NEW EBRD TRADE FACILITATION PROGRAM FOR BANKS IN THE CIS

March 11, 1999

SUMMARY: THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD) HAS A RANGE OF PRODUCTS AIMED AT FACILITATING INTRA-REGIONAL AND INTERNATIONAL TRADE IN ITS COUNTRIES OF OPERATIONS. THESE COMPRISE:

- CREDIT FACILITIES IN THE FORM OF EBRD GUARANTEES FOR CONFIRMATION OF LETTERS OF CREDIT THAT ARE PROVIDED TO BANKS IN THE EBRD'S COUNTRIES OF OPERATIONS; AND

- DIRECT FINANCING OF SELECTED LARGE PRIVATE SECTOR COMPANIES IN THE FORM OF REVOLVING PRE-EXPORT FINANCE AND/OR WORKING CAPITAL LOANS.

THIS INFORMATION SHEET OUTLINES THE NEW STRUCTURE OF THE TRADE FINANCE PRODUCTS THAT THE EBRD OFFERS TO BANKS IN ITS REGION OF OPERATIONS.

NEW TRADE FACILITATION PROGRAM FOR LOCAL BANKS

IN JANUARY 1999 THE EBRD LAUNCHED A NEW EXTENDED TRADE FACILITATION PROGRAM COVERING ALL 26 OF THE BANK'S COUNTRIES OF OPERATIONS. THE NEW PROGRAM WILL CONSOLIDATE ALL OF THE BANK'S EXISTING TRADE FACILITATION PROGRAMS (TFPS) FOR LOCAL BANKS (COVERING BELARUS, KAZAKHSTAN, LITHUANIA, RUSSIA, UKRAINE, UZBEKISTAN) AND REGIONAL OMNIBUS TFPS INTO A SINGLE STREAMLINED PROGRAMME TO MEET THE NEEDS OF THE CHANGING ENVIRONMENT IN CENTRAL AND EASTERN EUROPE AND THE COMMONWEALTH OF INDEPENDENT STATES (CIS). THE PRINCIPAL OBJECTIVE OF THE TRADE FACILITATION PROGRAMMES REMAINS UNCHANGED: THE EBRD WILL, FROM TIME TO TIME, ISSUE GUARANTEES IN FAVOR OF
WESTERN CONFIRMING BANKS TO GUARANTEE ALL OR PART OF THE OBLIGATIONS OF LOCAL ISSUING BANKS ACCEPTABLE TO THE EBRD AND ARISING UNDER ELIGIBLE TRADE FINANCES TRANSACTIONS. A NUMBER OF IMPORTANT CHANGES HAVE BEEN MADE TO THE PRODUCT STRUCTURE TO PROVIDE GREATER FLEXIBILITY. AN OUTLINE OF THESE CHANGES IS SET OUT BELOW, AND IS EXPLAINED IN MORE DETAIL IN THE EBRD'S "TERMS AND CONDITIONS FOR THE ISSUE OF TRADE FINANCE
GUARANTEES":

- THE EBRD WILL EXTEND ITS COVER TO ADVANCE PAYMENT BONDS, OTHER FORMS OF PAYMENT GUARANTEES, BILLS OF EXCHANGE AND PROMISSORY NOTES FROM ISSUING BANKS. THESE INSTRUMENTS WILL BECOME ELIGIBLE IN ADDITION TO LETTERS OF CREDIT AND STANDBY LETTERS OF CREDIT.

- THE EBRD GUARANTEE WILL EXTEND TO UP TO 100 PER CENT OF THE FACE VALUE OF THE UNDERLYING TRADE FINANCE INSTRUMENT.

- ALL TRADE FINANCE LINES PROVIDED TO ISSUING BANKS WILL BE UNCOMMITTED AND CAN BE AMENDED OR CANCELLED BY THE EBRD AT ANY TIME.

- RATES OF GUARANTEE FEE PAYABLE TO THE EBRD WILL BE VARIABLE AND AGREED SEPARATELY FOR EACH TRADE FINANCE INSTRUMENT GUARANTEED BY THE EBRD.

- THE PROCEDURE FOR THE ISSUE OF EBRD GUARANTEES HAS BEEN REVISED TO DEVELOP A SIMPLE AND STRAIGHTFORWARD APPROVAL PROCESS.

- IN ADDITION TO OFF-BALANCE-SHEET CREDIT, THE EBRD WILL PROVIDE SHORT-TERM REVOLVING LOANS TO SELECTED LOCAL BANKS FOR PRE-EXPORT FINANCE ON-LENDING TO LOCAL COMPANIES.

ISSUING AND CONFIRMING BANKS

THE NEW PROGRAM WILL BE OPEN TO BANKS REGISTERED IN ALL THE EBRD'S COUNTRIES OF OPERATIONS, INCLUDING BANKS WITH MAJORITY FOREIGN OWNERSHIP AND SUBSIDIARIES OF FOREIGN BANKS. ALL FOREIGN BANKS WITH AN ESTABLISHED RECORD OF TRADE FINANCE OPERATIONS WITH BANKS IN THE REGION ARE ELIGIBLE TO JOIN THE PROGRAM AS CONFIRMING BANKS. SELECTED BANKS FROM THE COUNTRIES OF OPERATIONS THAT HAVE A DEMONSTRATED CAPABILITY OF PROCESSING CONFIRMATIONS OF TRADE FINANCE INSTRUMENTS MAY ALSO ACT AS CONFIRMING BANKS. THE PARTICIPATION OF ISSUING BANKS AND CONFIRMING BANKS WILL BE SUBJECT TO THE EBRD'S APPROVAL AND SIGNING OF APPROPRIATE LEGAL DOCUMENTATION.

UNDERLYING TRANSACTIONS AND ELIGIBLE INSTRUMENTS

THE PROGRAM WILL SUPPORT BOTH INTRA-REGIONAL TRADE AND INTERNATIONAL TRADE IN THE BANK'S REGION OF OPERATIONS. EBRD GUARANTEES MAY BE USED TO GUARANTEE THE FOLLOWING TRANSACTIONS ASSOCIATED WITH EXPORTS FROM, OR IMPORTS TO, THE BANK'S COUNTRIES OF OPERATIONS:

- CONFIRMATION BY THE CONFIRMING BANK OF DOCUMENTARY LETTERS OF CREDIT OR TRADE-RELATED STANDBY LETTERS OF CREDIT FROM THE ISSUING BANK (SUCH LETTERS OF CREDIT AND STANDBY LETTERS OF CREDIT BEING SUBJECT TO UCP 500);

- ISSUANCE OF ADVANCE PAYMENT BONDS AND OTHER FORMS OF PAYMENT GUARANTEES (OTHER THAN BID, PERFORMANCE AND SIMILAR CONTRACT BONDS) BY THE CONFIRMING BANK ON THE BASIS OF COUNTER-GUARANTEES FROM THE ISSUING BANK;

- DISCOUNT OR SIMILAR REFINANCING BY THE CONFIRMING BANK OF TRADE-RELATED PROMISSORY NOTES FROM THE ISSUING BANK OR OF TRADE-RELATED PROMISSORY NOTES ISSUED BY A THIRD PARTY AND GUARANTEED BY THE ISSUING BANK; AND

- DISCOUNT OR SIMILAR REFINANCING BY THE CONFIRMING BANK OF TRADE-RELATED BILLS OF EXCHANGE ISSUED BY A THIRD PARTY AND GUARANTEED BY ACCEPTANCE BY THE ISSUING BANK.

THE EBRD WILL CONSIDER ISSUING GUARANTEES IN SUPPORT OF OTHER TYPES OF TRADE FINANCE INSTRUMENTS ISSUED OR GUARANTEED BY THE ISSUING BANK IN RELATION TO EXPORTS FROM, AND IMPORTS TO, THE COUNTRIES OF OPERATIONS. EBRD GUARANTEES MAY BE ISSUED TO GUARANTEE EXPORTS OR IMPORTS OF ANY TYPE OF GOODS OR COMMODITIES, OTHER THAN:

- ARMAMENTS AND MUNITIONS;

- TOBACCO AND TOBACCO PRODUCTS;

- HARD LIQUOR;

- PRODUCTS LISTED IN THE EBRD'S ENVIRONMENTAL EXCLUSION LIST;

- PRODUCTS PROHIBITED FOR IMPORT TO, OR EXPORTS FROM, THE RELEVANT COUNTRIES BY APPLICABLE LAW OR INTERNATIONAL CONVENTION.

EBRD GUARANTEES

EBRD GUARANTEES WILL COVER ONLY THE RISK OF PAYMENT BY THE ISSUING BANK AND WILL NOT ASSUME ANY RISK OF THE EXPORTER OR THE IMPORTER. THE GUARANTEE WILL BE ISSUED BY SWIFT OR BY TESTED TELEX IN THE FORM OF AN IRREVOCABLE STANDBY LETTER OF CREDIT IN FAVOR OF THE CONFIRMING BANK PAYABLE UPON ITS FIRST WRITTEN DEMAND. THE EBRD GUARANTEE CAN BE ISSUED IN ANY FREELY CONVERTIBLE CURRENCY IN THE AMOUNT OF UP TO 100 PER CENT OF THE NOMINAL VALUE OF THE GUARANTEED INSTRUMENT.

PRICING

FOR EACH EBRD GUARANTEE ISSUED OR PRE-EXPORT ADVANCE MADE, THE EBRD WILL CHARGE A GUARANTEE FEE OR - IN THE CASE OF ADVANCES - INTEREST, WHICH WILL DEPEND ON THE AGREED MARKET RATE AND TENOR OF THE EBRD EXPOSURE. DUE TO THE UNCOMMITTED STRUCTURE OF TRADE FINANCE LIMITS, NO COMMITMENT FEE WILL APPLY. FOR EACH TRANSACTION, THE GUARANTEE FEE WILL BE NEGOTIATED WITH, AND PAYABLE BY, THE BANK THAT REQUESTED THE ISSUANCE OF THE EBRD GUARANTEE, WHICH MAY BE THE ISSUING BANK OR THE CONFIRMING BANK. AS A GENERAL GUIDELINE, LOWER FEE RATES WILL BE CHARGED FOR REDUCED PERCENTAGES OF EBRD GUARANTEE COVER TO ENCOURAGE RISK SHARING BY CONFIRMING BANKS.

GUARANTEE APPLICATION PROCESS

AN EBRD GUARANTEE MAY BE REQUESTED EITHER BY THE ISSUING BANK OR BY THE CONFIRMING BANK. EBRD TRADE FINANCE STAFF WILL BE PLEASED TO DISCUSS DETAILS OF THE GUARANTEED TRANSACTION, PERCENTAGE OF COVER AND PRICING BEFORE A FORMAL GUARANTEE REQUEST IS SUBMITTED. GUARANTEE REQUESTS MAY BE SUBMITTED BY A TESTED TELEX OR SWIFT. WHERE THE CONFIRMING BANK HAS REQUESTED THE ISSUE, A CONFIRMATION FROM THE ISSUING BANK WILL BE SOUGHT. THE EBRD'S DECISION TO ISSUE ITS GUARANTEE FOR ANY PARTICULAR INSTRUMENT WILL BE BASED ON ITS COMMERCIAL JUDGEMENT, WITH DUE CONSIDERATION OF RISKS AND OF THE UNDERLYING TRANSACTION. THE EBRD WILL HAVE NO COMMITMENT TO ISSUE FURTHER GUARANTEES OR MAKE PRE-EXPORT ADVANCES, BUT WILL CONSIDER DOING SO ON A CASE-BY-CASE BASIS. THE EBRD WILL NOT BE INVOLVED IN THE PROCESSING OF SHIPMENT DOCUMENTS, WHICH WILL BE HANDLED BETWEEN THE CONFIRMING BANK AND THE ISSUING BANK.

PRE-EXPORT FINANCE ADVANCES

IN ADDITION TO PROVIDING TRADE FINANCE GUARANTEES, THE EBRD WILL ALSO EXTEND SHORT-TERM REVOLVING LOANS TO BANKS IN ITS COUNTRIES OF OPERATIONS. THESE LOANS WILL BE STRUCTURED TO FUND PRE-EXPORT FINANCE ADVANCES PROVIDED TO LOCAL COMPANIES. THE EBRD WILL NORMALLY REQUIRE EXPORT PROCEEDS GENERATED BY COMPANIES FINANCED THROUGH THE PROGRAMME TO BE DIRECTED THROUGH AN ESCROW ACCOUNT OR FOR A SIMILAR ARRANGEMENT TO BE MADE.

LEGAL DOCUMENTATION

THE ISSUANCE OF EBRD GUARANTEES WILL BE GOVERNED BY STANDARDIZED TRADE FINANCE AGREEMENTS TO BE SIGNED BY THE ISSUING BANKS AND THE EBRD. THE BANK'S PRE-EXPORT ADVANCES WILL BE GOVERNED BY A STANDARD REVOLVING LOAN FACILITY AGREEMENT BETWEEN CLIENT BANKS AND THE EBRD. IN LINE WITH THE UNCOMMITTED STRUCTURE OF THE PROGRAM, THE SIGNING OF A TRADE FINANCE AGREEMENT OR A REVOLVING LOAN FACILITY AGREEMENT WILL NOT CONSTITUTE A COMMITMENT ON BEHALF OF THE EBRD TO ISSUE ITS GUARANTEES OR TO PROVIDE PRE-EXPORT ADVANCES. INSTEAD, IT WILL SET FORTH THE BASIS FOR OPERATIONAL AND LEGAL RELATIONSHIPS BETWEEN THE EBRD AND THE ISSUING BANK AS AND WHEN THE EBRD
GUARANTEE IS ISSUED OR AN ADVANCE IS MADE. NO PAYMENT AGREEMENT WILL NEED TO BE SIGNED BY THE EBRD AND CONFIRMING BANKS. THE CONFIRMING BANKS WILL RECEIVE "EBRD TERMS AND CONDITIONS FOR ISSUANCE OF TRADE GUARANTEES", WHICH WILL FORM THE BASIS FOR OPERATIONS UNDER THE PROGRAMME. ALL ACCREDITED CONFIRMING BANKS ARE ELIGIBLE TO OPERATE WITH EVERY ISSUING BANK FOR WHICH THE EBRD AGREES TO ISSUE ITS GUARANTEE.

LARGE AND/OR COMPLEX TRANSACTIONS

AS EVENTS AND CONDITIONS IN THE EBRD'S COUNTRIES OF OPERATIONS CHANGE RAPIDLY, THE PROGRAMME MAY BE ADJUSTED OR NEW PRODUCTS INTRODUCED. THE EBRD WELCOMES PROPOSALS RELATED TO TRADE FINANCE TRANSACTIONS THAT - AS A RESULT OF THEIR SIZE, COMPLEXITY OR OTHER FACTORS - CANNOT BE READILY FINANCED WITHIN THE PROGRAMME. DETAILS OF THE SIZE, MATURITY AND TYPE OF FINANCING REQUIRED SHOULD BE INCLUDED AS WELL AS THE PRODUCT AND INDUSTRY INVOLVED. THE PREFERRED TARGETS FOR THIS TYPE OF EBRD SUPPORT INCLUDE EQUIPMENT, COMMODITIES AND COMMODITY-BASED INDUSTRIES, RAW MATERIALS, MANUFACTURED AND BASIC CONSUMER GOODS, AGRICULTURAL PRODUCE, CONSTRUCTION MATERIALS AND PHARMACEUTICALS.

PLEASE NOT THAT THIS PROGRAM IS FOR BANKS IN THE EBRD COUNTRIES OF OPERATION AND NOT DIRECTLY FOR EXPORTERS.

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FOR ADDITIONAL INFORMATION ON THE EBRD AND PROJECT OPPORTUNITIES, READERS ARE REFERRED TO THE FOLLOWING SOURCES: THE U.S. NATIONAL TRADE DATA BANK (NTDB), (NTDB WEBSITE: HTTP://STAT-USA.DOC.GOV)
TEL: +(202) 482-1986; THE ELECTRONIC BULLETIN BOARD (EBB) OPERATED BY THE US DEPARTMENT OF COMMERCE,
TEL: +(202) 482-1986; THE EASTERN EUROPE BUSINESS INFORMATION CENTER, (EEBIC), (EEBIC WEBSITE: HTTP://WWW.MAC.DOC.GOV/EEBIC/CEEBIC.HTML) TEL: +(202) 482-2645,
FAX: +(202) 482-4473, AND THE BUSINESS INFORMATION SERVICE FOR THE NEWLY INDEPENDENT STATES, (BISNIS), (BISNIS WEBSITE: HTTP://WWW.MAC.DOC.GOV/BISNIS)
TEL: +(202) 482-4655, FAX: +(202) 482-2293. FOR INFORMATION ON OTHER MULTILATERAL DEVELOPMENT BANK FUNDED PROJECTS, CONTACT THE MULTILATERAL DEVELOPMENT BANK OFFICE, US DEPARTMENT OF COMMERCE, WASHINGTON, D.C. TEL: +(202) 482 3399.
FOR GENERAL TRADE INFORMATION CALL: 1-800-USA-TRADE.

EBRD CONTACT IS GENE R. HARRIS, SENIOR COMMERCIAL OFFICER, OFFICE OF THE U.S. EXECUTIVE DIRECTOR, EBRD, ONE EXCHANGE SQUARE, LONDON, EC2A 2EH, UNITED KINGDOM.
TEL: 44-171-588-4027/28 OR 338-7490, FAX: 44-171-588-4026 OR 338-6487. EMAIL: HARRISG@EBRD.COM.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)