The Association of Banks in Singapore (ABS) on Monday (30 November) launched the ABS Code of Best Practices for Commodity Financing together with the support of the Monetary Authority of Singapore (MAS), Enterprise Singapore (ESG) and the Accounting and Corporate Regulatory Authority (ACRA).

The Code is the industry’s first set of commodity financing best practices, said ABS. It lays out key principles governing prudent commodity trade financing practices, providing a benchmark for banks’ lending standards in the sector to help enhance the resilience, relevance and competitiveness of Singapore as a global commodity trading hub.

The Code was developed by an industry working group of 28 banks, representing the majority of commodity financing banks in Singapore, in consultation with trading firms. Two key themes underpin the Code:

1. at a macro level, banks’ understanding of traders’ corporate governance, risk management practices, business and transactions through due diligence and policy requirements; and
2. at a transactional level, banks obtaining sufficient transparency and control over financed transactions, goods and receivables.

The Code is designed to provide broad guidance to banks, which are expected to ensure that appropriate policies and procedures, as well as controls, are in place to observe the principles in the Code in a risk proportionate manner, explained ABS.

“This is an important step to strengthen Singapore’s stature as a global commodity trading hub,” said Samuel Tsien, Chairman of ABS and Group CEO of OCBC.

“The Code of Best Practices ensures a more robust and disciplined financing approach to support the growth of Singapore’s thriving commodity trading sector, which comprises a broad spectrum of participants, ranging from boutique firms to leading international commodity groups.”

“The Code of Best Practices will encourage greater transparency and trust between trading firms and their lenders, and promote sustainable credit flows to support Singapore’s growth as a global commodities trading hub. We look forward to strong participation by the industry in implementing the Code,” added Ho Hern Shin, MAS’ Assistant Managing Director, Banking and Insurance. 

“The Code of Best Practices was developed with feedback from a diverse range of commodity trading companies. It is the industry’s commitment to raise trust and confidence in Singapore as a premier trade and financial hub,” said Satvinder Singh, Enterprise Singapore’s Assistant CEO.

“As the centre of global trade in a growing region, the Code sets out a common set of risk management considerations that will guide creditors and provide them comfort when financing global trading companies.”

 “The Code is a step in the right direction to boost corporate transparency and enhance the trust between the banks and commodity trading companies. This will help to promote accountability and uphold the integrity of the commodity trading sector,” noted Andy Sim, ACRA’s Assistant Chief Executive, Legal Services and Compliance.

A full copy of the ABS Code of Best Practices for Commodity Financing is available for download here.

Photo credit: Association of Banks in Singapore
Published: 2 December, 2020