Via Trade Finance Global (TFG)
From a TFG and BAFT roundtable, this whitepaper examines the evolving role of banks in global trade as they navigate unprecedented disruption. Based on a discussion held during the BAFT Global Councils Forum 2025, it features insights from leaders in major global banks and institutions covering tariffs, shifting ESG priorities, regulatory complexity, financial crime, and rapid digitization in 2025.
Via Global Trade Review by Jenny Messenger
Baft (Bankers Association for Finance and Trade) and other industry bodies have urged EU member states to be consistent in implementing the Capital Requirements Directive (CRD) 6 to avoid disrupting cross-border financial services.
CRD6 is the latest iteration of the directive that requires banks and investment companies to put aside capital as insulation against financial shocks, and will ensure EU firms are aligned with outstanding aspects of Basel 3.
Previously, banks headquartered in non-EU countries could provide services like loans and guarantees in the EU without a physical presence by relying on cross-border waivers.
But changes under the regulation will bring in the branch requirement, meaning that third-country banks and large investment firms must operate through locally licensed branches, unless an exemption applies.
The European Commission published CRD6 in June 2024, and the directive must be transposed into the national law of each EU member state by 10 January 2026. The branch requirement will enter into force from 11 January 2027.
Yet some countries’ proposed legislation differs from the CRD6 text in “several significant areas relating to the branch requirement” and the activities that are exempt from it, the industry groups say.
Alongside Baft, the position paper is supported by UK Finance, the Bank Policy Institute, the Swiss Finance Council, the Loan Market Association, the Association of Foreign Banks and the Japanese Bankers Association.
“A national transposition of the branch requirement that omits or unduly narrows these exemptions and carve-outs is not aligned with the intended scope” and would “introduce uncertainty and unnecessary risk to the stability of the local banking market”, the paper says.
The exemption covers core banking activities that involve inter-bank business, intragroup business or reverse-solicited business – where a client contacts a firm first.
It also applies to core banking services, including ancillary services like taking deposits or granting loans, related to the Markets in Financial Instruments Directive (Mifid).
“We would advocate that all member states ensure that they faithfully transpose the branch requirement in this regard, ensuring that core banking services connected with Mifid services are exempt,” the paper says.
The branch requirement also does not apply to existing contracts entered into before 11 July 2026.
Custody services, which enable corporates and institutional investors to hold international assets and settle cross-border transactions, could be particularly at risk if member states’ legislation is imprecise.
“Lending by custodians is an intrinsic part of transaction settlement and, therefore, integral to the smooth functioning of capital markets,” the paper notes.
Other consequences of a fragmented system could be interruptions in banking services for EU clients, higher costs for service recipients and fragmentation of liquidity pools.
There is also the risk that European recipients of third-country core banking services could move out of jurisdictions with reduced flexibility, the paper adds.
In response, the industry groups have recommended that ambiguities over the exemptions be clarified.
For example, they argue the follow-on right in reverse solicitation – which covers products or services that are closely related to those initially requested by the client – should be explicitly referenced.
The associations’ position paper includes sample text to make sure member states harmonise the regulation of cross-border banking services and avoid “gold-plating” the legislation.
Uncertainty over CRD6 is the latest challenge arising in the EU’s implementation of the Basel framework.
Banks last year were spared what they said was a potentially significant blow to trade finance when the EU decided not to implement parts of the framework that would have more than doubled capital treatment for off-balance sheet trade finance instruments.
WASHINGTON, D.C. (September 23, 2025) – BAFT, the leading global financial services association for international transaction banking, has released a groundbreaking white paper titled “The BAFT G20 Global Roadmap: Accelerating Economic Stability for a Resilient Future.” Developed by the BAFT G20 Principles in Payments Working Group, the paper demystifies the structure, purpose, and measurable goals of the G20, while outlining its critical influence on global financial stability, sustainable growth, and the transformation of cross-border payments.
As economic interconnectedness and digital innovation reshape the global financial system, the white paper provides clarity on the G20’s evolving priorities—from fostering macroeconomic coordination and climate resilience to driving real-world progress in payments cost reduction, speed, transparency, and accessibility.
“This white paper is the first in a series that underscores BAFT’s commitment to advancing financial system modernization in line with global public policy goals,” said Deepa Sinha, SVP of Payments & Financial Crimes of BAFT. “By unpacking the G20 principles and cross-border payments roadmap, we aim to empower financial institutions, regulators, and payment providers to collaborate more effectively in building a resilient, inclusive, and interoperable global payments ecosystem.”
Key highlights of the white paper include:
The paper also aligns BAFT’s advocacy and education efforts with the G20’s global objectives, highlighting the importance of harmonized standards, regulatory consistency, and public-private partnership in delivering meaningful outcomes for economies and end users alike.
BAFT invites stakeholders across the payments and trade finance communities to engage with this timely white paper, and to participate in the ongoing dialogue as the series continues with deeper dives into each of the G20 cross-border goals.
To access the full white paper, visit www.baft.org
About BAFT
BAFT is the leading global industry association for international transaction banking. Bringing together financial institutions, service providers, and the regulatory community, BAFT provides thought leadership, advocacy, education, and a platform for collaboration to promote sound financial practices that foster innovation, efficiency, and commercial growth. The association engages in a broad range of issues affecting transaction banking, including trade finance, payments, and compliance, helping members navigate a rapidly evolving global landscape. For more information about BAFT, visit baft.org, or follow BAFT on X (Formally Twitter), LinkedIn, and YouTube.
BAFT joined with numerous trade associations, including the Bank Policy Institute, UK Finance, the Loan Market Association, the Swiss Finance Council, and others, to urge European Union Member States to implement the branch requirements under CRD VI (Capital Requirements Directive) in a uniform and harmonized manner. This effort is part of BAFT’s overall advocacy on Basel III capital standards as they are implemented at the national level. CRD VI was, in part, the EU’s adoption of the final pieces of the Basel III Framework.
Via Trade Finance Global by Glee Baniago
Navigating the trade finance landscape, with constant dodgeballs in the form of geopolitical tensions, regulatory requirements, and threatening technology, requires considerable agility. But this year’s BAFT Global Annual Meeting, in Washington, DC, revealed the considerable opportunity in times of turbulence.
These takeaways are drawn from the following sessions:
The traditional rivalry between established banks and fintech disruptors is giving way to partnerships which leverage each other’s strengths; banks can typically provide deep client relationships and multi-currency funding capabilities, whilst fintechs handle complex supplier onboarding and electronic time drafts.
This shift reflects mounting client expectations for real-time analytics, automated payment execution, and comprehensive supply chain visibility, a demand so large it is impossible to solve alone. The approach is proving commercially successful: joint responses to client RFIs are becoming commonplace, with customers explicitly requesting collaborative solutions that neither party could deliver independently.
Samarium is a rare-earth metal used in military-grade magnets, and its supply is entirely controlled by China. This should serve as an emblem of the wider inefficiencies in the geopolitical ecosystem, where skyrocketing tariffs (from the US and in response) are forcing companies to rethink global dependencies.
The rhetoric around this is largely politicised. Returning to Samarium, the magnets which it produces are critical components in missiles, smart bombs, and fighter jets, making it clear that whoever controls such resources has a large stake in military capabilities and strategy.
But rethinking has created new opportunities for trade finance providers. The renewable energy sector and the data centre supply chain particularly illustrate this shift. The rapid expansion of the data centre sector has led to streamlined procurement and modular construction, but has also exposed an over-reliance on a small pool of suppliers, contractors, and standardised components. As such, massive data centre projects exceeding two gigawatts require localised supply chains to ensure resilience. Tesla’s ‘Gigafactory Nevada’ battery facilities and in-house lithium refining operations represent the future that many corporates are moving towards.
In GTR’s first comprehensive gender diversity survey, 47% of respondents reported women hold just 0-5% of C-suite positions in trade finance organisations; 45% of employees don’t know whether their organisation has gender pay parity policies, suggesting fundamental communication failures around diversity initiatives.
There’s a business case for inclusion which extends beyond the ethical one. McKinsey data shows that companies prioritising diversity achieve a 39% greater likelihood of outperforming peers on profitability. Yet the sector appears to have embraced technological partnerships more readily than workplace inclusion. As the industry transforms through artificial intelligence (AI) and embedded finance, diverse perspectives will become increasingly valuable.
The integration of AI across trade finance operations is moving beyond experimental phases into practical applications. Fintech providers are leading this adoption, using AI to optimise supplier onboarding programmes and enhance real-time analytics capabilities that clients increasingly demand.
Deep-tier supplier finance – extending credit down the supply chain to suppliers’ suppliers – exemplifies AI’s potential impact. While still in its infancy, this approach can unlock significant value by financing entities that might otherwise pay 6-7% interest rates. As AI capabilities mature and processes become increasingly automated, industry leaders predict this will enable financing of entire value chains more efficiently, making supply networks more resilient while reducing overall borrowing costs.
While banks have traditionally focused on data analysis and pattern recognition, AI agents can understand policies, execute rules, and take actions based on business knowledge, and could present a space to watch in the future. This could render the ‘human in the loop’ approach redundant when dealing with systems that can process hundreds of sources: ‘AI checking AI’ could be implemented, with humans performing random spot checks to build trust over time.
This approach mirrors how we learned to trust GPS navigation systems like Waze. Banks need to develop systematic verification processes where different AI models cross-reference results, and humans validate randomly selected outputs to maintain quality control while leveraging AI’s scale advantages.
Whether agentic AI or otherwise, the competitive consequences of avoiding AI adoption could be fatal, all the while maintaining data security and regulatory compliance.
The introduction of IFRS and FASB disclosure requirements for supplier finance programmes initially sparked industry concern about potential market contraction. Rating agencies like S&P began scrutinising programmes more closely, with blanket rules such as treating anything over 90 days as debt regardless of industry context.
However, the opposite effect has materialised. Increased transparency has actually attracted new corporates to consider supplier finance: the global supply chain finance market is projected to grow at a compound annual growth rate of 8.8% from 2022 (the year the new standards took effect) to 2031.
While some programmes with excessive payment terms or disproportionate balance sheet dependency have scaled back, the clearer regulatory framework has provided confidence for new entrants. Industry participants now argue for more nuanced rating agency approaches that consider sector-specific norms, recognising that 30-day terms suit perishable goods like dairy, whilst 360-day terms may be appropriate for capital equipment like wind turbines.
Washington, D.C. – BAFT, the leading global industry association for international transaction banking, has published a new white paper titled “ISO 20022 Migrations: Lessons Learned in Sanctions & Compliance.” This latest publication is part of BAFT’s ongoing efforts to support the financial industry in navigating the complex landscape of global payment modernization and regulatory compliance.
The white paper captures practical insights from early adopters of ISO 20022, specifically focusing on the challenges and strategies related to sanctions screening and financial crime compliance. As financial institutions transition to richer data formats and structured messaging, the paper highlights both the operational and regulatory implications, and provides actionable recommendations for compliance professionals and technology teams.
“ISO 20022 has introduced new dimensions to data quality, transparency, and risk management,” said Deepa Sinha, senior vice president of payments & financial crimes, BAFT. “This white paper addresses a critical area—how the migration impacts sanctions and compliance operations—and offers lessons that can benefit banks still undergoing or preparing for the transition.”
Key themes explored in the white paper include data truncation and translation issues, evolving regulatory expectations, technology enablement, and the need for cross-functional collaboration between compliance, operations, and IT. The white paper is available to BAFT members and the broader industry community on the BAFT website.
Click here to read BAFT’s ISO 20022 Migrations: Best Practices & Guidance. The white paper is also available within BAFT’s Library of Documents under the Guidance and Industry Practices section.
About BAFT
BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.
BAFT Media Contact:
Blair Bernstein
Senior Director, Public Relations
[email protected]
+1 (202) 663-5468