SINGAPORE: DBS Group and Standard Chartered are leading a group of 12 other banks in Singapore to create a digital trade finance registry in a bid to mitigate the risk of trade fraud and boost transparency.
The move by commodity trade financiers in Singapore to create a central database to record trade transactions financed across banks comes after the industry lost billions of dollars due to a spate of defaults and cases of suspected trade fraud this year.
The Trade Finance Registry will also be able to mitigate against duplicate financing from different bank lenders for the same trade inventory, leading to greater trust and confidence among banks and traders, according to a statement on Tuesday (Oct 6).
Developed on a blockchain network, DBS and Standard Chartered conducted the proof of concept over three months, with the support of 12 other banks. They comprise: ABN AMRO, ANZ, CIMB, Deutsche Bank, ICICI, Lloyds, Maybank, Natixis, OCBC, Rabobank, SMBC and UOB.
According to the statement, banks are now able to conduct validations only within a single customer entity or across their individual banking network, "with no view of what other banks have financed or undertaken payment obligation against".
A digital trade registry can strengthen trade financing banks' ability to avoid duplicate financing, and facilitate more sustained credit flow in trade financing, said Ms Ho Hern Shin, assistant managing director of banking and insurance at the Monetary Authority of Singapore.
"Building greater resilience in the industry ecosystem is even more important today as businesses and economies continue to deal with the impact of prolonged trade disruptions," said Mr Sriram Muthukrishnan, global head of trade product management at DBS Bank.
"The Trade Finance Registry marks an important step towards fostering greater transparency through collaboration and strengthening lending practices in Singapore’s banking sector while ensuring a secure operating environment for the industry," he added.
Following the completion of the proof of concept, DBS and Standard Chartered will work with the Association Banks of Singapore (ABS) to implement the registry as an industry utility to enhance trade financing practices within Singapore, before expanding it globally to cover major trade corridors at a later stage.
The registry will be managed by ABS, supported by a standing committee represented by ABS council member banks.
Three working groups of banks will also be set up to jointly lead the governance, technical development and business scope of the project.