Banks plan Singapore commodity trade finance database

A group of European and Asian banks is planning to set up a blockchain-based trade finance database in Singapore, in an attempt to prevent the kind of inventory fraud that was exposed by the collapse of several oil trading companies earlier this year.

The government-backed Trade Finance Registry (TFR), which is still at the proof-of-concept stage, will allow participants to access records of commodity trade transactions financed by banks in Singapore. The project is led by Singapore's DBS and the UK's Standard Chartered and includes 12 other banks, including Germany's Deutsche Bank, Dutch bank ABN Amro and France's Natixis.

The planned database, which the banks said could be rolled out globally, comes after Singapore trading firms Hin Leong, Zenrock Commodities and Hontop were revealed in court filings to have used a single letter of credit to finance multiple cargoes, or secured financing for cargoes that did not exist. Banks are facing losses of up to $4bn as a result, prompting plans to overhaul financing standards for the commodity sector.

Today's announcement made no mention of the trading company collapses, but said the planned TFR "mitigates against duplicate financing from different bank lenders for the same trade inventory, leading to greater trust and confidence among banks and traders alike".

The industry group worked with a Singapore-based blockchain firm, dltledgers, to develop the new platform, according to government business agency Enterprise Singapore.

DBS, Standard Chartered and local trade group The Association Banks of Singapore plan to introduce the TFR to enhance trade financing practices in Singapore before expanding it to cover "major trade corridors" at a later stage. The timeline for its implementation is unclear.

The other banks that are participating in the project are Australia's ANZ, Malaysia's CIMB and Maybank, India's ICICI, the UK's Lloyds, the Netherlands' Rabobank, Japan's SMBC and Singapore's OCBC and UOB.

A separate code of conduct for commodity financing standards should be finalised by the end of this year, Monetary Authority of Singapore chairman Tharman Shanmugaratnam said yesterday.

By Kevin Foster