June 1998

by Padraic J. Sweeney

Russian commercial banks are becoming important partners for the Export-Import Bank of the United States (Ex-Im ) in financing U.S. exports to Russia, as the Russian Government reduces its use of sovereign guarantees. Ex-Im officials noted the shift towards greater cooperation with Russian banks at the 1998 Ex-Im annual conference, May 7 - 8, in Washington, DC.

Commercial Banks Criteria for Consideration
Ex-Im considers Russian commercial bank risk on a case-by-case basis. Although it has no list of "approved" Russian banks, it does set minimum criteria for banks whose risk it will consider. The minimum criteria include three years of audited financial statements, in English; financial statements audited to international accounting standards (IAS); unqualified opinion(s) from a Western accounting firm concerning the financial condition of the bank; minimum capitalization of $15 million, and minimum total assets of $100 million. There is no preset exposure limit for Russian banks.

Ex-Im takes a conservative approach to working with Russian commercial banks: building exposure gradually with individual banks, developing satisfactory payment experience, and then expanding activities. The maximum repayment term currently available for Russian banks is five years. Commercial banks owned by the Russian Government are considered on a nonsovereign basis. This approach applies to all Ex-Im Bank programs (loans, guarantees, and insurance).

The shift to commercial banks will be particularly important for companies financing exports under Ex-Im's "Oil and Gas Framework Agreement" (OGFA), which accounts for approximately 50 percent of all its transactions in Russia. In the future, all borrowers using OGFA will have to be from the private sector. Repayment conditions have been eased for OGFA transactions, and payments can now be made from any existing oil production of the borrower, whether or not it is derived from the project being financed.

Medium-Term Credit Standards
Ex-Im officials also presented new "Medium-Term Credit Standards" at the annual conference. The standards, which were adopted recently in order to simplify and expedite processing of medium-term transactions, define the criteria the bank will apply in evaluating creditworthiness of the primary source of repayment in such transactions. Ex-Im Bank defines medium-term transactions as those involving exports of capital goods and services with a financed amount not exceeding $10 million and repayment terms of seven years of less. Insurance, guarantees, and loans are all medium-term programs.

Ex-Im Bank is an independent federal agency that supports American jobs by financing the sales of U.S. goods and services to foreign markets. In fiscal year 1997, Ex-Im Bank supported U.S. exports worth more than $15 billion. As of March 31, 1998, Ex-Im had financed 50 transactions in Russia worth $2.1 billion. For more information, visit the Exim Bank home page at http://www.exim.gov.

Padraic J. Sweeney covers finance for BISNIS.

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