Governmental state-funded export financing scheme

In the wake of the financial crisis of 2008, comprehensive international efforts were made to strengthen the solidity of financial institutions, and the rules for large exposures of credit institutions have been tightened. This means that Eksportfinans requires a substantial increase in capital if it is to continue to have the same lending power to finance loans that are not guaranteed by the Norwegian Guarantee Institute for Export Credits (GIEK). However, Eksportfinans and its owners have not managed to arrive at a plan for recapitalisation that will ensure an export financing scheme that the Government considers robust enough to meet both their clients’ needs and future solidity requirements.

The “108 scheme” of subsidised fixed interest (CIRR) loans was established in 1978, based on the OECD “Arrangement on Officially Supported Export Credits”. The Arrangement regulates competition between the OECD countries with respect to interest rate and instalment conditions for officially supported loans for exports of capital goods. Under the scheme domestic exporters of capital goods are able to compete on equal terms with other exporters in countries with national export credit schemes. The 108 scheme has been administered by Eksportfinans since the beginning.

CIRR loans are fixed-interest loans based on government bonds in the currency in question plus 1 percentage point. The interest rate is fixed when the agreement between the Norwegian supplier and the buyer is signed, and the loan is normally disbursed somewhat later. Before beginning to draw on the loan, the borrower may choose to take advantage of either the previously fixed CIRR interest rate or the current commercial rate. Thus the borrower has an interest-rate option free of charge. The CIRR interest rate will be more attractive when the commercial rate rises before the loan is disbursed.

In order to ensure that competitive export financing for Norwegian exporters will be continued, the Government is proposing to establish a governmental state-funded export financing scheme. Until the new scheme is operational there will be a need for an interim arrangement to be administered in cooperation with Eksportfinans. Under this interim scheme the state will be the counterparty to the loan agreement, but Eksportfinans will administer the financing on behalf of the state. The interim scheme will operate until the new permanent governmental state-funded scheme is in place, which will be at the latest by 1 July 2012.

State-funded export credits play a very central role in the financing of Norwegian capital goods exports, especially in times of financial market unrest with few alternative sources of export financing available. In such situations it is essential that the state can ensure stable framework conditions for Norwegian exporters. Eksportfinans has been administering Norwegian CIRR loans on behalf of the state since 1978, but can no longer continue to provide this service. The Ministry of Trade and Industry therefore considers that the interests of export companies are best served by establishing a governmental state-funded export financing scheme that can offer loans at both CIRR and commercial interest rates for projects that qualify for CIRR. A state-funded scheme will be robust, reliable and cost-effective, and will continue to offer the Norwegian export industry financing at competitive rates. The schemewill be client-friendly and flexible in order to meet the needs of the business sector.