International Trade Finance from the Origins to the Present: Market Structures, Regulation and Governance

Abstract

This chapter presents a history of international trade finance-the oldest domain of international finance-from its emergence in the Middle Ages up to today. We describe how the structure and governance of the global trade finance market changed over time and how trade credit instruments evolved. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centres (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global centre for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays.

Handbook of the History of Money and Currency

“…In that period, Sterling-denominated bankers' acceptances (bills of exchange endorsed by merchant banks on behalf of foreign borrowers) were not only the key instrument to finance world trade and short-term capital movements -including US international trade (Eichengreen 2011, pp. 14-19) -but also money market assets globally demanded by banks as short-term investment to manage their liquidity and by official institutions (central banks and Treasuries) as a substitute for gold reserves (Flandreau and Jobst 2005;Bignon et al 2012;Flandreau and Ugolini 2013;Accominotti and Ugolini 2019).…”

International Money Markets: Eurocurrencies

“…In that period, Sterling-denominated bankers' acceptances (bills of exchange endorsed by merchant banks on behalf of foreign borrowers) were not only the key instrument to finance world trade and short-term capital movements -including US international trade (Eichengreen 2011, pp. 14-19) -but also money market assets globally demanded by banks as short-term investment to manage their liquidity and by official institutions (central banks and Treasuries) as a substitute for gold reserves (Flandreau and Jobst 2005;Bignon et al 2012;Flandreau and Ugolini 2013;Accominotti and Ugolini 2019).…”