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Hit by commodity defaults, banks in Singapore develop digital trade registry

Stock Markets Oct 06, 2020 02:50AM ET
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2/2 © Reuters. FILE PHOTO: DBS signages are seen as office workers work in Singapore 2/2

By Anshuman Daga and Jessica Jaganathan

SINGAPORE (Reuters) - Some of the world's biggest banks in commodity trade finance are creating a digital trade finance registry in Singapore to reduce risk of trade fraud and boost transparency after losing billions of dollars due to a spate of defaults.

Banks have pared their commodities business this year following collapses, including that of Singapore oil trader Hin Leong Trading (Pte) Ltd, which shocked lenders after instances of financial wrongdoing were laid bare by the coronavirus crisis.

According to a joint statement issued on Tuesday, DBS Group (SI:DBSM) and Standard Chartered (L:STAN) are leading a group of 12 other banks in Singapore to create and conduct a central database to access trade transactions financed across banks.

"A digital trade registry strengthens trade financing banks' ability to avoid duplicate financing, and facilitates more sustained credit flow in trade financing," said Ho Hern Shin, an assistant managing director at the Monetary Authority of Singapore.

The move comes after investigations into commodity trading firms revealed that multiple layers of financing from different lenders were obtained for the same inventory.

Eugene Tarzimanov, a senior credit officer at Moody's (NYSE:MCO) Investors Service, said the latest move was "credit positive" for banks as it will reduce the risk of fraud seen in recent years.

"Moreover, the registry will make it easier for smaller commodity traders to access bank credit in Singapore, as their lenders will be more confident that the collateral is really there," he told Reuters.

Reuters first reported in July that commodity trade financiers are teaming up in the city-state to strengthen lending practices and improve transparency.

Developed on a blockchain network supported by technology provider dltledgers, DBS and StanChart said they developed the trial project in three months with banks including ABN AMRO (AS:ABNd), ANZ (AX:ANZ), Deutsche Bank (NDE:DBKGn), OCBC (SI:OCBC) and Rabobank.

After the pilot project is completed, it will be implemented as "an industry utility to enhance trade financing practices within Singapore, before expanding it globally to cover major trade corridors at a later stage," according to the statement.

The registry's proof of concept is supported by Enterprise Singapore (ESG), a government agency that promotes trade, and endorsed by the main representative body of banks.

Hit by commodity defaults, banks in Singapore develop digital trade registry
 

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Chris Sundo
Chris Sundo Oct 06, 2020 3:25AM ET
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Any safety mechanism is only as good as the recurring techniques to reconcile between the safety mechanism and the banks actual transactions. Good luck with government being in the oversight mode and the current PM having rigged himself a government where he feels he needs to intimidate his citizens with lawsuits after those citizens pointed out embezzlement in which the PM is likely involved and which the PM was likely trying to cover up by suing people. Best thing to do is vote out the PM and his party and hire big 5 international auditing firms to audit the government from left to right and from bottom to top, and keep bringing in for testifying those bloggers that were sued by PM.
Edward Chong
Edward Chong Oct 06, 2020 3:25AM ET
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haha u really know the history well.
 
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