Director-General Roberto Azevêdo, on 17 January 2014, welcomed a recent decision by the Basel Committee on Banking Supervision as “of particular significance for the availability of trade finance in the developing world”.

He said: “I welcome the decision taken by the Basel Committee on Banking Supervision on 12 January, which modifies regulations on bank leverage in a way that will support trade. This decision is of particular significance for the availability of trade finance in the developing world, where letters of credit are a key instrument of payment. This is good news for developing countries, for the expansion of their trade and for the continued growth of South-South trade flows.”

The Basel Committee announced on 12 January 2014, the modification of a key rule for banks – which goes in the direction of facilitating trade transactions in particular in favour of developing countries.

The revised Text (see “Amendments to Basel III’s leverage ratio issued by the Basel Committee”), indicates that the Basel Committee will now follow this new approach for trade: “For short-term self-liquidating trade letters of credit arising from the movement of goods (eg documentary credits collateralised by the underlying shipment), a 20% CCF will be applied to both issuing and confirming banks.”

This revised approach means that the leverage ratio will be five times less expensive for trade instruments than originally envisaged.