exp credit guarantee
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All rights reserved. Copyright 2008
Euler Hermes Kreditversicherungs-AG and
PricewaterhouseCoopers AG WPG.
Opportunities and development
in the current global crisis
Ute Kochlowski-Kadjaia, Euler Hermes Russia
Moscow, April 21, 2010
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Contents
Role and Function of Export Credit Agencies(ECAs)
Crisis Response Consequences for ECAs
Cover Policy for Russia
Conclusion
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Mandatary business
Federal Export Credit GuaranteesBy order and for account of the Federal Republic of
Germany
as leading partner
cooperating as partners to a consortium
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Interministerial Committee for ExportGuarantees (IMA)
IMA
AA
Federal Foreign OfficeBMWi
Federal Ministry of
Economics and
Technology
(in charge)
BMF
Federal Ministry
of Finance
Experts- KfW IPEX-Bank
- AKA Ausfuhrkredit-Gesellschaft
- Representatives of export and banking
ConsortiumEuler Hermes
PricewaterhouseCoopers
BMZFederal Ministry for
Economic
Cooperation and
Development
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Definition Export Credit Guarantees
Insurance against the political / commercial risks arising abroadinvolved in export business (or export financing)
transacted by an exporter domiciled in Germany
provided by the Federal Republic of Germany
It requires
the payment of a premium in accordance with the risk involved
and
an uninsured portion to be borne by the policy holder
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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
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NEWLY COVERED BUSINESS
15.213.2
10.313.012.2
7.2
7.5
6.7
7.67.6
2005 2006 2007 2008 2009
Wholeturnover/ Rev. policies
Specific policies
in Euro billions
20.6
17.0
19.822.4
20.7
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TOP MARKETS FOR NEW GUARANTEES
165
12
210
845
649
447
678
703
716
971
1,552
1,357
1,479
2,878
2,042
1,353
1,363
1,991
2,066
2,087
10. Israel
9. Romania
8. Dubai
7. India
6. Brazil
5. China
4. Turkey
3. Russia
2. United States
1. South Korea
2009
2008
in Euro millions
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Total: 15,156 EUR millions
in Euro millions and in %
BREAKDOWN OF SPECIFIC POLICIESBY TYPE OF SECTORS
51%
20%
12%
6%
4%
3% 2% 1%Infrastructure: 7,659 (51%)
Processing industry: 3,046 (20%)
Energy: 1,852 (12%)
Paper, timber, leather and textileindustry: 943 (6%)
Services: 611 (4%)
Mining: 503 (3%)
Agriculture and food processingindustry: 338 (2%)
Environmental technology: 149 (1%)
Oil production and gas gathering: 32(0.2%)
Chemical industry: 22 (0.1%)
thereof:
aircraft: 21%
ships: 19%
thereof:
metal industry: 16%
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Types of export guarantees extract
Cover facilities
Single export cover/tied loan cover (pre and post shipment)
Framework credit cover
Revolving buyer credit cover
Project financing
Structured financing including countertrade business
Cover in local currency
Cover against payment defaults for confirmed L/C
Whole turnover cover
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Tied loan cover
Export contract/deliveryForeign buyerGerman exporter
German bankLoan contract
Repayment
Disbursement of
buyer credit
Foreign bank
If necessary: buyer involvement
in payment obligationsLocal
contract
Types of export guarantees I
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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. consensus must be considered
Types of export guarantees II
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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, in exceptional cases up
to 24 months)
Policy period is one year and will be automatically extended if notice oftermination is not given
Targets
Cover ofshort term credits
More flexible and quicker
Types of export guarantees III
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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 is acceptable in
principle. Local costs and foreign content
can amount to 30% (base rate) of the
contact value without any statements.Exceeding the base rate is possible under
certain circumstances.
Foreign ContentInclusion of non-German sub deliveries
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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
Foreign Content Reinsurance I
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ASHRA (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.A)
German ECA: 21 reinsurance agreements with other
ECAs
Foreign Content Reinsurance II
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Contents
Role and Function of Export Credit Agencies (ECAs)
Crisis Response Consequences for ECAs
Cover Policy for Russia
Conclusion
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Challenge for ECAs
The major challenge for ECAs in a world characterised by afinancial and increasingly economic crisis is to find a balancebetween
... a prudent and responsibleadministration of the German
governments and taxpayers
money
grant cover after a thorough
evaluation of the risks involved
and the objective of promotingthe economy, in our caseespecially German exports
accept risks despite the global
economic turbulences
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Crisis response Consequences on ECAs I
During the crisis ECAs were forced to act counter-cyclically andflexibly.
Substantial increase in demand for ECA cover in combination with ECArelated government action against the crisis
ECAs are approached by new customers and are getting involved in new
industry sectors and/or buyer countries such as EU and other OECD
countries
Cover is sought for risks that used to be perceived as save
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Crisis response Consequences on ECAs II
Governments response with new/amended insuranceproducts and cover policies in order to facilitate exportfinance
(Re-)Entry of ECAs in the field of marketable risks (shortterm cover for EU and OECD countries) due to restrictions ofthe private credit insurance market
ECAs are extending their umbrella rather than closing it
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Crisis response New and amended products I
German Government launched a package of new coverregulations 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
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Crisis response New and amended products II
German Government launched a package of new coverregulations embedded in the Economic Stimulus Plan II.
Contract Bonding Increased single limit of cover from EUR 80 to EUR 300 million to ease
exporters liquidity position, as it helps to ease the pressure on theexporters credit line
Securitisation Guarantee in relation to the KfW Refinancing Program
Facilitating access to long-term funding for banks arrangingHermescovered transactions.
Banks sell their covered receivables (from existing and new loans) to KfWand make fresh funds available for the financing of new business coveredunder Federal Export Credit Guarantees
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The crisis so far
Despite a double-digit decrease in German exports in 2009 as well ascancellations and postponement of many projects cover volume is
expected to rise
Both standard and new products contributed to this result
During the crisis, ECA-covered financing has gained tremendous
importance
ECAs have proved to be a reliable partner and will continue giving
support to maintain and where necessary restore trust in globalfinancial systems and trade relationships.
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Policies regarding the analyses of banks I
Apart from generally accepted banks, still case by case analysis
No general rejection of any CIS country
Detailed information regarding ownership structure
In-depth insight into the respective banks risk management
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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
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Contents
Role and Function of Export Credit Agencies (ECAs)
Crisis Response Consequences for ECAs
Cover Policy for Russia
Conclusion
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Russia cover policy
Generally open for short-term transactions (examination of creditworthiness)Criteria / securities for credit business transactions:
- State guarantee
- Corporate risk
Additional securities not required in cases of excellent standing of the buyer
- Bank guarantee
Generally accepted banks: 15 banks such as VTB, Sberbank,
Vnesheconombank, 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
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Russia cover volume for recent years
1.420
1.7922.015
3.249
2.878
1.991
2004 2005 2006 2007 2008 2009
short term long term total
(in million EUR)
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German ECA underwriting volume(long term) for Russia by type of security
716
61
29
25
50
32
35
37
37
32
17
75
36
50
6361
47
68
23
2002 2003 2004 2005 2006 2007 2008 2009
(30.09.)
State Guarantees Bank Securities Corporate Risk
%
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Russia recent experience
Only very few covered banks have not been able to meet theirobligations so far
Strong effort by the Russian government to support system relevant
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
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Contents
Role and Function of Export Credit Agencies (ECAs)
Crisis Response Consequences for ECAs
Cover Policy for Russia
Conclusion
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Conclusion
Due to the current challenges and difficulties ECA-covered financing has
gained tremendous importance.
ECAs will be a reliable partner and will give support to maintain and where
necessary restore trust in global financial systems and trade relationships.
Russia and CIS will remain major partners also in the years to come.
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Thank you for your attention!
Further information is provided under:
Hotline: +49 (0) 40/88 34-90 00
www.agaportal.deinfo@exportkreditgarantien.de
Vorname Name
Unternehmen
Tel.:
E-Mail:
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