Singapore Banks Unite to Boost Commodity Financing Standards
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The ABS Code of Best Practices for Commodity Financing, launched with the support of the Monetary Authority of Singapore (MAS), Enterprise Singapore (ESG) and Accounting and Corporate Regulatory Authority (ACRA), is the industry’s first set of commodity financing best practices.
The Association of Banks in Singapore (ABS) has launched a set of best practices to ensure a more robust and disciplined financing approach to support the growth of Singapore’s commodity trading sector, it announced on Monday.
Developed with feedback from a diverse range of commodity trading companies and an industry working group of 28 banks, the Code 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 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, ABS said
Samuel Tsien, chairman of ABS and Group CEO of OCBC, said the Code is «an important step to strengthen Singapore’s stature as a global commodity trading hub.»
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, Andy Sim, ACRA’s assistant chief executive, legal services and compliance, said in the announcement.
Singapore’s oil trading sector has come under the spotlight since the commodity’s plunge earlier this year as a result of the Covid-19 pandemic, with several trading firms having trouble repaying their debts. Numerous banks including HSBC, DBS, OCBC, Societe Generale and ABN AMRO, were owed a total of $3.8 billion by oil trader Hin Leong, while Zenrock owes at least six banks a total of $166.1 million and has outstanding balances of $449 million
Questions & Answers
Q.Which organisations supported the development and launch of the ABS Code of Best Practices?
Which organisations supported the development and launch of the ABS Code of Best Practices?
The Monetary Authority of Singapore, Enterprise Singapore, and the Accounting and Corporate Regulatory Authority supported the launch of the ABS Code.
Q.What is the primary purpose of the new Code of Best Practices for Commodity Financing?
What is the primary purpose of the new Code of Best Practices for Commodity Financing?
The Code aims to establish a more robust and disciplined financing approach to support Singapore's commodity trading sector and enhance its resilience and competitiveness.
Q.What recent issues in Singapore's commodity trading sector prompted the need for these new standards?
What recent issues in Singapore's commodity trading sector prompted the need for these new standards?
The oil trading sector faced difficulties, with several firms struggling to repay debts following the commodity's plunge due to the Covid-19 pandemic.