Government proposes improvements in export financing
On 10 November 2016, the Government presented legislative proposals to Parliament that aim to ensure more competitive financing for Finnish companies engaged in exporting capital goods and thus to improve their export opportunities.
The scope for banks to finance major export deals is limited because of the stricter solvency regulations that apply. For this reason, Finnish Export Credit Ltd and Finnvera Plc have an important role in financing exports of capital goods. The legislative proposals seek to address the growing demand for finance in Finland’s key sectors exporting capital goods.
The Government's line is to seek to preserve the export financing authorisations and terms of financing at the level prevailing in Finland’s principal competitor countries. To achieve this objective the export credit guarantee authorisations and the authorisations for export credits and interest equalisation will be raised, allowing financing pursuant to OECD guidelines to be secured for the export deals of Finnish companies.
Finnish Export Credit Ltd’s authorisations raised to maximum of EUR 22 billion and Finnvera Plc’s export credit guarantees to maximum of EUR 27 billion
To promote exports, it is proposed that the Act on Officially Supported Export and Ship Credits and Intrest Equalisation be amended by increasing the maximum authorisations for Finnish Export Credit Ltd’s export and shipbuilding credits to EUR 22 billion from EUR 13 billion, and the interest equalisation authorisation also from EUR 13 billion to EUR 22 billion.
It is proposed that the Act on the State's Export Credit Guarantees be amended so as to increase the combined liability of the export credit guarantees granted by Finnvera Plc and the hedging arrangements to EUR 27 billion from EUR 19 billion. This includes an increase of EUR 3.5 billion in the guarantee authorisation for special risk-taking, to EUR 5 billion.
An amendment is also proposed to the Act on the State-Owned Specialised Financing Company. Under the proposal, loans of up to EUR 3 billion, mainly short-term in nature, could be granted from the Budget if Finnvera is unable itself to acquire funds on reasonable terms.
A requirement for obtaining export finance is that the exports should contribute to the development of the Finnish economy. It is now proposed that provisions on the terms and conditions be set out by Government decree. The aim is to take better account of the internationalisation of business than at present.
“Export growth and competitive exports are vitally important for Finland’s wellbeing and for employment. Financing is a key element of the competitiveness of capital-intensive exports. The Government wants to ensure that export growth is not stifled by a lack of competitive finance,” says Minister of Economic Affairs Olli Rehn.
Although the increases in authorisations are significant, they are not expected to lead to any direct expenditure increase in public finances. However, the increase in the maximum amount of export credit guarantees by EUR 8 billion will add to the export financing risk. Any export credit guarantee claims would be paid primarily from the guarantee fee income for the year in which the claim is payable, and subsequently from Finnvera Plc’s reserve for export credit guarantee and special guarantee operations and from the State Guarantee Fund. These assets are expected to cover the credit risks of the guarantee portfolio.
Hannu Väänänen, Special Adviser, Ministry of Economic Affairs and Employment, tel. +358 50 410 4909
Kari Parkkonen, Senior Government Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 506 4938