Analysts anticipate growth in markets like India, Vietnam, Thailand, and Australia, supported by the China+1 strategy aimed at mitigating risks in global supply chains.
To gain insights into trade in the region and the importance of embracing uncertainty, Trade Finance Global (TFG) interviewed Hoang Anh Le Nguyen, APAC Geographic Lead for Trade Finance & Working Capital Solutions at Swiss Re Corporate Solutions.
Commercial uncertainty remains prevalent in the region, with fluctuating trade flows affected by elevated interest rates and delayed recovery expectations. Companies have been grappling with high costs, leading to decreased utilization of financing facilities and a shift towards self-financing solutions. The competitive market has become more challenging, with banks facing deteriorating credit conditions and extended payment terms for clients.
Geopolitical factors, such as protests in Bangladesh and uncertainties around US trade tariffs, have further tightened financing conditions, impacting risk appetite and pricing across key geographies. Regulatory changes, such as the removal of double default in Australia and express assignment prohibitions in India, have added complexity to sustaining growth in APAC.
Swiss Re Corporate Solutions has responded by leveraging its regional presence and client relationships to address client needs promptly. With the implementation of Basel IV standards, there is an increased focus on distributing risk to insurance partners, highlighting the insurance industry’s role as a reliable risk partner.
The reinsurance and commercial insurance sector is adapting to global challenges through agility, data-driven decision-making, and strategic partnerships. Swiss Re Corporate Solutions has established a global team to deliver trade finance solutions to financial clients, including coverage for letters of credit, trade loans, bank guarantees, and supply chain finance instruments. The firm is also underwriting larger portfolios through algorithmic methods, reflecting the evolving nature of the business.
Future opportunities in trade finance include supply chain finance, structured trade finance, special purpose and general purpose term loans, and non-bank financial institution (NBFI) financing. Growth potential is expected in markets like India, Vietnam, Thailand, Philippines, and Australia. Adapting to evolving needs, Swiss Re Corporate Solutions is extending existing programs, covering longer-tenor risks, and expanding capacity through facultative reinsurance solutions.
In conclusion, the story of trade finance in APAC is one of resilience and adaptability in the face of uncertainty. Organizations that can navigate unpredictability and find opportunities amid challenges will have a competitive edge in shaping the future trajectory of trade finance in the region.