Standard Chartered Quietly Exits LC Processing in Three Markets

Standard Chartered has begun winding down its documentary credit processing operations in three markets — Kenya, Bangladesh, and Sri Lanka — according to sources familiar with the bank's operations. The move, which has not been publicly announced, affects roughly $800 million in annual LC volume.

What we know

The exits are operational, not geographic. Standard Chartered is not leaving these countries — it is pulling out of the low-margin, high-touch business of processing letters of credit for small and mid-size exporters. The bank will continue to operate in corporate and investment banking, wealth management, and FX in all three markets.

The rationale is straightforward: documentary credit processing in emerging markets is labor-intensive, low-margin work. A single LC can require five to eight document reviews, multiple rounds of discrepancy negotiation, and compliance checks that have grown exponentially since 2020. When the average LC value is under $50,000, the economics do not work at Western bank cost structures.

Why it matters

Standard Chartered has long been one of the few global banks willing to serve smaller trade flows in frontier and emerging markets. Its exit creates a vacuum that local banks may struggle to fill — not because of capital constraints, but because of correspondent banking relationships.

An LC from a Kenyan bank only works if the advising or confirming bank in Europe or Asia trusts that issuing bank's credit. Standard Chartered served as a bridge. Without it, many SMEs will face either higher costs (as smaller intermediaries charge more for confirmation) or longer payment cycles (as they shift to documentary collections or open account terms with weaker protections).

The bigger picture

This is not just a Standard Chartered story. It is the latest data point in a decade-long trend: global banks retreating from trade finance in markets where they are needed most. HSBC did the same across West Africa in 2019. BNP Paribas scaled back in Central Asia in 2021. Each exit widens the trade finance gap — estimated at $2.5 trillion by the Asian Development Bank — and pushes more SME trade into the informal, unbanked, undocumented economy.

The solutions being proposed — fintech platforms, development finance institution guarantees, blockchain-based trust networks — are real but small. They are not yet operating at the scale needed to replace the correspondent banking infrastructure that took a century to build.

We will keep tracking which banks step in to fill the gap. If any do.