Exp Credit Guarantee

8/6/2019 Exp Credit Guarantee

1/33

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


2/33

page 2

Contents

Role and Function of Export Credit Agencies(ECAs)

Crisis Response Consequences for ECAs

Cover Policy for Russia

Conclusion


3/33

page 3

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


4/33

page 4

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


5/33

page 5

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


6/33

page 6

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


7/33

page 7

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


8/33

page 8

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


9/33

page 9

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%


10/33

page 10

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


11/33

page 11

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


12/33

page 12

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


13/33

page 13

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


14/33

page 14

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


15/33

page 15

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


16/33

page 16

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


17/33

page 17

Contents

Role and Function of Export Credit Agencies (ECAs)



Conclusion


18/33

page 18

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


19/33

page 19

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


20/33

page 20

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


21/33

page 21

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


22/33

page 22

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


23/33

page 23

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.


24/33

page 24

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


25/33

page 25

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


26/33

page 26

Contents




Conclusion


27/33

page 27

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


28/33

page 28

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)


29/33

page 29

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

%


30/33

page 30

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


31/33

page 31

Contents




Conclusion


32/33

page 32

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.


33/33

page 33

Thank you for your attention!

Further information is provided under:

Hotline: +49 (0) 40/88 34-90 00

[email protected]

Vorname Name

Unternehmen

Tel.:

E-Mail:

Documents

Exp Credit Guarantee