Question
Current trends in trade finance exhibit a clear shift to open account-based trade and away from the traditional (and more secure) documentary credit. By some
Current trends in trade finance exhibit a clear shift to open account-based trade and away from the traditional (and more secure) documentary credit. By some estimates, documentary letters of credit are now utilized in about 4% of trade transactions, even where higher-risk markets are involved.
1. Discuss the assertion by a senior European trade banker that "we are just one major crisis away from a mass return to traditional trade finance instruments, particularly the letter of credit."
2. What characteristics of the letter of credit might be the basis for such a statement?
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