Modernization of 25-Year-Old Credit Risk Appetite Policy Maintains U.S. Taxpayer Protection and Bolsters American Competitiveness in More Countries
FOR IMMEDIATE RELEASE December 23, 2020
Office of Communications (202) 565-3206
WASHINGTON – The Export-Import Bank of the United States (EXIM) Board of Directors yesterday unanimously voted to modernize EXIM’s credit risk appetite to permit the agency to provide financing in support of U.S. exports to more foreign markets. As a result, it will enhance the ability of U.S. businesses and workers—many of whom are struggling as a result of the headwinds of COVID-19—to compete for sales in additional countries and on terms competitive with those being offered by the People’s Republic of China and other foreign export credit agencies around the world.
EXIM’s new credit risk appetite approved yesterday replaces a policy that prevented EXIM from financing exports to select countries without full consideration of the merits of a particular transaction. EXIM historically has maintained a low default rate well below its two percent statutory cap set by the U.S. Congress. Its current default rate as of September 30, 2020, is 0.819 percent, or less than one percent. Key in achieving this result are continuous efforts to improve strong underwriting processes, employee expertise, and effective management of exposure and recoveries on those credits that default.
“As EXIM Chairman, I am fully committed to both protecting the U.S. taxpayer and doing everything possible to support American jobs through exports,” said EXIM President and Chairman Kimberly Reed. “We are bringing these important, twin priorities into better balance with this action. We also are taking our Congressional mandate to advance America’s comparative leadership with respect to the People’s Republic of China very seriously. As a result, American exporters can compete more effectively for global sales against China and others. I thank EXIM’s Chief Risk Officer Ken Tinsley and the entire EXIM team for their hard work over the past several months on this effort.”
“The COVID-19 pandemic has been devastating to many small businesses. The ability to provide cover in markets that carry more risk enables EXIM to more effectively perform our mission of supporting American jobs by facilitating the export of U.S.-made goods and services, and to fulfill our role of filling the gap with financing where the private sector is unwilling or unable to assume the risk,” said EXIM Director and former Congressman Spencer Bachus.
“The revision of EXIM’s credit risk appetite will bolster its ability to compete with export credit agencies around the world, while keeping in place adequate protections for U.S. taxpayers against risk of loss,” said EXIM’s Chief Risk Officer, Kenneth Tinsley. “This action is particularly helpful in competing with China in the execution of EXIM’s Transformational Exports Program mandated by Congress.”
EXIM’s framework for analyzing transactions begins with the assessment of country risk, which is done on a government-wide basis within the Interagency Country Risk Assessment System (ICRAS), an interagency working group chaired by the Office of Management and Budget that risk rates a country’s willingness and ability to repay its debt. EXIM is the Secretariat for ICRAS, pursuant to which EXIM’s country economists prepare the reports containing the assessment of country risk for review and approval by the interagency working group. The ICRAS system provides separate risk ratings for lending to a sovereign government and lending to private borrowers that apply to the cross-border credit activities of all U.S. government agencies. The results of these reviews inform EXIM’s determination about whether transactions in a given market may meet the statutory requirement for a reasonable assurance of repayment. The new approved credit risk appetite represents a revision in its nexus with the risk ratings.
With respect to future potential transactions presented to the EXIM Board of Directors for consideration as a result of this new policy, the Board continues to have the final determination as to whether they meet the Charter mandate of “reasonable assurance of repayment.”
EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to support sales of U.S. goods and services to international buyers. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, approximately 90 percent of the total number of the agency’s authorizations has directly supported small businesses. Since 1992, EXIM has generated more than $9 billion for the U.S. Treasury for repayment of U.S. debt.
For more information about EXIM, please visit www.exim.gov.