The Inter-minister Committee of Finances, Warranties and Insurances has issued the Norm with respect to stabilisation of the interest rate for medium and long-term export credit facilities, which entered into force on January 13 2009.
The Norm sets forth the rules on which the Export Import Bank of Romania (EximBank) manages and coordinates the mechanism for the stabilisation of the interest rate in medium and long-term credit facilities granted by the financing banks to Romanian exporters. EximBank is a Romanian joint-stock company, with a state-owned majority, founded to support the Romanian export business by means of financial-banking instruments and specific insurance.
The purpose of the Norm is to actively sustain Romanian exporters by giving them access to export credit facilities under similar conditions as those obtained by exporters from the EU and OECD. The support consists in granting a preferential rate for the export credit facilities: the CIRR (Commercial Interest Reference Rate).
The mechanism introduced by the Norm is applicable for a period of five years and is funded from a one billion Lei budget ($300,000,000). It implies a process where the financing bank gives credit facilities at the CIRR rate, as communicated by the OECD Secretary and pays or receives the difference between this interest rate and the variable interest rate which it incurs for the refinancing of the credit facilities on the competitive market. In the event that the financing bank registers losses, they will be reimbursed by EximBank. Should the financing bank register gains, they will be assigned to EximBank.
The beneficiaries of the Norm are:
(i) Romanian exporters requesting medium and long-term financing (between two and 12 years depending on the object of the credit); and
(ii) Romanian and foreign commercial banks which finance Romanian exports, based on the partnership agreement concluded with EximBank.
This mechanism is the only official means of support for medium and long-term export credit facilities permitted in the EU. It implies the financing of export credit facilities at the CIRR rate following a partnership agreement between the financing bank and EximBank.
The eligibility conditions for the export transaction/export credit facility are as follows:
(i) the down payment must be 15% or more of the value of the export agreement that shall be paid by the external buyer before the beginning of the crediting period;
(ii) the export credit facility must be insured against commercial and/or political risks; and
(iii) the national contents of the exported goods/services must be 30% or more.
The only beneficiaries of this mechanism are Romanian exporters that cumulatively fulfill the following conditions: (i) perform export activities on its own or on commission; (ii) do not fall under the provisions of the Community Guidelines on state aid for rescuing and restructuring firms in difficulty; (iii) is not undergoing an insolvency procedure; (iv) does not have debts towards the general consolidated state budget with no special-payment plan; (v) is not a respondent in a litigation against the public authorities, including EximBank.
Romanian exporters may not benefit from the stabilisation of the interest rate offered by EximBank if: (i) the goods appear on the list periodically elaborated by the government as not beneficiating from this type of support; (ii) they export military equipment and agricultural goods; (iii) the export has a negative impact on environment; (iv) it exports to an affiliated entity; (v) they have concluded an export contract with a natural entity; (vi) they have an export contract with an external buyer that is located in a country which allows for more advantageous re-imbursement conditions, the location of which is different from the final destination of the goods or services.
This mechanism is of interest to both Romanian exporters and banks.
The exporters gain stability when budgeting medium and long-term expenses (as the interest rate is fixed) and competitiveness when negotiating export credit facilities by offering similar financing conditions to those of which benefit the exporters from the EU and OECD.
Also, Romanian and foreign banks may register an increase of the volume and portfolio quality of export credit facilities and recover from EximBank losses that result from the difference between the CIRR rate and the market interest rate, to which a margin is applied depending on the duration of the export credit facility.