Question

Explain how banks can facilitate trade between importers and exporters that do not completely trust each other.

Answer 1

Banks play role of an advisor between importer and exporter. There may be possibility that importer of one country would not have trust on exporter of other country because both of are strangers. Both dont have trust on each other hence in such case there is requirement of international trusted body and their bank can play a vital role.

As banks operate in international market and they are institutions with huge credibility they can act on behalf of importer and exporter of their own country. Although two banks may be different but they can be trusted as they operate across the borders hence, bank can play as advisor or a representative of their respective importer and exporter in an international transaction.