OECD Agreement Breaks New Ground, Evens Competition, Lowers Costs for U.S.
FOR IMMEDIATE RELEASE July 22, 1997
Ken Murphy (202) 565-3200
Washington, D.C.: The Export-Import Bank of the United States (Ex-Im Bank) is supporting a new agreement by the participants to the Export Credit Arrangement group of the Organization for Economic Cooperation and Development (OECD) that will set minimum premium rates (also called exposure fees) for country and sovereign risks. The final agreement is considered an important step toward reducing the need for official export credit support and increasing fair competition among foreign companies in the world marketplace.
Ex-Im Bank, the United States` official export credit agency (ECA), has been working with other major official ECAs for more than two years to create a level playing field among the OECD`s 29 member countries and has pushed hard for adoption of the premium agreement that makes pricing risk based so that premium rates charged to customers are adequate to cover long-term operating costs and losses.
The acceptance of this agreement represents the latest success in Ex-Im Bank`s ongoing efforts to be fully responsive to its congressional mandate to negotiate reductions in the cost of government supported export financing, said Ex-Im Bank Director Rita M. Rodriguez, who serves as Ex-Im Bank`s representative to OECD. The agreement establishes reasonable rules for leveling the playing field in terms of premium rates and exposure fees. It also offers future opportunities for steady progress in subsidy reduction while maintaining U.S. export financing competitiveness.
The new rules include: an econometric model to assess country risk; initial minimum premium benchmarks for seven country risk categories; differences in minimum rates to be applied according to quality and percentage of coverage provided; rate review procedures; and, a comprehensive electronic exchange of information designed to maintain maximum transparency among OECD members.
The new rules were agreed upon June 26, 1997, and will take effect on April 1, 1999, after a two-year transition period. They will apply to all officially-supported export credits with a repayment term of two years or longer provided by direct financing, refinancing, insurance or guarantees. Official export credits for ships, aircraft and agriculture are excluded.