The UK export credit agency has launched a letter of credit guarantee scheme to assist exporters by boosting the availability of short-term export finance.
Five banks initially – Barclays, RBS, HSBC, Lloyds TSB and Standard Chartered – are supporting the scheme by the Export Credits Guarantee Department and will be making arrangements so exporters can participate.
It will cover 282 overseas banks in 36 export markets. More banks and export markets are expected to be added to the scheme.
By sharing with banks the credit risks associated with confirmed letters of credit, ECGD aims to increase the amount of short-term export finance which the banking sector can make available to UK exporters. This is particularly important at a time when the risk appetite of the trade market has been reduced due to the difficulties in the financial sector.
A confirmed letter of credit is considered one of the most secure payment mechanisms for trade transactions.
Trade Minister Lord Davies of Abersoch said: “I believe this new scheme could provide real help to UK exporters, particularly smaller companies exporting to emerging markets, which is where letters of credit are most used and where new opportunities can be found."
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