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Ute Kochlowski-Kadjaia, Euler Hermes Russia
All rights reserved. Copyright © 2008 Euler Hermes Kreditversicherungs-AG and PricewaterhouseCoopers AG WPG.
Moscow, April 21, 2010
Role and Function of Export Credit Agencies (ECAs) Response – Consequences for ECAs Policy for Russia
Federal Export Credit Guarantees By order and for account of the Federal Republic of Germany
as leading partner cooperating as partners to a consortium
Interministerial Committee for Export Guarantees (IMA) BMF Federal Ministry of Finance BMWi Federal Ministry of Economics and Technology (in charge) Consortium Euler Hermes PricewaterhouseCoopers AA Federal Foreign Office IMA BMZ Federal Ministry for Economic Cooperation and Development Experts .Representatives of export and banking page 4 .AKA Ausfuhrkredit-Gesellschaft .KfW IPEX-Bank .
Definition Export Credit Guarantees Insurance against the political / commercial risks arising abroad in export business (or export financing) by an exporter domiciled in Germany by the Federal Republic of Germany involved transacted provided It requires the an payment of a premium in accordance with the risk involved and uninsured portion to be borne by the policy holder page 5 .
Requirements for Export Credit Guarantees Business that qualifies for official support – Export transactions (supply. works/services and financing contracts) of a German exporter with goods of mainly German origin involving non-marketable risks abroad Criteria for the granting of cover are – that the transaction is eligible for support – that the risk is justifiable – that the terms of the contract are in accordance with common practice – that the provisions of the federal budget law are observed page 6 .
6 17.7 7.3 13.2 15.2 13.8 7.7 20.6 6.NEWLY COVERED BUSINESS in Euro billions 19.4 7. policies Specific policies page 7 .0 10.6 20.5 22.2 12.2 2005 2006 2007 2008 2009 Wholeturnover/ Rev.0 7.
087 2. India 8.878 649 2009 2008 page 8 .TOP MARKETS FOR NEW GUARANTEES in Euro millions 1. Dubai 9.479 1.363 1. United States 3.353 1. China 6.066 2.991 2. Israel 12 165 447 210 971 845 716 703 678 1.357 2. Brazil 7.552 1.042 1. South Korea 2. Turkey 5. Romania 10. Russia 4.
2%) Chemical industry: 22 (0.852 (12%) Paper. leather and textile industry: 943 (6%) Services: 611 (4%) 21% 51% 19% Mining: 503 (3%) Agriculture and food processing industry: 338 (2%) Environmental technology: 149 (1%) Oil production and gas gathering: 32 (0.BREAKDOWN OF SPECIFIC POLICIES BY TYPE OF SECTORS in Euro millions and in % 4% 6% 3% 2% 1% Infrastructure: 7. timber.659 (51%) Processing industry: 3.046 (20%) Energy: 1.156 EUR millions page 9 .1%) 12% thereof: aircraft: ships: thereof: metal industry: 16% 20% Total: 15.
Types of export guarantees – extract Cover facilities Single export cover/tied loan cover (pre and post shipment) credit cover buyer credit cover financing including countertrade business Framework Revolving Project financing Structured Cover Cover Whole in local currency against payment defaults for confirmed L/C turnover cover page 10 .
Types of export guarantees I Tied loan cover Export contract/delivery German exporter Foreign buyer Disbursement of buyer credit If necessary: buyer involvement in payment obligations Local contract Loan contract German bank Repayment Foreign bank page 11 .
consensus must be considered page 12 .Types of export guarantees II Framework credit cover Targets – – Financial credits for smaller transactions More flexible and quicker Criteria for cover – – – Credit volume up to EUR 10m per single transaction Currency framework and single contract must be the same International standards e.g.
in exceptional cases up to 24 months) Policy period is one year and will be automatically extended if notice of termination is not given Targets – – Cover of short term credits More flexible and quicker page 13 .Types of export guarantees III Revolving buyer credit cover Contract between a German and a foreign bank to finance transactions between one German exporter and one foreign importer Payment terms on short term basis (up to 12 months.
Exceeding the base rate is possible under certain circumstances. Local costs and foreign content can amount to 30% (base rate) of the contact value without any statements. … foreign content is acceptable in principle. page 14 .Foreign Content Inclusion of non-German sub deliveries In general: Export guarantees are granted to promote German export goods. but… … a product receiving a German certificate of origin is considered as German.
Foreign Content – Reinsurance I Background Main supply and subcontracting deliveries will be covered by one credit insurer The value of the subcontracting deliveries will be reinsured by the credit insurer for goods sourced from his country Resulting in – – – – One policyholder One credit insurer One cover One cover scheme = One stop shop page 15 .
A) page 16 .Foreign Content – Reinsurance II German ECA: 21 reinsurance agreements with other ECAs ASHR´A (Israel) Atradius (Netherlands) CESCE (Spain) COFACE (France) COSEC (Portugal) ECGD (Great Britain) EDC (Canada) EFIC (Australia) EGAP (Czech Republic) EKF (Denmark) EKN (Sweden) FINNVERA (Finland) GIEK (Norway) KUKE (Poland) NEXI (Japan) ODL (Luxemburg) OeKB (Austria) ONDD (Belgium) SACE (Italy) SERV (Switzerland) SID (Slovenia) US Ex-Im Bank (U.S.
Contents Role and Function of Export Credit Agencies (ECAs) Response – Consequences for ECAs Policy for Russia Crisis Cover Conclusion page 17 .
..Challenge for ECAs The major challenge for ECAs in a world characterised by a financial and increasingly economic crisis is to find a balance between… . in our case especially German exports cover after a thorough evaluation of the risks involved ►accept risks despite the global economic turbulences page 18 . a prudent and responsible administration of the German government‘s and taxpayer‘s money ►grant …and the objective of promoting the economy.
Crisis response – Consequences on ECAs I During the crisis ECAs were forced to act counter-cyclically and flexibly. Substantial increase in demand for ECA cover in combination with ECA related government action against the crisis are approached by new customers and are getting involved in new industry sectors and/or buyer countries such as EU and other OECD countries ECAs Cover is sought for risks that used to be perceived as save page 19 .
Crisis response – Consequences on ECAs II Governments response with new/amended insurance products and cover policies in order to facilitate export finance of ECAs in the field of marketable risks (short term cover for EU and OECD countries) due to restrictions of the private credit insurance market (Re-)Entry ECAs are extending their umbrella – rather than closing it page 20 .
Crisis response – New and amended products I German Government launched a package of new cover regulations embedded in the Economic Stimulus Plan II. Supplier Credit Guarantee – Increased percentage of cover up to 95 % to reduce refinancing costs Credit Confirmation Risk Cover – Newly established instrument to stabilize L/C business – Banks can insure themselves against the risks involved in the confirmation of a letter of credit that has been issued to finance an export transaction by a German company page 21 .
as it helps to ease the pressure on the exporter’s credit line Securitisation Guarantee in relation to the KfW Refinancing Program – Facilitating access to long-term funding for banks arranging Hermescovered transactions. – Banks sell their covered receivables (from existing and new loans) to KfW and make fresh funds available for the financing of new business covered under Federal Export Credit Guarantees page 22 .Crisis response – New and amended products II German Government launched a package of new cover regulations embedded in the Economic Stimulus Plan II. Contract Bonding – Increased single limit of cover from EUR 80 to EUR 300 million to ease exporter’s liquidity position.
ECA-covered financing has gained tremendous importance have proved to be a reliable partner and will continue giving support to maintain and where necessary restore trust in global financial systems and trade relationships.The crisis so far Despite a double-digit decrease in German exports in 2009 as well as cancellations and postponement of many projects cover volume is expected to rise standard and new products contributed to this result Both During the crisis. ECAs page 23 .
still case by case analysis No general rejection of any CIS country ► ► Detailed information regarding ownership structure In-depth insight into the respective bank‘s risk management page 24 .Policies regarding the analyses of banks I ► ► Apart from generally accepted banks.
Policy regarding analysis of banks II ► Financial Statements (preferentially according to IFRS) for 3rd Quarter 2008 Securities portfolio Detailed overview of liquidity situation Exposure to currency risks .Matching Maturities .Proportion of ‘Loans to customers’ in foreign currencies and assessment of customers’ ability to pay back such loans ► ► ► ► ► ► Detailed overview of ‘Loans to Individuals‘ Exposure to real estate sector Impairment provisions page 25 .
Contents Role and Function of Export Credit Agencies (ECAs) Response – Consequences for ECAs Policy for Russia Crisis Cover Conclusion page 26 .
Bank guarantee • Generally accepted banks: 15 banks such as VTB. Gazprombank or Alfa Bank • Other banks on a case-by-case basis (about 50 banks so far) • In general involvement of the Russian buyer in the payment obligations Premium category 4 page 27 . Vnesheconombank. Sberbank.Russia – cover policy Generally open for short-term transactions (examination of creditworthiness) / securities for credit business transactions: Criteria .State guarantee .Corporate risk • Additional securities not required in cases of excellent standing of the buyer .
420 2.249 2.991 2004 2005 2006 short term 2007 long term total 2008 2009 page 28 .015 1.Russia – cover volume for recent years (in million EUR) 3.878 1.792 1.
German ECA underwriting volume (long term) for Russia by type of security 23 17 36 35 47 37 61 68 32 63 37 25 29 16 2002 2003 2004 7 2005 2006 2007 2008 2009 (30.) 50 50 75 % 61 32 State Guarantees Bank Securities Corporate Risk page 29 .09.
Russia – recent experience ► Only very few covered banks have not been able to meet their obligations so far effort by the Russian government to support system relevant ► Strong banks ► Further consolidation of the banking sector is nevertheless to be expected in 2009 Russia will remain a major partner in the years to come page 30 .
Contents Role and Function of Export Credit Agencies (ECAs) Response – Consequences for ECAs Policy for Russia Crisis Cover Conclusion page 31 .
page 32 .Conclusion Due to the current challenges and difficulties ECA-covered financing has gained tremendous importance. Russia and CIS will remain major partners also in the years to come. ECAs will be a reliable partner and will give support to maintain and where necessary restore trust in global financial systems and trade relationships.
de page 33 .: E-Mail: Further information is provided under: Hotline: +49 (0) 40/88 34-90 00 www.Thank you for your attention! Vorname Name Unternehmen Tel.de email@example.com.
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