Singapore wants to improve its standards for the commodities trading industry to increase banking confidence in the industry, says Minister for Trade and Industry Chan Chun Sing at a keynote address at the Financial Times (FT) Commodities Asia Summit 2020 on Nov 2.
“There have been isolated cases of mismanagement and defaults globally that have reduced confidence amongst banks to provide financing to commodity trading companies,” he says, without naming firms.
Several scandals have engulfed Singapore’s oil trading community including the collapse of Singapore oil trader Hin Leong Trading amid the dramatic drop in oil prices in April 2020.
To do so, Chan says the industry will be partnered with two key initiatives.
The first will see the Association of Banks in Singapore (ABS) developing a code of best practices to strengthen commodity financing standards in Singapore.
The initiative, which is done with the support of the Monetary Authority of Singapore (MAS), Enterprise Singapore (ESG) and the Accounting and Corporate Regulatory Authority (ACRA), will be finalised in 4Q2020.
“These steps being taken by the industry will result in a safer trading environment, a more rigorous credit assessment of trading companies, and, ensure access to banking facilities that are commensurate with creditworthiness,” says Chan.
“This will not only strengthen the fundamentals of the trading sector, but also Singapore’s resilience, relevance and competitiveness as a global commodities trading hub,” he adds.
In the second initiative, DBS and Standard Chartered have jointly led a workgroup of over 20 banks with the support of MAS and ESG to create a digital Trade Finance Registry.
The registry, Chan says, has been endorsed by ABS and will provide banks with greater visibility for detecting duplicate financing and validating trade.
See also: Singapore's loan growth expected to remain in the red till 2021: RHB
