The single greatest change we will experience in trade finance will be a tightening of available capacity and a resultant increase in pricing.
With the eurozone crisis, we are seeing the withdrawal of European banks from the trade finance arena. The ability to access U.S. dollars, which represent more than 70 percent of trade terms, is constrained, resulting in a reduced exposure to major segments of the market, from short-term commodity transactions to long-term aircraft finance.
In addition, many European banks that were historically active in the secondary market for trade finance transactions no longer are engaging in funded risk participations. This is causing a constriction in available capacity for primary lenders as they may be challenged to hold more transactions on their balance sheets.
These same banks are being forced to deleverage their balance sheets as they absorb write downs of their European sovereign debt.