Issues Arising In Commodity Inventory Finance

Introduction

The knock-on effects of the global economic crisis have influenced the financing of the commodities trading industry. Changes in the regulatory landscape in Europe and the United States have likewise influenced the manner in which finance is being provided to the sector. One manifestation has been an increase in lending conducted through ownership and intermediation structures that interpose the financier as owner of the commodities. Such structures have the advantage that they may, depending on the accounting practices of the bank, be treated as purchases/sales for regulatory capital purposes, meaning the financing that they provide requires less capital than traditional secured loans.