- Tightening ship finance under Basel IV is hitting smaller vessel owners hardest, increasing operational risks that ultimately affect trade finance through delays, demurrage disputes, and LC discrepancies.
- Alternative funding sources such as Chinese leasing, Japanese banks, and shipping bonds mainly support large operators, leaving smaller, under-capitalised owners underserved.
- Regulated tokenised equity structures could help diversify vessel funding, improving owners’ financial resilience and reducing counterparty risk across commodity trade flows.
Ship finance, the capital allocated to purchasing or building vessels, is integral to maritime trade. However, it is treated as entirely separate from trade finance. The top 40 banks lending to shipping held portfolios worth $289.65 billion at the end of 2024, up 2% from 2023. That year-on-year reading looks stable and, in a narrow sense, it is.
The Petrofin Global Index, recognised as the benchmark for the size and lending trends of the top ship financiers, was set at 100 in 2008. It now sits at 63 – marginally above the previous year. Over the same time span, Clarksons Research announced that the global fleet value is around $2 trillion, roughly twice its 2008 level.
The distance between what the fleet is worth and what banks are willing to lend against it has not closed. Basel IV, which came into effect in the European Union (EU) on 1 January 2025 and is phasing in across the UK until 2030, tightens that further through higher capital charges on shipping loans. European ship finance margins are expected to widen by 20 to 40 basis points.
I spent over 20 years at sea, much of it in command, before moving into maritime finance. The reason this contraction matters beyond shipping is that the owners it squeezes hardest are not the top 20 operators. They are the sub-scale owners, whose vessels carry most of the world’s ordinary commodity cargo.
Their financial fragility lands on the trade finance desk through charter party performance, demurrage claims, and discrepancies on letters of credit (LCs).
Where the capital has gone
The flow of replacement capital is familiar. Chinese leasing houses have absorbed a large share of tier-one demand, mostly for very large crude carriers (VLCCs), liquified natural gas (LNG) carriers, and container newbuildings placed by the dominant operators.
Japanese banks now hold 22% of the top 40 bank portfolio, underpinned by a weak yen and rapid growth in sale-and-leaseback transactions. Greek banks grew 18% year-on-year to $18 billion in 2024, filling space vacated by German Landesbanken and Nordic lenders.
Public debt markets have also picked up some of the slack, with DNB Carnegie participating in various shipping bond deals, including Navios Partners ($300 million). International Seaways ($250 million), and more. However, these channels finance the top of the market. They do not reach the middle.
Relevance to the trade finance desk
The global merchant fleet comprised around 112,500 vessels of at least 100 gross tonnes in early 2025, as reported by the United Nations (UN) Trade and Development (UNCTAD).
Thousands of those vessels are operated by owners running between one and 10 ships, often family-owned, second- or third-generation, on routes that do not make league tables, but move the cargoes that ordinary (LCs) finance.
From a parcel of soyabean out of Santos to diesel out of Fujairah and steel coils running across the Black Sea, it’s not the top 20 operators that do most of the moving. It’s the sub-scale owner.
When that owner is under-capitalised, the consequences show up outside the shipping sector. Charter party performance tightens. Voyage economics turn fragile when insurance premiums rise, as they have on war-risk cover over the past two years. Vessel condition deteriorates in ways that eventually produce off-hire periods and port state control detentions, and those produce demurrage disputes and LC discrepancies downstream.
I have sat on both sides of that conversation. First as master of a vessel detained by port state control, and later as an adviser trying to explain to a bank why the owner could not afford the repair the surveyor had ordered.
He was not lazy or crooked. He had made his loan payment that quarter, and he could not make his repair invoice. And that is a common story. The underwritten flow and the underwriting of the ship that carries it are not separable problems.
Why the middle is still underserved
Several answers have attempted to address this gap.
Export credit agencies (ECAs) remain tied to domestic shipyard orders and rarely reach the secondhand market, where most fleet trade happens.
Private credit and specialty debt funds have entered shipping aggressively over the past five years, but their ticket sizes and internal rate of return (IRR) thresholds exclude the owner running two handysize bulkers. Leasing fills the top of the market and is capacity-constrained in the middle.
Effective, but without scaling the gap
Debt contraction and equity scarcity are the same problem viewed from two different angles. Reduced bank lending means lower advance ratios for the lenders still in the market, which means the equity ticket at closing goes up.
A $20 million modern bulker at 60% loan-to-value (LTV) asks for $8 million of equity. At the 50% LTV, a Basel IV-constrained lender might now write, the same vessel asks for $10 million. The owner who cannot renew a fleet is usually short on both sides of the stack.
Traditional equity sources, such as family partnerships and Greek or Norwegian equity syndicates, are geographically narrow and relationship-bound. An owner in Chennai, Dubai, or Lagos, however capable, does not have the same access as one in Piraeus or Oslo.
Regulated tokenised equity exposure: One mechanism
Regulated frameworks for tokenised economic exposure to vessel equity have begun to develop in this space, and it deserves careful framing.
The technology is secondary. What matters is that jurisdictions – including the UAE through the Virtual Assets Regulatory Authority, Singapore through the Monetary Authority of Singapore (MAS), and the EU through its distributed ledger technology (DLT) pilot regime – have begun to supervise fractional equity structures on ships in ways that did not exist five years ago.
Secondary market liquidity is thin, price discovery is nascent, and the route from institutional to retail capital remains unproven at scale. What it offers is an additional route into the equity side of a vessel’s capital stack that does not depend on a single banking relationship or a single fundraising cycle.
The counterparty-risk payoff for a trade finance desk sits at that specific point. A vessel that closed with a deeper, more diversified capital base is a vessel whose owner has more cushion for the repair invoice, the war-risk hike, and the protection and indemnity (P&I) call.
That cushion compresses the long tail of demurrage disputes and LC discrepancies that originate from ships which were underfunded at purchase.
The horizon
The reason this belongs on the trade finance radar has little to do with tokenisation as a theme.
If your book carries exposure to commodity flows, the financial resilience of the vessels carrying those flows is a counterparty question. The phased return to the Suez route that started in early 2026 has begun to release around 6% of global container fleet capacity back into an already well-supplied market.
Long-term freight rates on the main Asia to Europe trade routes have softened. The owners most exposed to that compression are the under-capitalised ones, and those are disproportionately the owners whose vessels move ordinary commercial cargo.
—
A more diversified capital stack in the middle of the shipping market reduces that performance risk.
The mechanisms are early, the gap is real, and the cargoes moving through it are the cargoes you are already financing.
