The trade finance market in Switzerland and in Lugano

What trade finance means for a commodity trader

The term trade finance covers every form of credit, payment security and risk transfer that a bank or insurer provides in connection with the movement of goods. For a manufacturer it often means no more than an occasional documentary credit for an export. For a commodity trader it is the core of the business model. A trader buys a cargo whose value frequently exceeds its equity, holds it for weeks or months and sells it before or during the voyage. The gap between the payment to the seller and the receipt from the buyer must be financed. The purchase and sale must also be secured against the insolvency or bad faith of the counterparties, against political events and against fluctuations in price. The Federal Council's report of 26 February 2020 on commodity trading and money laundering estimated that Swiss-based commodity trading was financed to the extent of 80 to 90 per cent by bank credit.¹ The same report distinguished two models of financing. In the transactional model a bank finances a specific shipment for a short period, typically through a documentary credit, and takes the goods as security. In the non-transactional model it grants a revolving credit line for a longer term and relies on periodic reporting instead of controlling each transaction.²

The distinction matters for Lugano because it corresponds roughly to the size of the trader. The large houses in Geneva and Zug finance most of their working capital through syndicated revolving credit facilities and, increasingly, through bonds, securitizations of receivables and prepayment structures. A report by the nongovernmental organization Public Eye calculated that the five largest Swiss-based traders raised revolving credit facilities of about USD 328 billion between 2013 and 2019.³ Small and medium-sized traders, which dominate the Lugano cluster, have no access to such facilities. They depend on transactional lines, on borrowing base facilities that are secured by inventory and receivables, and on the willingness of a few banks to accept their credit risk. The ecosystem of Lugano is therefore an ecosystem of transactional trade finance in which the bank looks at the cargo and the documents as much as at the balance sheet of its client.

The size of the Swiss market

There is no official statistic on the volume of commodity trade finance provided from Switzerland, and the estimates differ widely. In 2014 the Swiss Bankers Association was reported to have calculated that Swiss banks had financed about USD 1.5 trillion of commodity trade in 2011, which would have corresponded to about a quarter of world commodity trade finance.⁴ A sponsored article on Ticino in the trade finance journal GTR repeated in 2016 the figure of CHF 1.5 trillion of commodity trade finance managed from Switzerland.⁵ The Federal Council's report of 2020, relying on a study by Oliver Wyman, put the financing provided to the Swiss trading sector at about CHF 62 billion in 2016.⁶ Public Eye observed that the Swiss Bankers Association could not explain the methodology of its earlier figure.⁷ The difference between the two numbers has a plausible explanation. The larger figure appears to measure the turnover of trade financed through Swiss desks over a year, in which a revolving line is used many times, while the smaller figure measures the outstanding amount of credit at a given time. For a practitioner, the lesson is to treat all headline figures on Swiss trade finance with caution and to ask in each case whether they measure flows or stocks.

What can be said with confidence is that the Swiss market is concentrated in Geneva. The Federal Statistical Office counted 954 persons employed in the financing of commodity trade as a support activity in 2022, against only twelve in Ticino.⁸ The figure for Ticino understates the work done in Lugano because many relationship managers and credit officers who serve Ticino clients are counted at the location of their desk in Geneva or Zurich. It nevertheless shows the order of magnitude. Lugano is a place where traders are financed, but it is not a place where much trade finance is produced. The interdepartmental commodities platform of the Confederation, created in 2013 by the Federal Department of Foreign Affairs, the Federal Department of Finance and the Federal Department of Economic Affairs, describes the Swiss commodity sector as comprising trading companies, specialized financing banks, inspection firms, shipping companies and insurers. It counted about 950 trading companies with roughly 10,000 employees.⁹

Notes

1. Swiss Federal Council, Aufsicht über die Rohstoffhandelstätigkeiten unter dem Blickwinkel der Geldwäscherei, report of 26 February 2020 in response to Postulate 17.4204 Seydoux-Christe, 5, https://www.parlament.ch/centers/eparl/curia/2017/20174204/Bericht%20BR%20D.pdf. ↩
2. Federal Council, report of 26 February 2020 (above), 5. ↩
3. Public Eye, Trade Finance Demystified: The Intransparent World of Commodity Trade Finance (Lausanne/Zurich, September 2020), 16, Figure 4 (revolving credit facilities 2013–2019: Glencore USD 122.1 billion, Trafigura USD 74.2 billion, Vitol USD 70.7 billion, Mercuria USD 34.9 billion, Gunvor USD 25.9 billion), https://www.publiceye.ch/fileadmin/doc/Rohstoffe/20200928_PublicEye_TradeFinanceDemysti fied_E.pdf. The total in the text is the sum of these figures. ↩
4. Matthew Allen, "Greasing the wheels of energy and food supply", SWI swissinfo.ch, 3 July 2014, https://www.swissinfo.ch/eng/business/greasing-the-wheels-of-energy-and-food-supply/ 40486286 (USD 1.5 trillion, CHF 1.35 trillion, in 2011; about 25 per cent of global commodity trade finance). ↩
5. GTR, "Sponsored: Success story, focus on Switzerland", Global Trade Review, vol. 14, issue 2 (2016), https://www.gtreview.com/magazine/volume-14issue-2/sponsored-success-story-focus-on-switzerland. The article was sponsored and its figures are those of its contributors. ↩
6. Federal Council, report of 26 February 2020 (above), 5. ↩
7. Public Eye, Trade Finance Demystified (above), 4 (Oliver Wyman, 2016: USD 62 billion; Swiss Bankers Association, 2011: CHF 1,500 billion, without explanation of methodology). ↩
8. See Chapter F.I, which cites Federal Statistical Office (BFS), Statistik der Rohstoffhändler (2023), cluster figures for 2022. ↩
9. State Secretariat for International Finance (SIF), "Commodity trading and finance", https://www.sif.admin.ch/en/commodity-trading-finance (platform established in 2013; SIF chaired it until March 2025, after which SECO took over for one year). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.