16th June 2008 (E15) – A Proposal, with the point of view that commercial banks could also finance exports, is already at the table of the Conference of Economics Ministers. Export loans with state subventions, as a part of the support of exports, will cease to be a dominant feature of the Czech Export Bank (CEB). Paradoxically, in this manner, its significance in the Czech market could increase. The Ministries of Finances and Trade suggest that these loans could be on the same terms also provided by commercial banks. However the whole process needs to be administrated by somebody. And the CNB could undertake this very role.
How flexible the new system will be depends, according to the opinion of the work-group for export financing, which participated with the Bank Association on the formulation of the proposal, largely on who will administer the process. In practice of the EU member states there are various administrators who, deputised by the state, administer the interest adjustments for advantageous export loans. Through them also usually flow all finances. They can be represented by specially established state-bodies or by private non-bank subjects, acting on the basis of deputation by a government.
The role of administrator can also be played by a bank, which acts on behalf of the Ministry of Finance.
According to the work-group, it is possible to reach an agreement only in the event that the authorised bank itself does not provide export loans, or if it is able to separate the adjustments of interest from the agenda of provision of export loans. In such a case CEB could play that role in the Czech Republic. This variant is also favoured by the deputy of the Ministry of Industry and Trade, Martin Tlapa.
Incidentally CEB, already at the beginning of June, separated the functions of the Board of Directors and of Executive Management. Therefore to separate the CEB’s own activity from administration of adjustment of loans for commercial banks should not be any problem for the bank.
Additionally the bank already has experience with the refinancing of loans. Therefore it would be a less financially demanding solution than if a special department were to be created at some Ministry.
“The proposal should be a part of the new strategy of the Czech Export bank. If it will be approved by the economics ministers and the government it could start to function roughly in the middle of next year,” stated Tlapa.
It should not be any problem for CEB to separate its own activity from administration of adjustment of loans for commercial banks.
How would the CEB function as an administrator
Advantageous export loans would be provided also by commercial banks for which the CEB would be adjusting the differences in interest towards the price for which they would be acquiring financial assets on market. Commercial banks currently already provide such loans i.e. via refinancing loans from CEB. Since the year 1996, when CEB was founded, it provided to banks 14.6 billion crowns as refinancing loans. CEB so far has financed export loans in the total amount of over 200 billion crowns.
About the author: Martina Martinovičová