Deutsche Bank Tests the Trade Winds

  • Why it matters

    Why it matters

    Tighter regulations have prompted banks to sever many international banking contacts, causing a severe shortage of global trade finance for small and medium-sized businesses.

  • Facts


    • Small and medium-sized firms face a $1.6 trillion shortage of trade financing, according to the Asia Development Bank.
    • Banks have been pulling out of trade finance due to higher costs caused by tighter regulations to curb money laundering and terrorist financing.
    • Deutsche Bank plans to increase its market share in trade finance, especially with emerging markets.
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Cargo ship leaving the port or bay. Despite US embargo, Cuba…
Compliance with costly regulations has steered trade finance into treacherous waters. Source: Getty Images

You’d be forgiven for thinking Deutsche Bank, in the throes of a major restructuring, would lose its taste for adventure. Yet Germany’s biggest bank is expanding its financing of trade between industrial nations and emerging economies – an increasingly challenging sector. What’s more, Deutsche Bank is beefing up this business just as droves of other banks are getting out.

A German engineering firm selling machines to build roads in Brazil, sugar exporters and importers and dozens of firms making parts for Apple’s iPhones depend on banks for loans, letters of credit and other documents to support their trade. European banks once used their heritage to dominate trade financing, but many have retrenched, hurt by the regional debt crisis and struggling to conform to tougher global rules. British bank RBS, for example, has pulled out of 25 of the 38 countries it operated in, closing its trade finance department in the process.

This broad-based retreat has opened the door to rival banks eager to grab a slice of the market, according to studies by the World Bank and the Financial Stability Board of G20 countries.

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