Commercial Interest Reference Rates (CIRRs) are the official lending rates of Export Credit Agencies. They are calculated monthly and are based on government bonds issued in the country's domestic market for the country's currency. In the case of the US dollar, the CIRR is based on the U.S. Treasury bond rate. Ex-Im Bank's updated CIRR rates are published on the Internet on the Monday preceding the 15th of the month and are effective on the 15th of the month.
Prior to the establishment of the CIRR system, Export Credit Agencies used a matrix rate as the official lending rate. Matrix rates were calculated based on the weighted average of interest rates of a basket of currencies and valid for a six-month period (that is they were adjusted in January and July of each year to reflect changes in the underlying market rates). Early in the 1980's, market rates for most currencies were higher then the matrix rate. Many Export Credit Agencies realized that they were lending money at much lower rates than were generally available in their financial markets -- while this mismatch certainly made their financing attractive, it put them at a disadvantage when they tried to fund themselves. A collection of ECAs, realizing the financial disadvantage of borrowing high and lending low, pushed for an increase in the matrix rate (i.e., add a higher margin to the base rate). However, several other countries had commercial rates that were lower than the matrix rate; these countries did not want to see the rate rise. After several years of discussion, a compromise was reached -- commercially indexed rates for each currency would be developed and phased in over an extended period of time. Countries were given the choice of establishing a single-tier or three-tier system. In single-tier systems, all repayment terms receive the same interest rate. Three-tier systems, in contrast, have separate rates depending on the length of repayment. A transition system was established that allowed for immediate usage of CIRRs in each of the three country categories but that over an extended period of time, on a country category basis, removed the matrix rate option. In 1988, matrix rates for Category I countries were eliminated. Category II matrix rates were eliminated in 1992 and the last matrix rate, for Category III, was eliminated in 1995.
Construction of the CIRR
Ex-Im Bank's CIRR is set on the 15th of each month and is based on average U.S. Treasury rates for the preceding month plus one percent. The Treasury rates used as a base can be found in the Federal Reserve Statistical Release H.15 (519) on the Monday following the last day of the month. [For further information on the H.15 (519), call the Federal Reserve Statistical Release Line at (202) 452-3206.] Ex-Im Bank uses a three-tiered system that creates separate lending rates for different repayment terms. The three-tiered system is based on a) 3-year Treasury bond yields for repayment terms up to and including 5 years; b) 5-year Treasury bond yields for over 5 years and up to and including 8.5 years; and c) 7-year Treasury bond yields for over 8.5 years.
Ex-Im Bank CIRR policy
Ex-Im Bank offers both a loan and a guarantee option in Letters of Interest (LIs) and Final Commitments (APs). For direct loans, an indicative CIRR is provided in an LI based on the lending rate in effect at the time the LI is issued. For all AP direct loans (including Structured/Project Finance transactions), Ex-Im Bank will generally set the lending rate to the applicable CIRR at the time of first disbursement, except for aircraft transactions where the Large Aircraft Sector Understanding (LASU) or the Aircraft Sector Understanding (ASU) apply. For information on these rates within the context of aircraft transactions, contact Ex-Im Bank's Transportation Unit at 202-565-3550.