LOCAL lender DBS and Standard Chartered have jointly led a workgroup of 12 other banks to create and conduct a proof-of-concept (POC) for a digital Trade Finance Registry (TFR).
This is to enhance lending practices and improve transparency in commodity trade, DBS and StanChart said in a joint statement on Tuesday.
The TFR POC aims to serve as a secure central database for the banking industry to access records of trade transactions financed across banks in Singapore, both banks said.
“This mitigates against duplicate financing from different bank lenders for the same trade inventory, leading to greater trust and confidence among banks and traders alike,” DBS and StanChart added.
The POC is supported by Enterprise Singapore and endorsed by The Association Banks in Singapore (ABS).
Said Sriram Muthukrishnan, global head of trade product management at DBS: “The Trade Finance Registry marks an important step towards fostering greater transparency through collaboration and strengthening lending practices in Singapore’s banking sector while ensuring a secure operating environment for the industry as we progress towards an increasingly digital trade future.”
Sam Mathew, global head of documentary trade at StanChart, noted that driving sustainable trade finance growth and managing risks are core to the bank’s strategy. He added that the POC was also delivered in “record time” from concept to testing.
Developed on a blockchain network supported by technology provider dltledgers, DBS and StanChart created the POC within three months, with the support of 12 other banks. The participating banks were ABN Amro, ANZ, CIMB, Deutsche Bank, ICICI, Lloyds, Maybank, Natixis, OCBC, Rabobank, SMBC, and UOB.
Said Satvinder Singh, Enterprise Singapore’s assistant chief executive officer: “By working with dltledgers, a local company specializing in blockchain technology, the industry workgroup was able to accelerate the development of a neutral and secure platform to ease the flow of information between banks and prevent duplicate financing.”
According to DBS and StanChart, banks are now able to conduct validations only within a single customer entity, or across their individual banking network, with no view of what other banks have financed or undertaken payment obligation against.
“This information asymmetry is a key gap that can only be addressed with a TFR that facilitates collaboration across industry players and government agencies,” added DBS and StanChart.
With the completion of the POC, DBS and StanChart will work with ABS to implement the registry as an industry utility to enhance trade financing practices within Singapore, before expanding it globally at a later stage, the banks said.
As at 10.05 am on Tuesday, DBS shares were trading at S$20.66, up S$0.08 or 0.4 per cent.