In a quickfire session at the 50th Annual Trade and Forfaiting Conference held at ITFA Cyprus, TFG’s Deepesh Patel spoke with Sean Edwards, Chairman of the International Trade and Forfaiting Association (ITFA), about some of the key themes emerging throughout the conference.

1. Demystifying trade finance as an asset class 

One of the central topics was the effort to further establish trade finance as an attractive and accessible asset class, particularly for non-traditional investors. 

Edwards noted that while trade finance can offer an uncorrelated source of returns, educating investors on the nuances of products like supply chain finance and letters of credit remains a challenge.

To address this, ITFA has recently published a trio of guides—one on securitisation, one on upcoming documentation called “Rules of the Game,” and one on what investors are looking for.

These aim to provide clarity on the documentation, structures, and investor perspectives in the trade finance space. Edwards emphasised the importance of these educational initiatives to broaden participation and liquidity in the sector.

2. Sustainability: Navigating the regulatory landscape 

Sustainability has been a key priority for ITFA, with the association focused on assisting its member banks in navigating the evolving regulatory environment around ESG reporting. But the fundamental question is, what’s changed?

“In a way,” said Edwards in response, “nothing has changed and everything has changed. There is a lot more legislation, and regulation, and we’re trying to help our members get to grips with that.”

Edwards acknowledged the lack of homogeneity in sustainability metrics, which has created uncertainty for both banks and regulators. “There’s so much regulation around, that sometimes even the regulators don’t know what they want the banks to report on.”

To address this, ITFA has convened a working group of a dozen banks to develop common reporting standards, providing a collaborative platform for the industry to align on best practices. This initiative, led by ITFA’s Audit Council, seeks to bridge the gap between regulatory expectations and the practical implementation of sustainability measures.

3. Digitalisation: Building the “digital archipelago”

Discussing the progress in digitalisation, Edwards described the industry’s transition as a shift from “digital islands” to a more interconnected “digital archipelago”. While there has been steady progress in the adoption of digital trade instruments and platforms, the challenge remains in seamlessly integrating these disparate systems into a cohesive ecosystem.

Edwards noted that the legal framework supporting digital trade has improved, but conservative mindsets and the need to update legacy systems continue to slow the pace of transformation.

However, he remains optimistic, stating that the “road ahead” is clear, even if the industry is still “on a bicycle rather than a Ferrari”.

4. Advocacy for trade credit insurance 

ITFA has been actively advocating for the recognition of trade credit insurance in the regulatory landscape, particularly around the upcoming Basel IV framework. 

Edwards said, “If banks can get the capital relief as well as the credit relief, then that obviously makes the product a lot more useful.” He emphasised the importance of both types of relief being provided by trade credit insurance and being accounted for in the new regulations.

Additionally, ITFA has observed a growing interest in portfolio-level insurance solutions, which leverage technology to manage larger pools of receivables rather than relying solely on single-name risk coverage.

5. Originate-to-distribute: expanding the investor base 

ITFA has been key in focusing on the need to distribute trade finance assets beyond the traditional bank-to-bank model. Edwards highlighted the importance of engaging with non-bank investors, such as insurance companies, funds, and sovereign wealth funds, to diversify the source of liquidity in the market.

“Changes are making things more expensive,” he explained. “So it’s much more important to distribute risk. But obviously, if we’re distributing it to other banks who’ve got the same problems as us, we’re going to find limited appetite.”

This underscored the need to onboard new investor classes to the trade finance ecosystem.

6. Looking ahead: The 51st ITFA Conference in Singapore 

As the 50th ITFA conference comes to a close, Edwards announced that the 51st annual conference will be held in Singapore, highlighting the association’s commitment to maintaining a global footprint and providing a platform for the industry to convene and address the evolving landscape of trade finance.

It’s essential to document the varied themes which emerged from the 50th annual conference, as the industry’s dynamic nature means that, come the 51st annual conference, these six topics will be almost unrecognisable.