Trade credit can expose firms to FX risk – BIS paper
Currency borrowers partially insulate their partners from shocks, but still pass them along supply chains
Firms that rely on trade credit may be exposed to foreign exchange risk even if they do not conduct cross-border transactions, a working paper by the Bank for International Settlements finds.
In a trade credit relationship, one firm grants credit to another by delaying the deadline for a payment for goods or services. The paper’s authors – Bryan Hardy, Felipe Saffie and Ina Simonovska – say that one party to such a transaction might be a borrower in FX markets, which means trade credit could
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