Why is China so against foreign business

Financing and securing foreign business


Federal export credit guarantees (so-called Hermes Cover) have been an important instrument for promoting foreign trade for decades. They protect exporters and banks from economically and politically induced payment defaults. The cover offer extends over the entire value chain - from production to delivery to payment of the last installment.

By assuming an export credit guarantee, the risk of default is largely transferred to the Federal Republic of Germany. For this, the policyholders pay a risk-adequate premium (remuneration). In the event of damage, the federal government will compensate them in the amount of the claim covered.

Export credit guarantees play a central role in risk management and financing. Thanks to the first-class credit rating of the federal government, the credit risk is reduced. This has a positive effect on the financing conditions. In many cases, Hermes Cover enables a business to be financed through credit institutions.

The federal export credit guarantees are generally available to all export companies and export financing banks based in Germany - regardless of the size of the company or the amount of the contract to be covered. Decisive for the assumption of an export credit guarantee are the eligibility for funding and the risk-related acceptability of the business.

Deliveries and services which, among other things, serve to secure and create jobs in Germany and open up new sales markets are considered to be eligible for funding. Businesses by small and medium-sized enterprises (SMEs) are particularly worthy of support.

Risk-wise justifiability means that there is a realistic prospect of damage-free progress in the export business applied for as cover.

The federal export credit guarantees complement the offerings of private credit insurers. Hermes cover comes into play where the private sector does not provide a corresponding or adequate cover offer. As a result, the federal government's business concentrates on securing deliveries and services in emerging and developing countries.

Economic policy objective

In order to avoid distortions of competition caused by the various state export finance and export credit insurance systems, OECD member states have committed themselves with the so-called OECD consensus to comply with certain framework conditions for state-supported protection and financing of export transactions. In addition, there are harmonized regulations in the EU that are binding for the EU member states. One of the important tasks of the BMWi is to further develop the international regulations and to adapt them to current developments. This is to ensure that exporters compete on the price and quality of export products and not on the level of government support.

Export credit guarantees issued by the federal government in 2020

In 2020, the federal government secured exports totaling 16.7 billion euros with export credit guarantees. The majority of the goods and services covered went to emerging and developing countries. Their share in the newly acquired cover volume was 80.4%.

With regard to the Covid-19 pandemic, the EU Commission decided to expand the coverage options to include short-term transactions in the EU and the core OECD countries (so-called marketable risks). Among other things, this led to an increase in the number of applications of around 35% compared to the same period in the previous year. Against the background of the COVID-19 crisis, numerous companies applied for an export credit guarantee for the first time.

With EUR 507.8 million, the federal export credit guarantees made a positive contribution to the federal budget in 2020. Immediately after the outbreak of the COVID-19 pandemic, the federal government took various support measures to support the German export industry and those employed there. Above all, the decision to carry out a modified risk assessment that takes into account the economic situation of the foreign customer before the outbreak of the crisis and the viability of his business model in the post-COVID era was particularly groundbreaking.

With this fundamental decision, the Federal Government has laid the foundation for deliveries and services as well as export financing to be secured with export credit guarantees to a considerable extent in 2020.

With the 5-point package of measures, the federal government also passed a corona-specific support program for the German export industry, which aims to improve the liquidity situation of exporters and importers, facilitate business financing and expand the refinancing options of banks in connection with export business.

Export Credit Guarantees - Responsibilities and Management

The export credit guarantees are processed on behalf of the federal government by Euler Hermes AG as a federal mandate. The Interministerial Committee for Export Credit Guarantees decides by consensus on the coverage policy and the acceptance of an application for export credit guarantees for export transactions. In addition to the lead Federal Ministry for Economic Affairs and Energy, the committee includes the Federal Ministry of Finance (BMF), the Foreign Office (AA) and the Ministry for Economic Cooperation and Development (BMZ).

Consideration of environmental and social standards as well as compliance with human rights

The Federal Government attaches particular importance to the observance of environmental and social standards as well as the observance of human rights when accepting export credit guarantees. It does not provide cover for export transactions that violate international environmental, social and human rights standards.

For projects and transactions within the scope of the Common Approaches of the OECD (Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence), environmental, social and human rights aspects are an integral part of the assessment procedure. If there are indications of significant negative environmental or social impacts of a project or indications of human rights violations, a transaction is subjected to an environmental, social and human rights review regardless of the underlying credit period and the contract value.

Export credit guarantees and their contribution to more climate protection

The federal government is working intensively on the question of what additional contribution the guarantee instruments of foreign trade promotion can make in order to achieve the goals of the Paris climate protection agreement. In 2020, the federal government expanded the coverage options for business in the field of renewable energies and improved their financing options. In addition, the federal government decided to limit the coverage options for certain transactions with a high climate impact.

Both measures are part of a step-by-step climate strategy that is to be further developed in the course of 2021. The aim of the climate strategy is to support German exporters in the upcoming transformation on the way to a low-carbon economy and to provide them with a reliable framework that offers them and their foreign buyers planning security. The measures should be based on international standards and take place in coordination with other important actors at European and international level. The strategy aims to ensure a level playing field in the area of ‚Äč‚Äčexport credit guarantees and to prevent competitive disadvantages for German companies.