Singapore said it wants to restore the finance industry’s confidence in commodities trading after a series of scandals recently rocked the sector.

Several trading firms collapsed earlier this year amid a flurry of allegations of fraud and suspect deals after the slump in oil prices sparked by the coronavirus crisis.

Many have involved Singapore - the world’s biggest bunkering port and Southeast Asia’s petroleum refining hub - including Hin Leong, once one of Asia’s largest fuel traders.

“We want to uplift standards for the commodities trading industry to increase banking confidence in the industry,” said Singapore’s minister for trade and industry Chan Chun Sing.

Chan, who was speaking at Financial Times event in Singapore, said there had been “isolated cases of mismanagement and defaults globally” that have “reduced confidence amongst banks to provide financing to commodity trading companies”.

He said the Association of Banks in Singapore (ABS) was “partnering with the industry” to develop a new code of practice for commodity financing, which is expected to be finalized in the fourth quarter of 2020.

Commodities trading is a key component of Singapore’s wholesale trade sector, which contributed 17% of the city state's GDP in 2019.

Singapore’s minister for trade and industry Chan Chun Sing

“I am glad that trading companies, who have an interest in ensuring that higher standards are being practiced within the industry, have actively provided inputs to ABS,” said Chan.

“These steps being taken by the industry will result in a safer trading environment, a more rigorous credit assessment of trading companies, and ensure access to banking facilities that are commensurate with creditworthiness.”

Chan said this will not only strengthen the fundamentals of the trading sector, but also Singapore’s “resilience, relevance and competitiveness” as a global commodities trading hub.

Secondly, Chan said local bank DBS and Standard Chartered have jointly led a working group of more than 20 banks with the support of government agencies to create and conduct a proof-of-concept for a digital trade finance registry.

“The registry has been endorsed by ABS and will provide banks with greater visibility for detecting duplicate financing and validating trade,” he said.

Within Singapore’s ecosystem, Chan said industry players have also developed new “digital solutions” that will “aid in the governance” of the commodities trading industry.

“ClearDox and Contour are some promising blockchain platforms for commodity trade finance which have set up in Singapore and have live solutions,” he said.

“These digital solutions will help to improve efficiency of trading operations while reducing fraud risks through increased visibility of trade transactions.”

Commodities trading is a key component of Singapore’s wholesale trade sector, which contributed 17% of the city state’s gross domestic product in 2019.

There are now said to be more than 400 international commodities trading companies in Singapore across varied commodity domains such as energy, industrial metals and agriculture products.