The financial crisis has caused many banks to experience severe difficulties in finding long term funding. This, in turn, has made banks reluctant to grant new export loans, which are loans given to foreign customers to enable them to purchase products sold by a national producer. To limit the adverse impact on the supply of export credit, the European Commission has authorised a scheme in Germany under EC Treaty State aid rules.
The scheme proposes to introduce a mechanism by which the German public credit institution Kreditanstalt für Wiederaufbau (KfW), would be allowed to purchase existing credit export loans from banks. The refinancing of existing export credits will then provide banks with appropriate funding to grant new export loans to purchasers outside the European Union. Only loans that are covered by 100% export credit insurance from the Federal Government will be eligible for purchase by KfW and any new export credit granted must be the same in value as the financing received from KfW.
The Commission has found this measure to be consistent with its guidance on State support for financial institutions in the current economic crisis and has held the scheme to be appropriate and necessary to address major market disruption. The scheme has been authorised for six months, and in addition to other safeguards, will minimise any potential distortions of competition.