BIS国际清算银行-Trade-credit-trade-finance-and-the-Covid-19-Crisis_9页_689kb

BIS Bulletin Summary: Trade Credit, Trade Finance, and the Covid-19 Crisis

Core Content

This BIS Bulletin examines the impact of the Covid-19 pandemic on trade credit and trade finance, highlighting how supply chain vulnerabilities have been exacerbated by the crisis. The report focuses on non-financial corporations (NFCs), their exposure to trade receivables, and the role of financial intermediaries in mitigating these risks.

Main Points

1. Trade Credit and Trade Finance Overview

• Trade credit and trade finance are critical for sustaining supply chains, especially in international trade.
• Trade credit refers to firms providing credit to their customers (e.g., through accounts receivable).
• Trade finance includes factoring, credit insurance, and securitisation of receivables, and is particularly common for importers and exporters.
• The US dollar is the dominant currency in trade finance, making dollar liquidity a key concern for global value chains (GVCs).

2. Trends in Trade Credit and Finance

• Trade credit (accounts receivable) constitutes a significant portion of working capital for firms, with a stable volume of around 20% of GDP over the past 25 years.
• Trade finance has seen a steady increase over the past two decades, aligning with the growth of GVCs.
• Global value chains have become longer and more complex, with cross-border transactions increasing significantly.
• Factoring and securitisation (e.g., trade receivables ABS) are used to reduce exposures and increase liquidity.

3. Exposure Distribution

• NFCs retain over 70% of their trade receivables exposure.
• Banks bear 13% and insurers bear 14% of the ultimate exposure.
• Securitisation is minimal, with less than 1% of trade receivables being securitised.
• Cross-border receivables are more offloaded than domestic ones (80% vs. 15%), due to higher risks and information frictions.

4. Vulnerabilities Exposed by the Pandemic

• The pandemic has directly hit real economic activity, unlike the Great Financial Crisis (GFC), which affected the banking sector more.
• Inter-firm lending (trade credit) is less effective during the pandemic due to synchronised shocks and reduced liquidity.
• Supply chain disruptions have had knock-on effects, particularly in the auto industry, due to interconnectedness.
• Credit risk mitigation tools such as trade receivables ABS and reverse factoring are vulnerable to liquidity stress and rollover risks.

5. Dollar Appreciation and Trade Finance

• Dollar appreciation negatively affects trade finance and GVCs, due to tightening dollar credit conditions.
• Central bank swap lines and other liquidity measures can help cushion the impact of dollar fluctuations on global trade.

6. Policy Implications

• Central banks may need to provide direct support to smaller firms in supply chains, such as grants and loan guarantees.
• Government-backed bank loans could be used to purchase trade receivables and inject liquidity into supply chains.
• Infrastructure support for financial contracting (e.g., digital platforms) can help small suppliers access reverse factoring.
• Credit insurers have been affected, and authorities in Europe have taken steps to enhance loss absorption capacity.

Key Information

• Trade credit is a major source of working capital for non-financial corporations.
• Trade finance has grown due to the expansion of GVCs and increased cross-border activity.
• Central bank swap lines and dollar liquidity measures are crucial in supporting global trade during the pandemic.
• Supply chain vulnerabilities are more pronounced due to interconnectedness, longer chains, and increased reliance on financial intermediaries.
• Credit risk mitigation tools like reverse factoring and ABS are highly sensitive to liquidity stress and market conditions.

Conclusion

The Covid-19 crisis has exposed significant vulnerabilities in trade credit and finance, particularly in global supply chains. While financial intermediaries play a key role in mitigating risk, NFCs remain heavily exposed to trade receivables. Policy responses are needed to support liquidity, reduce risk, and ensure the stability of international trade and GVCs. The international dimension, especially the prevalence of the US dollar, makes global coordination essential in addressing the economic fallout of the pandemic.