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Since 1978, the OECD countries have been parties to an agreement,
which regulates the use of export credits - the Consensus
agreement. The aim is to ensure that all the countries, which have
ratified the agreement, offer their respective export industries
identical financing terms. The Consensus agreement is based on the
fact that there is credit competition between exporters from
several countries. The agreement stipulates minimum lending rates,
maximum financing period, and sets limits to maturity and
financing amount. |
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The main principle of the Consensus agreement is that different
terms of financing shall apply to different groups of recipient
countries. The nations of the world are therefore divided into two
categories:
I High income countries, 2-5 year loan terms. II Low income
countries, 2-10 year loan terms |
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The interest rate is fixed from the date of commitment and varies
depending of the loan currency. It is based on the government bond
rate in the various currencies and is referred to as CIRR (Commercial
Interest Reference Rate) CIRR is set on a monthly basis and may be
offered in all hard currencies. Financing is offered at a fixed
rate of interest valid for 120 days from the date of commitment.
The rate is therefore hedged at no cost throughout this period,
and the borrower is not affected by any rise in interest rates
during the loan commitment period. However, the borrower will
benefit from any fall in interest rates. Interest rate hedging of
this kind is also available in commercial markets, but only at
substantial costs |
