The Financial Stability Board (FSB) has been conducting an annual monitoring exercise to assess global trends and risks in the shadow banking system since 2011 and recently published the Global Shadow Banking and Monitoring report, using 2016 data.
The report estimates global financial assets at $US340 trillion with shadow banking at $US45.2 trillion.
It is important to find the balance between existing trade solutions and what technology can deliver in the absence of one big central solution – the latter being an unlikely outcome given the various geographies and numerous parties involved in international trade.
Shifting the dial
Many emerging markets’ banks and international trade participants remain years away from making effective use of technology and existing legacy systems don’t communicate efficiently across borders.
Digitisation and innovation has helped shift the dial on this front. Proof of concepts are becoming a reality and moving into production mode.
Initiatives such as the Trade Information Network, Singapore Networked Trade Platform and eTradeConnect in Hong Kong are making financial tools accessible for more businesses by moving away from the current paper-based processes.
The progress towards trade digitisation is a steady one. Mass adoption will require additional effort and the parties involved, including financial institutions and regulators, will have a key role to play.
Digitisation of trade also presents an opportunity to streamline processes, reduce transaction time and cost, mitigate fraud risk and, in some cases, increase transparency of the transaction for the parties involved.
But it’s not just about saving money. Trade digitisation can aid in keeping pace with the changing regulatory landscape by providing the flexibility to adapt and change efficiently.
Currently it takes a substantial amount of manual input to ensure end-to-end compliance and incorporation of auto compliance checks can ease the pressures in this area.
It is encouraging to see bodies such as the Monetary Authority of Singapore and Hong Kong Monetary Authority engaging in dialogue regarding interoperability.
Regulators, financial institutions and international bodies need to improve the dialogue and make concerted efforts towards embracing digitisation that facilitates trade finance and prevents financial crime across all segments of the business.
Mark Evans is Managing Director, Transaction Banking at ANZ
This is an edited version of comments made at the Regional Consultative Group (Asia) in Sydney in November, hosted by the Financial Stability Board.