“Some of the world’s biggest banks are trying to extend the principles of securitization to the plain-vanilla world of trade finance – a market worth an estimated $10 trillion a year – as concern mounts that regulatory changes could constrain a key lubricant of the global economy.
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JPMorgan [JPM 43.65 
-0.69 (-1.56%) 
] is among several banks that have begun testing investor appetite for the trade finance equivalent of collateralised debt obligations – the derivative products blamed for compounding the financial crisis – in an attempt to boost lending capacity.
Trade finance supports more than 80 percent of global trade. But it has been disrupted by the financial crisis, as some lenders got into trouble, and by the regulatory response to the crisis, as banks have been ordered to hold more capital against lending.
Banks have lobbied hard against the constraints imposed on trade finance by the Basel III global rule book, due to be phased in from 2013.
The new rules for overall bank borrowing – the leverage ratio – treat a typical three-month trade finance loan as a year-long exposure, effectively forcing banks to hold far more top-quality capital against the loan….”
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