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Credit gets tied up tight
18 November 2008
With the financial crisis reaching what many consider to be a peak, international trade finance provision has slowed to a trickle as many banks claim their hands and balance sheets are tied. Jonathan Bell examines what initiatives have already come or may come from agencies, central banks and governments to provide the much needed help
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trade finance credit crisis liquidity squeeze dry up 2008
"At the moment there seems to be two sorts of banks: those that haven't got money to lend and those that have money but are sitting on it doing nothing!" These were the words of the head of trade and structured trade finance at the European arm of a major US headquartered trading company when this writer spoke with him only three weeks ago.
Despite the market conditions this is a particularly damning statement when the pedigree of this particular company is taken into consideration. Very few banks will admit to 'sitting on funds', and similarly very few will admit to having none available. But without doubt, these are not just liquidity constraints these are wholesale blockages of funds for trade finance globally.
The Baltic Dry Index (BDI) which is a composite measure of current dry bulk shipping spot prices (i.e., the cost of moving goods like coal, iron ore,...
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