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Explainer: How commodity trade finance works

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Global banks were left shell-shocked this year by a series of commodity trader collapses after instances of fraud were laid bare by the coronavirus crisis.

FILE PHOTO: ABN AMRO logo is seen at the headquarters in Amsterdam, Netherlands May 14, 2019. REUTERS/Piroschka van de Wouw

The $21 billion liquidity hole left by the Dutch bank will be hard to fill, presenting a more uncertain future for smaller commodity traders without a strong presence in a niche market. * Major oil and commodity trading firms make use of another type of loan called a revolving credit facility . Under an RCF, a consortium of banks allow a company to borrow up to an agreed upon maximum threshold. The company can repeatedly borrow and repay this credit, as long as it not exceed the threshold.

 

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