The International Chamber of Commerce (ICC) has published its 2019 and 2020 interim findings from its Trade Register on the performance of short-term trade and supply chain finance assets, alongside partners BCG and Global Credit Data.

Early analysis of the data for these assets suggests a slight rise in defaults across most trade finance products in 2020, in part due to the effects of the COVID-19 pandemic on global trade – and related shifts in demand and supply.

Trade finance products include Import Letters of Credit (LCs), Export LCs, Import and Export Loans, Performance Guarantees and Supply Chain Finance.

Early analysis suggests however, that despite slightly higher default rates, the overall averages are not significantly out of line with the average default rates reported by the Trade Register over the 14-year period for which data has been collected.

Other factors behind the default rates of trade finance products in 2020, which will be released in the full ICC Trade Register report, could include the interventions of governments through emergency state-backed lending, which ‘cushioned’ the impact on SMEs.

It appears as though Import LCs observed the biggest rise in default rates, skewed towards Import LCs. Supply Chain Finance and Import / Export Loans also observed small increases, attributed to a small number of corporate and entity defaults across the regions.

Tomasch Kubiak of ICC’s global policy team said:


“The initial findings show that trade assets performed relatively robustly through the COVID-19 crisis — with default rates not significantly outside the boundaries of what we’ve seen in past years despite the immense demand shock caused by the pandemic.  Our initial read is that this is partially — if not largely —  attributable to the cushioning effect of major stimulus packages deployed in many countries over the past year. The good news is these interventions have clearly worked well in keeping small businesses afloat. What’s now vital is that governments don’t withdraw this support prematurely— risking a sudden tightening of credit conditions that could have a pro-cyclical effect on SME failures.” 

At product level, a number of initial trends have been identified:

  • Import L/Cs: an observed increase in 2020 default rates appears skewed towards SMEs. Obligor-weighted default rates overall rose by 40-50% versus the prior year – compared to more modest rises for transaction- and exposure-weighted default rates.
  • Export L/Cs: an increase in default rates is observed against prior years across all methodologies, likely influenced by one-off idiosyncratic defaults. Nevertheless, overall default rates for Export L/Cs continue to remain very low relative to other trade finance products.
  • Loans for Import / Export: it appears that increases in default rates were driven primarily by two or three large corporate exposures with a number of transactions across a cross-section of banks reporting data to the ICC Trade Register.
  • Performance Guarantees: default rates appear relatively flat, potentially influenced in part by contracting parties extending tenors due to the unprecedented nature of the crisis.
  • Supply Chain Finance: it appears that default rates have risen, driven primarily by an increase in smaller entity defaults across several regions, and potentially also the result of improved data coverage of Supply Chain Finance (SCF) exposures in the ICC Trade Register over time

Meanwhile, 2019 presented a more mixed picture, with the moderate increases across the portfolio vs. prior years likely driven by SME defaults – potentially indicating an emerging downturn in the economic cycle prior to the pandemic.

ICC has noted that these headline findings are based on an initial analysis of a partial data set – and, as such, should be treated with a degree of caution.

ICC, BCG, and GCD teams are in the process of finalising and validating data submissions from member banks, with a view to publishing the final ICC Trade Register report in early September 2021.

Last year’s ICC Trade Register results: