March 23, 2011 / 1:20 PM / 8 years ago

Trade finance group sees small hit from Japan crisis

* Trade group: Japan quake to have small short-term impact

* Sees no material impact in long term

* Sees Basel rules hampering trade finance

ZURICH, March 23 (Reuters) - The devastating earthquake in Japan is unlikely to take a big chunk out of world trade, the head of a trade finance group said at media conference on Wednesday.

Damage from the Japanese earthquake and tsunami could top $300 billion, dwarfing losses from the 1995 Kobe quake and Hurricane Katrina in 2005. There are also concerns that destruction of factories and infrastructure could disrupt supply chains, particularly for technology parts. [ID:nL3E7EF0FL] [ID:nL3E7EM3MC]

But the chairman of the Paris-based International Chamber of Commerce’s (ICC) Banking Commission said he did not think the March 11 quake would do irreparable damage to trade provided the crisis at a stricken nuclear plant does not worsen.

“We do believe on a short term (basis) there will be a marginal impact,” said Kay Chye Tan, chairman of the commission, who is also head of global trade finance at Standard Chartered.

“In the longer term we do not think it will be material.”

The impact on trade between China and Japan is expected to be limited, and disruptions to production have so far not had a major impact on the amount of freight leaving Japan by air, Lufthansa Cargo (LHAG.DE) said. [ID:nLDE72M0RC] [ID:nTOE72L00S]


Practitioners of trade finance, which underpins 60-80 percent of the $12-13 trillion in global merchandise trade, say the Basel III rules designed to prevent another financial crisis could make trade finance more expensive or less available.

Bankers have been calling on the Basel banking regulators to revise the rules so that trade finance, which they argue has a low rate of default, is not unfairly penalised. [ID:nTOE6A907K]

The ICC Banking Commission, which sets rules for trade finance, said its survey of 210 banks revealed 34 percent of respondents thought the new regulatory regime would make them reconsider their strategy, while 57 percent said they lacked sufficient information on the new regulations. The Basel rules requiring banks to hold more and higher quality capital will be phased in from 2013.

The ICC and other interested parties have been in talks with the Basel Committee in a bid to modify the standards.

The ICC fears that if changes are not made it will push trade finance — which would be considered an off-balance sheet transaction — towards harder-to-regulate hedge funds and private equity groups.

But so far there is no timeframe for a decision, and little indication as to what decision the Basel regulators might take.

“I wouldn’t want to second guess they’re going to do at the end of the day,” said ICC committee-member Dan Taylor. (Reporting by Catherine Bosley; Editing by Catherine Evans)

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