At the 2026 BAFT International Trade and Payments Conference in Jersey City, USA, Trade Treasury Payments (TTP) spoke with Jonathan Lonsdale, Global Head of Trade and Working Capital Solutions for Private Debt Mobilisation at Santander and TTP Global Advisory Panel Member, and Ryan Hollar-Gregory, Head of Working Capital Distribution at MUFG, about how banks distribute trade assets and why the secondary market is becoming an increasingly important part of trade finance.

What is trade distribution?

Trade distribution is the process by which a bank sells or transfers part of a trade finance exposure to other financial institutions or investors, allowing risk and capital to be shared across the market.

Lonsdale explained that distribution often starts with simple balance sheet limits. A bank may want to support a large client transaction but cannot hold the full exposure on its own. “If you want to put a large ticket on the table for your clients, say a billion dollars, and you only have appetite for two hundred million, then distribution becomes essential,” he said.

Distribution is also used to free up capital, improve returns, and meet client requests to involve multiple relationship banks in a financing programme.

How trade assets are distributed

Hollar-Gregory outlined the main ways banks distribute assets. These are:

1. Master participation agreements: Often based on industry-standard frameworks such as the BAFT Master Risk Participation Agreement, allowing banks to sell participations in trade assets while retaining the original client relationship.
2. Assignments: Typically used for longer-dated assets or loans that pay interest periodically, where the ownership of the asset (or a portion of it) is legally transferred to another investor.
3. Fund structures: Some banks place trade assets into internal investment funds managed by their private wealth or asset management divisions, allowing investors to gain exposure to a portfolio of trade assets.

Some banks also use securitisation, though this is less common because of structural constraints. “The vast majority of investors are still banks,” Hollar-Gregory said, “but in the last five to six years we’ve seen non-bank investors becoming increasingly active.” Funds, asset managers, and speciality finance firms are becoming more visible participants, especially where they can take higher-yielding risk.

As more banks look to build distribution desks, Lonsdale called out the importance of getting the foundations, like clear legal and regulatory requirements, right. “Trade is already an operationally heavy asset class, and distribution adds another layer on top,” he said, suggesting that aspiring banks start with pilot transactions to test structures and build investor relationships before they scale.

Regional dynamics and a changing investor base

Part of the reason for testing the market is that there are still considerable regional variations in how trade assets are distributed. The Americas, for example, tends to see higher pricing and a stronger focus on open-account funded structures, while Europe has a more developed distribution ecosystem, with “more than a dozen” distributing banks, compared to the Americas where “you may have six, seven, eight banks that really distribute consistently,” Hollar-Gregory explained. Asia is more complex, shaped by differing legal and regulatory frameworks across jurisdictions. Hollar-Gregory said, “In Asia, understanding the legal and regulatory framework is probably more important than in any other region.”

These differences are becoming more pronounced as the investor base evolves. Trade finance assets are typically short-dated, often with maturities in the 90–180 day range, and have historically very low default rates, according to data from the International Chamber of Commerce. That profile has attracted increasing interest from non-bank investors. Over the past three years, the asset class has moved from a relatively niche allocation to a more mainstream part of private credit markets, with a growing number of institutional funds entering the space. As a result, distribution is no longer confined to bank-to-bank activity, but is developing into a broader, more global market.

Looking ahead, the outlook appears strong for the distribution market. “I think there will be more exchange, and it will become an increasingly liquid market as the year goes on,” Lonsdale said, adding that financing needs in areas such as defence could also contribute to increased activity. Hollar-Gregory added, “Having that distribution capability will be critical to winning large deals going forward.”

Trade distribution is no longer just a back-end balance sheet tool, but is becoming a core part of how banks structure and deliver trade finance.