Statistical Indicators of Trade Finance Risk in Commercial Banking

Trade finance is essential to global trade as it facilitates the movement of goods and services and provides short-term credit extensions, warranties, and liquidity to importers and exporters. Nonetheless, trade finance operations in commercial banks now face a variety of risks, such as credit, operational, and market risk. This research explores statistical indicators that can predict trade finance risk in commercial banks. The study uses a quantitative research method, with secondary financial data sourced from commercial bank data and international financial data sources.The study examines the statistical indicators, including ratios of non-performing loans, probability of default, loss given default, exposure at default, and trade volume dynamics, and their association with trade finance risk. The predictive power and significance of these indicators are tested using econometric models such as regression analysis.The results are likely to show that credit and market indicators are a better way to assess trade finance risk than relying on a single indicator. Specifically, metrics associated with the probability of default and the performance of loans are expected to be significant. This research adds to the literature by providing a statistical approach for assessing risk in trade finance. It also offers insights for policymakers and bank managers to improve risk management frameworks and promote financial stability in the banking system.