WASHINGTON, D.C., Nov. 10 -- The International Finance Corporation (IFC) has approved a guarantee of up to US$10 million for the Russian Trade Enhancement Facility, a new US$20 million facility that will partially guarantee the credit risk of Russian banks engaged in trade finance. The facility, the first of its type to be supported by IFC, is expected to guarantee up to US$2.4 billion of Russian trade. The co-guarantor of the facility is ABN-AMRO Bank N.V., a premier Dutch bank, which will match, dollar for dollar, IFC's exposure on each transaction. ABN-AMRO is active in Russia, where it has established a branch in Moscow as well as a representative office in St. Petersburg. The facility will be administered by the Austrian subsidiary of ABN-AMRO Bank. According to Edward Nassim, Director of IFC's Europe Department, "the facility will make it possible for Russian banks to finance international trade on more attractive terms." Given the perceived high credit risk of Russian importers, exporters to Russia usu
ally require a letter of credit from a Western bank, guaranteeing payment. Under current market practice, Western banks generally establish confirmation lines of credit for Russian banks only if they are fully collateralized by cash deposits. The Russian Trade Enhancement Facility will reduce the cash collateral requirement by guaranteeing a portion of the credit. "The Russian Trade Enhancement Facility will alleviate the crippling effect of the absence of proper settlement and credit instruments on the development of trade between Russia and the rest of the world," said Mr. Sanjiv Kapur, Principal Investment Officer in the Capital Markets Division of IFC's Europe Department. IFC, a member of the World Bank Group, is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
