White Paper The Role of Law and Regulation in International Trade Finance: the Case of Correspondent Banking

The document examines the critical role of law and regulation in international trade finance, specifically focusing on the 'de-risking' trend where globally active banks withdraw from correspondent banking relationships (CBRs) in developing markets. This trend, driven by stricter anti-money laundering (AML), counter-terrorist financing (CTF), and Basel III prudential regulations, has exacerbated a global trade finance gap estimated at $1.6 trillion. The paper argues that while bank-intermediated finance remains dominant, the current regulatory environment creates bottlenecks for local and regional banks. It recommends a shift toward a more inclusive regulatory dialogue, the adoption of digitalization and non-bank financing solutions, the creation of regional regulatory frameworks, and the strengthening of national due diligence capacities to improve financial inclusion for SMEs and developing nations.

• There is a significant global gap in international trade finance, estimated at up to $1.6 trillion, with the most acute shortages found in low-income countries (LICs) and least-developed countries (LDCs).
• The decline of correspondent banking relationships (CBRs) has been most severe in Africa, the Caribbean, Central Asia, and Europe, limiting the ability of local banks to provide cross-border services and access US dollar funding.
• The withdrawal of globally active banks from developing markets is driven by increased compliance costs and a risk-averse approach resulting from tighter AML/CTF controls, Basel III prudential regulations, and tax transparency rules.
• The document proposes a four-pronged strategy to address the trade finance gap: leveraging technology and non-bank financing, fostering inclusive international regulatory dialogue, establishing regional regulatory frameworks, and strengthening national regulatory capacities.
• Digitalization, including distributed ledger technology and paperless transactions, is identified as a way to reduce transaction and compliance costs and provide alternatives to traditional bank-intermediated finance, particularly for SMEs.

APA

World Economic Forum (2017). White Paper The Role of Law and Regulation in International Trade Finance: the Case of Correspondent Banking. http://www3.weforum.org/docs/WEF_White_Paper_The_Role_of_Law_and_Regulation.pdf

Chicago

World Economic Forum. White Paper The Role of Law and Regulation in International Trade Finance: the Case of Correspondent Banking. 2017. http://www3.weforum.org/docs/WEF_White_Paper_The_Role_of_Law_and_Regulation.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=White Paper The Role of Law and Regulation in International Trade Finance: the Case of Correspondent Banking |date=July 2017 |url=http://www3.weforum.org/docs/WEF_White_Paper_The_Role_of_Law_and_Regulation.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2017white, author = {{World Economic Forum}}, title = {{White Paper The Role of Law and Regulation in International Trade Finance: the Case of Correspondent Banking}}, institution = {World Economic Forum}, year = {2017}, month = jul, url = {http://www3.weforum.org/docs/WEF_White_Paper_The_Role_of_Law_and_Regulation.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }