Katharine Morton asks the rhetorical question and looks forward to mulling over the answers
Once upon a time, an export credit agency (ECA) could be loosely defined as a member of the international union of export credit insurers (Berne Union) or as participants in the OECD’s Arrangement. There were still many differences, of course. Some were government departments (for example, the UK’s ECGD, now UK Export Finance (UKEF), the grandfather of ECAs, founded in 1919), government companies or corporations (Canada) and private insurers operating on account of their governments (Germany).
There were also private insurers such as Trade Indemnity (founded in 1917, now Euler Hermes) but, strictly export credit was a government business.
All this cosy world was exploded in the 1980s. The Berne Union started to admit private insurers and the international financial institutions (IFIs) moved into insurance with MIGA (multinational investment guarantee agency of the World Bank Group). Perhaps most importantly, the private sector through privatisations, assumed a much greater role and their ultimate arbiters, the reinsurers, assumed a much bigger role too. That sector also went beyond insurance to ancillary services such as status information and debt collection.
That also raises the question who are the ECA’s customers? Are they exporting companies or the banks who provide the credits? Are ECAs running the risk of crowding out private investment or are they boldly going where banks fear to – or are unwilling to in a post-Basel III world – tread? And if those banks fear to tread, is there a risk that the risks aren’t worth taking at all because they’re not commercially viable. A fine line indeed.
One of the more interesting elements of this new world will be the impact of Brexit which will free UKEF from the EU Commission restraints of marketable and non-marketable risks.
We will continue to spotlight the evolving role of ECAs in the next edition of TFR (April) where we will have a feature from our own editor, Binyamin Ali, interviews with Diana Smallridge (president and CEO of International Finance Consulting), Adnan Yıldırım, the new CEO of Turkexim, following the interview with Vinco David, the new Secretary General of Berne Union, which is in the March edition. Fun times ahead.
Katharine Morton is editor-in-chief of TFR