Dutch ABN Amro Bank Decided to Withdraw from its 200-Year-Old Commodity Trade Finance Business
The industry is tumultuous as the Dutch ABN Amro Bank decided to withdraw from its 200-year-old commodity trade finance business. Commodity trade finance is a structure in which money is loaned to traders in the commodity market such as energy, agricultural products, and raw materials, and interest is collected. It is evaluated that ABN Amro, who has been operating in this field for a long time, has a great symbolic meaning when it closes the business due to sluggish profits.
According to major media on the 28th, ABN Amro recently declared the end of the related business, saying, “We have not achieved the necessary profits at an acceptable level of risk for years.” The bank recorded a net loss of 5 billion euros in the commodity trade sector in the second quarter. Compared to the net profit of 693 million euros in the same period last year, the new atmosphere for a year has been reversed. This is the result of losses in various commodity trade financial businesses following a blow after the Singapore commodity trading company Hin Leon filed for bankruptcy in April.
An industry that is familiar with the company’s commodity trade finance business has responded that it is “shocking” at the decision to withdraw its business. ABN Amro is rooted in a Dutch bank created in 1824 by then King William I to finance the East Indian colonies. This is because there has never been a precedent to stop even during crises such as the Great Depression. Credit rating agency S&P explained, “ABN Amro, along with ING Group, Labobank, BNP Paribas, Societe Generale, and Credia Glycol, has been one of the largest commodity trade finance companies in the world.” ABN Amro’s decision to withdraw from related projects is expected to result in approximately 800 employees losing their jobs over the next three to four years.
However, what attracts attention more than anything else is that global banks have begun to close the commodity trade finance business one after another. According to Bloomberg News, France BNP Paribas Bank along with ABN Amro decided to suspend business last month, and Australia New Zealand (ANZ) Bank also decided not to enter into new contracts while maintaining current contracts. In addition, France’s Societe Generale has strengthened risk management and stopped financial business related to Asian goods trade in its Singapore office. ING Group strengthened monitoring of related projects. This means that the big players are increasingly getting out of the market when it comes to commodity trade finance.
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