ABS launches code of best practices for commodity financing
17 December 2020
On 30 November 2020, The Association of Banks in Singapore (“ABS”), together with the support of the Monetary Authority of Singapore (“MAS”), Enterprise Singapore (“ESG”) and the Accounting and Corporate Regulatory Authority (“ACRA”), launched the ABS Code of Best Practices for Commodity Financing (“Code”).
The Code, which lays out key principles governing prudent commodity trade financing practices, is the industry’s first set of commodity financing best practices. It provides 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.
Two key themes underpin the Code:
- At a macro level, banks’ understanding of traders’ corporate governance, risk management practices, business and transactions through due diligence and policy requirements; and
- At a transactional level, banks obtaining sufficient transparency and control over financed transactions, goods and receivables.
The Code serves as a set of guidelines to provide broad guidance to banks, and is not meant to be exhaustive or to replace any legislation, regulations or guidelines issued by the relevant authorities in Singapore. MAS may refer to the Code in its supervisory oversight of the banks’ business and risk management activities. Banks are expected to ensure that appropriate policies, procedures and controls are in place to observe the principles in the Code in a risk-proportionate manner.
The Code was developed by an industry working group of 28 banks, representing the majority of commodity financing banks in Singapore, in consultation with trading firms.
Reference materials
The following materials are available on the ABS website www.abs.org.sg: