The majority of Priorbank’s corporate customers are interested in the purchase of equipment abroad, mainly in the EU countries. In order to finance their investment projects, Priorbank is developing relationships with foreign export credit agencies (ECAs) as well as the export-import banks.
In transactions under the insurance coverage of ECAs different procedures of financing can be used. For example, the German “approach” involves the signing of a bank-to-bank agreement which is to be followed by an individual agreement for the particular transaction. Priorbank has signed Framework Agreements with the leading German banks. Most often Priorbank acts as a borrower. This is explained by the fact that in the “emerging” markets the banks, as a rule, leave enterprises behind in regard to international accounting standards and financial transparency.
Foreign banks finance up to 85% of the total amount of an export contract. The rest of the amount is to be prepaid by the importer. The terms of financing varies from 1 to 5 years (in some countries up to 7 years).
This type of financing is relatively more expensive. The borrower has to reimburse the foreign bank the amount of the insurance premium paid to the ECA. Under the classification of a number of the largest agencies (ERG, KUKE, EULER HERMES, etc.) Belarus is in the 7th Risk Group (countries with the highest risk) meaning that for the loans to be granted to Belarusian borrowers it applies the highest premium rates (8.25% for transactions with terms of up to 5 years.)
Moreover, the share of goods or services produced in the country of the lender has to be 70-90% of the contract value.
The first transaction under the insurance coverage of ECA – Czech export insurance agency EGAP – was financed by Priorbank in 1994. Presently, Priorbank is accepted by EULER HERMES (Germany), KUKE (Poland), ERG (Switzerland), OND (Belgium), OeKB (Austria), SEC (Slovenia), HBOR (Croatia) and others. It means that a guarantee from the Government of the Republic of Belarus is not required.
The total financing received by Priorbank under the insurance coverage of ECAs in 2001-2006 amounts to about 35 million EUR. The largest transaction is the financing of purchasing and installation of technological equipment under a contract between MAZ and Slovenian company RIKO out of the proceeds of a 10.26 million EUR loan provided within an agreement between Nova Ljubljanska Banka D.D. and Slovenska Izvozna Druzba, D.D. (the Slovene Export Corporation, Inc.)
Resources of foreign banks, covered by foreign export credit agencies, are being allocated in the high growth industries, such as: motor-car construction, oil transportation, agriculture, food industry and power engineering.