2010 Competitiveness Report - Export-Import Bank of the United ...

10%, that are added to the MPR. Hence, the private buyer fee does not go higher than
50% over the MPR.
In 2010, as the OECD-mandated implementation date of the Malzkuhn-Drysdale
Package grew closer, the Bank decided to introduce the new fees for the Bank’s mediumterm
program in order to test the impact and utility of the new system. While the OECD
Agreement also takes an incremental approach to pricing risk, the surcharge between
each risk level (CC1-CC5) is much higher than Ex-Im’s internal pricing system. This
action created a temporary bifurcated pricing structure for the Bank’s medium- and
long-term programs, but will enable the Ex-Im to address any internal issues with the
new fee system before the formal September 1, 2011 implementation date.
G-7 ECAs’ Policies and Practices
Like Ex-Im Bank, the G-7 ECAs generally charge the MPR for sovereign transactions.
However, risk-rating methodologies, use of risk mitigants, and pricing mechanisms vary
widely among the G-7 ECAs. As a result, there is a fairly wide divergence in the fees
charged by G-7 ECAs for similar non-sovereign transactions. The difference among
ECAs in terms of experience, portfolios and philosophies generate this wide range in
private buyer risk-rating and pricing. This was evidenced during the many years of
premia negotiations when different ratings for the same or similar buyers emerged.
Years of risk rating and pricing exercises during the premia negotiations drew out the
countries that take an incremental approach to pricing non-sovereign risk and those
that take a more comprehensive approach – pricing based off of the total risk of the
buyer rather than surcharging for that risk. France, Germany and Japan use an
incremental system for pricing risk. Canada, Italy, and the United Kingdom take a more
comprehensive pricing approach. The difference in such methods generally yields lower
private buyer fees for the incremental pricing systems and higher risk premia when
using comprehensive risk pricing. A key goal of the premia negotiations was to develop
a common risk rating and pricing system so these disparities in pricing would come
closer together, particularly in competitive situations.
Over the next few years, the implementation and transparency procedures of the
Malzkuhn-Drysdale Package will be a telling sign as to whether the G-7 ECAs and other
OECD Participants in actuality are very far apart on their rating and pricing of private
buyer risk as the evidence will be based on real ECA transactions.
Exporter and Lender Survey and Focus Group Results
Results from the Exporter and Lender Survey and Focus Group indicate Ex-Im’s fees are
on average competitive with other ECAs.
Conclusion
There is a wide range in approaches to risk-based pricing among the G-7 ECAs with
some using the OECD MPRs as a reference point rather than as a benchmark. While
sovereign minimum rates no longer differ among OECD ECAs, these two approaches to
pricing results in wide range in fees for comparable private buyer risks. In order to close
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