Proposed Capital Rules Could Threaten Shipping Industry Lending
Global shipping companies will have credit trouble if new bank capital rules go into place. The Basel Committee of banking supervisors from all over the world met last month to draft new rules for lenders in the world's leading financial sectors, Reuters reported. The rules don't apply directly to the shipping industry—which accounts for 90 percent of world trade—but some parts of the requirements could impact how banks decide how much capital to set aside when they lend to shipping companies.
Reuters reported that German banks, which account for 25 percent of the world's outstanding shipping debt (totaling $400 billion), are struggling to receive a return on their loans.
"Those banks which have clearly defined rudest strategies, top credit, very carefully structured transactions … are thrown into the same bracket as those with higher risk strategy and with problematic portfolios," Paul Taylor, global head of shipping finance with Societe Generale Corporate and Investment Banking, told Reuters. "That is the biggest problem. Everyone suffers, but those with defaulting portfolios will be the big losers."
What that means, Taylor said, is that these financing bodies could do less business because of the pricing.
The European Central Bank also launched a review of banks' lending to the shipping industry.
"This is going to heap even more pressure on banks with large exposures to shipping that have non-performing loans," one source told Reuters.
Also, the Royal Bank of Scotland said it would slow its global shipping finance business and stop trying to sell off loans.