Trade-Related Financial Services - EBRD

The EBRD’s Trade Facilitation Programme (TFP) aims to promote foreign trade to, from and within central and eastern Europe, the Commonwealth of Independent States (CIS) and the southern and eastern Mediterranean (SEMED) region. Through the Programme, the EBRD provides guarantees to international commercial banks (confirming banks). In so doing, it takes the political and commercial payment risk of transactions undertaken by participating banks (issuing banks) in the EBRD’s countries of operations.

The Programme can guarantee any genuine trade transaction associated with exports from, imports to, and trade between the EBRD’s countries of operations. In 2016, the EBRD financed 1,359 trade transactions worth a total of €1.5 billion, working with 71 banks across 24 countries.

The Programme enables partner banks to continue to support local businesses in those countries and regions experiencing difficulties: in Central Asia, SEMED and Ukraine, the EBRD processed trade transactions worth over €920 million during 2016. The Early Transition Countries (ETCs) continued to have a significant share of trade finance business, accounting for 34 per cent of the number of TFP transactions.

Last year, the TFP launched two new initiatives. Trade Ready blends trade finance and trade-related advisory services to boost the trade potential of SMEs, training courses for local banks and policy dialogue that seeks to improve the institutional and regulatory environment for trade finance. Green TFP is a marketing initiative that seeks to promote the use of trade finance for the import and export of products and services using environmentally friendly technology.

The TFP supports business based on the following specific selection criteria: terms and conditions must reflect sound banking risks, and private funding must not be available on reasonable terms. The project must be environmentally neutral or beneficial and socially responsible, as well as respectful of the rights and needs of communities.

The EBRD guarantees cover a wide range of goods and services, including consumer goods, commodities, equipment, machinery and power supply as well as cross-border engineering, construction, shipbuilding, technical and other services. Trade finance instruments include letters of credit, payment and other types of guarantees, bills of exchange or promissory notes, performance bonds and bid bonds. The EBRD also provides short-term loans for trade-related transactions under the TFP.

The EBRD has added factoring as a new product to its TFP in order to further support the transfer of innovative trade finance solutions and know-how to its countries of operations. Through the TFP, the EBRD also provides financing for the domestic factoring activities, including in local currencies in a number of countries. Importantly, the TFP covers the political and commercial payment risk in the international trade transactions undertaken by banks in EBRD’s countries of operations (the issuing banks) in the area of international factoring.

One of the benefits of the TFP is the flexible nature of the Programme and the ability of the EBRD to combine forces with commercial partners to enhance their participation: for example, in 2011 a TFP guarantee was issued to cover 100 per cent of the payment risk of an advance payment guarantee issued by a Ukrainian bank to Deutsche Bank. Credit Suisse shares 35 percent of the EBRD’s risk. This deal facilitated intra-regional links and trade between Ukraine and Turkmenistan and was undertaken under market conditions where no commercial banks had the appetite to take risks. The EBRD successfully invited Credit Suisse to share 35 per cent of the EBRD’s risk, demonstrating that the EBRD is ready to cover risk which cannot be covered wholly by the commercial market.

E-Learning school in trade finance

To ensure lasting transition impact and skills transfer to the TFP’s issuing banks, in 2010 the Bank launched its e-learning school in trade finance. Funded by the EBRD Shareholder Special Fund, the online programme was extended in 2011 and now offers seven modules with basic and advanced trade finance subjects as well as a module dedicated to the environmental and social issues in trade, with content fully approved by the International Chamber of Commerce (ICC). The programme already includes over 300 students from more than 83 banks in 17 countries. Expansion of this programme to include issuing banks in the southern and eastern Mediterranean (SEMED) region was one of the Bank’s first activities in that region. This project is an efficient and progressive tool which has a direct impact on the quality standards of trade transactions and, as a consequence, the sector’s development in the region.