ECA financing under CRD IV

Author: | Published: 24 Apr 2014

A new enforceability opinion requirement means ECA-backed financings have not escaped the EU regulatory overhaul unscathed, says Citi's  Musonda Chibwe Kapotwe

Compared to those who originate capital markets and derivative transactions, bankers and lawyers who undertake debt financings backed by sovereign export credit agencies (ECAs) have seen less impact on their deals' documentation process as a result of the recent EU regulatory tsunami. It is therefore no surprise that the introduction of article 194 of the EU Capital Requirements Regulation 575/2013 (CRR) – which together with the Capital Requirements Directive IV 2013/13/EU (CRD IV) forms part of the framework implementing Basel III – occurred with little to no commentary on its impact on ECA financings.

Loan and trade finance products guaranteed by ECAs have reduced regulatory capital requirements, as an ECA guarantee may operate as a credit risk mitigant. The regulatory capital relief is permitted because the...