Policy News

EXIM Increases U.S. Exporter Access to Capital and Supply Chain Financing During COVID-19 by Raising Lender Guarantee Coverage Option to 95 Percent

“We commend U.S. EXIM Bank for facilitating a timely response to the industry’s request during this crisis,” said BAFT President and CEO Tod Burwell. “This is a significant step forward enabling banks to increase support for exporting companies during a challenging time.”

WASHINGTON – As part of its continuing efforts to support relief measures for U.S. exporters affected by the COVID-19 pandemic, the Export-Import Bank of the United States (EXIM) raised its Supply Chain Finance Program (SCF) and Working Capital Guarantee Program (WCGP) guarantee coverage option to 95 percent, up from the standard 90 percent guarantee. This increase is effective through April 30, 2021.

Lenders who elect the 95 percent coverage will be charged a guarantee fee of at least 2.06 percent with a risk premium added to non-investment grade credit for EXIM’s SCF program, and lenders who elect the 95 percent coverage will be charged a guarantee fee of at least 2.13 percent for the agency’s WCGP program. Guarantees under the 95 percent programs are not to exceed one year from the effective date of the financing. The guarantee fee for SCF will be charged on a monthly basis in arrears for the prior month’s guaranteed receivables, and the guarantee fee for WCGP will be due upfront.

By increasing the SCF and WCGP guarantee coverage option to 95 percent, EXIM will make the programs more widely available to U.S. suppliers and exporters and incentivize financial institutions to make more supply chain financing available to U.S. exporters by reducing their credit risk.

“Over the past several weeks, EXIM has done extensive outreach to diverse stakeholders, including financial institutions, to ensure we are taking the necessary steps to support America’s businesses and workers and the U.S. economy during this challenging time,” said EXIM President and Chairman Kimberly A. Reed. “Today’s announcement underscores our commitment to providing U.S. exporters access to much-needed capital and supply chain financing.”

“We commend U.S. EXIM Bank for facilitating a timely response to the industry’s request during this crisis,” said Bankers Association for Finance and Trade President and Chief Executive Officer Tod R. Burwell. “This is a significant step forward enabling banks to increase support for exporting companies during a challenging time.”

More information on EXIM’s COVID-19 response can be found here, which includes fact sheets on the Supply Chain Financing Guarantee Program and Working Capital Guarantee Program.

About EXIM
EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to support sales of U.S. goods and services to international buyers. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, approximately 90 percent of the total number of the agency’s authorizations has directly supported small businesses. Since 1992, EXIM has generated more than $9 billion for the U.S. Treasury for repayment of U.S. debt.

For more information about EXIM, please visit www.exim.gov.

BAFT Publishes Joint Paper Covering Digital Rapid Response Measures Taken By Banks Under COVID-19

In a global emergency, international trade may slow but it must not stop. Even as COVID-19 reveals the shortcomings of a paper-based trade system, financial institutions (FIs) are finding ways to keep trade circulating. How are they doing it? Read this joint paper published on April 23, 2020 from BAFT, the ICC and the ITFA entitled ‘How Banks Are Going Digital To Manage COVID-19’.

This paper, jointly published with the ICC and the ITFA, collates common practices undertaken by global banks in the COVID-19 emergency situation and shares some guidance. This is not a “best practices” document and many of the practices described are being improved already. Rather it is a practical reference document with information about measures put in place to continue the flow of trade and trade finance when paper transfer has become difficult or impossible.

The COVID-19 pandemic has disrupted shipping, in-person interactions, and travel. As such, alternative procedures are required to settle trade finance transactions. Data is sourced from 2020 data from ICC, ITFA  and BAFT members.

This brief shares the ad hoc practices being implemented by FIs under the COVID-19 pandemic. Their approaches are different from every previous global crisis in that responses target the singular problem of how to keep trade flowing when physical interactions are impracticable. The document makes clear that these quasi-digital solutions are interim only until actual e-enabled digitized solutions are fully developed.

Read the full paper from the ICC Digitalisation Working Group in the Library of Documents page under White Papers.

BAFT Files Joint Association Comment Letter to EU Policy Makers Regarding Credit Insurance During COVID-19

On April 14, 2020 BAFT along with the ITFA, the Berne Union, the IACPM, the IUA and Lloyd’s Market Association filed a joint comment letter to policy makers in the European Union regarding the ongoing discussion about facilitating bank lending and the role of credit insurance amid the COVID-19 crisis.

The International Trade and Forfaiting Association (ITFA), the Bankers Association for Finance and Trade (BAFT), the Berne Union, the International Association of Credit Portfolio Managers (IACPM), the International Underwriting Association (IUA) and Lloyd’s Market Association (LMA) follow with great interest and appreciate the ongoing discussion of the policymakers in the European Union about facilitating bank lending amid the COVID-19 crisis. The aforementioned industry representatives believe that when it comes to credit insurance and guarantees, public and private sectors are inextricably connected through their respective complementary roles.

We welcome the initiatives to reconsider the provisioning requirements for loans covered by Export Credit Agencies and other publicly guaranteed loans. This will be a very helpful measure to enable banks to continue the flow of much needed trade finance.

We wish to highlight that the private credit insurance market also provides important support to economic activity within Europe through facilitating bank lending in the same way as public sector Export Credit Agencies. Like Export Credit Agency cover, private credit insurance support a wide range of short, medium and long-term bank lending, including trade-related, asset-backed and corporate loans, for activities across the entire European Union and worldwide.

Read the full Comment Letter in the Library of Documents page under Comment Letters.

BAFT Comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR

BAFT issued comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR.

On March 25, 2020, BAFT issued comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR. In addition to responding to the consultation, BAFT made the case that the lack of a forward looking SOFR term reference rate presents operational challenges for this business line and encouraged the ARRC to develop a working group focused on trade finance to address issues specific to this subset of the industry. The comments are posted on the Library of Documents page under Comment Letters.

BAFT Updates USD Payments Information Chart

BAFT recently updated its chart of information required by over 50 jurisdictions for the processing of both inbound and outbound USD wire transfers.

BAFT first issued the chart in 2016 as an appendix to the paper entitled Practices and Guidance for Formatting Payments and Handling Inquiries Related to the Financial Action Task Force (FATF) Recommendation 16.

A group of experts on large-value, cross-border payments sitting on BAFT’s Payments Committee brought the information in the chart up to date through end of calendar year 2019.  Samantha Pelosi, Senior Vice President for Payments & Innovation at BAFT remarked that, “We are happy to provide this invaluable resource to the correspondent banking community again this year.”

The chart available to BAFT members at no charge and to non-members for a nominal fee.  It can be found on the BAFT website in the Library of Documents, under “Best Practices and Industry Standards”.

LIBOR Transition Progress Note: Impact on the BAFT Master Participation Agreement (MPA)

Following recent announcements by regulators and commentary by working groups on the importance of completing the transition to risk-free rates (“RFR”s) by end of 2021 (or in some cases earlier), BAFT and ITFA issue this joint statement as an update to the Guidance Note published May 2020.

Given the importance of transitioning to risk-free rates by the end of 2021, BAFT together with the ITFA are issuing this joint LIBOR transition progress note addressing the transition’s impact on the BAFT Master Participation Agreement (MPA). This is a follow up to an initial note published in May 2020 which introduced the challenge and requested that BAFT MPA users refrain from developing their own language for LIBOR replacement.  At that time, we provided high level disclaimer wording for use in marketing materials, etc. in order to avoid insertion of any institution specific wording in the MPAs to allow for maintaining the integrity of the document in the market.

Now we are pleased to share this latest update jointly drafted by ITFA and BAFT for the benefit of its respective members. This document addresses the impact of the LIBOR transition on the BAFT MPA, a broader update on the timing of the LIBOR transition and, lastly, some recommended next steps.

We will continue to work closely with ITFA on this matter and provide further updates as more clarity emerges.

To read the LIBOR Transition Progress Note: Impact on the BAFT MPA, visit our Library of Documents under the BAFT Standard Documents section or click here.