Export-Import Bank (Ex-Im Bank) Reauthorization

September 2, 2014

Export-Import Bank (Ex-Im Bank) Reauthorization

Background

What is Ex-Im Bank? As the official U.S. export credit

agency (ECA), Ex-Im Bank finances and insures U.S.

exports of goods and services with the goal of supporting

U.S. jobs. On a demand-driven basis, it seeks to support

exports that the private sector is unwilling or unable to

finance alone at commercially viable terms for exporting;

and/or to counter government-backed financing offered by

foreign countries through their ECAs. The rationales behind

Ex-Im Bank’s activities are subject to congressional debate.

Ex-Im Bank Products

Direct loan: Fixed-rate loan to foreign buyers of U.S. exports—

usually capital-intensive exports (e.g., aircraft, mining equipment).

Loan guarantee: Guarantee to a lender that, if default by the

buyer, payment of outstanding principal and interest on the loan.

Insurance: Protects U.S. exporters against risk of loss from nonpayment should a foreign buyer or other foreign debtor default.

Working capital: Short-term, secured working capital loans and

guarantees, usually to small businesses.

Special financing programs: Focus on a particular industry or

financing technique, e.g., aircraft, project, and supply chain finance.

What is the congressional interest and state of play? ExIm Bank’s general statutory charter (the Export-Import

Bank Act of 1945, as amended) expires on September 30,

2014. Currently, Congress is considering whether to renew

Ex-Im Bank’s authority; if so, under what terms; and if not,

the possibility of other policy options. Proposals in the 113th

Congress include a largely “clean” reauthorization of the

Bank; reauthorization with reforms; and termination of

authority. The Obama Administration’s April 2014

legislative proposal calls for a five-year renewal of Ex-Im

Bank’s authority and an increase in its exposure cap (limit

on total outstanding credit and insurance) to $160 billion by

FY2018—up from the $140 billion cap for FY2014.

What are statutory requirements for Ex-Im Bank’s

support? Under its charter, Ex-Im Bank’s financing must

offer a “reasonable assurance of repayment” and should

“supplement and encourage, and not compete with, private

capital.” The Bank considers a proposed transaction’s

potential U.S. economic and environmental impact, among

other policy issues. Based on its jobs mandate, Ex-Im Bank

requires a certain amount of U.S. content (85% for

medium- and long-term transactions) for an export contract

to receive full financing from the Bank. In addition,

products generally must be shipped on U.S. flag vessels.

Congress further requires Ex-Im Bank to support certain

types of exports. For example, the Bank must make

available not less than 20% of its total authority to finance

small business exports, and not less than 10% to finance

renewable energy-related exports. It also must promote

financing to sub-Saharan Africa, but does not have a

quantitative target. While the Bank seeks to support these

export goals, it is demand-driven, and its activity depends

on alignment with commercial interest and opportunities.

What is the international context? Ex-Im Bank has many

foreign counterparts (see Figure 1). It abides by the

Organization for Economic Cooperation and Development

(OECD) Arrangement on Officially Supported Export

Credits (the Arrangement), which establishes disciplines on

the terms and conditions for government-backed export

financing, such as minimum interest rates, risk fees, and

maximum repayment terms. The Arrangement is intended

to ensure that price and quality, not financing terms, guide

purchasing decisions. Over time, unregulated ECA

financing has grown, with emerging economies that are not

a part of the OECD providing export financing through

their ECAs and OECD members providing certain forms of

export financing not regulated by the Arrangement.

Figure 1. New Medium- and Long-Term Official

Export Credit Volumes for Selected ECAs, 2013

Source: Ex-Im Bank, 2013 Competitiveness Report, June 2014.

Note: Data subject to analytic assumptions and limited by availability

of information. OECD ECAs’ unregulated financing may be omitted.

What does its activity look like? According to Ex-Im

Bank, in FY2013, it authorized $27.3 billion in credit and

insurance transactions worldwide (see Figure 2),

supporting an estimated $37.4 billion of U.S. exports. U.S.

small businesses account for the majority of Ex-Im Bank’s

transactions by number (89% in FY2013), while larger

companies represent the majority by dollar amount. In

FY2013, the Bank’s worldwide exposure, subject to a

statutory limit of $130 billion for that year, reached a

reported $113.8 billion—a record high following increased

demand after the 2008-2009 financial crisis.

How does Ex-Im Bank manage risk? Ex-Im Bank

assesses credit and other risks of proposed transactions,

www.crs.gov | 7-5700

Export-Import Bank (Ex-Im Bank) Reauthorization

monitors current commitments for risks, and maintains

reserves against losses. It reported a default rate of 0.194%

as of June 2014 (provided quarterly to Congress). It also

has reported a recovery rate of 50 cents on the dollar on

average for transactions in default since 1992.

What is Ex-Im Bank’s appropriation? Ex-Im Bank’s

revenues include the interest, risk premia, and other fees it

charges for services. Such revenues in excess of forecasted

losses are recorded as offsetting collections. As part of the

annual appropriations process, Congress and the President

set an upper limit on the amount of these offsetting

collections available to Ex-Im Bank to fund its operations;

provide a direct appropriation for its Office of Inspector

General (OIG); and allow it to retain carryover funds for a

limited period of time. For FY2014, the Bank was provided

a limit of $115.5 million for administrative expenses,

funding of $5.1 million for the OIG, and up to $10 million

in carryover authority until September 30, 2017. Ex-Im

Bank reported providing $1.1 billion to the Treasury in

FY2013 after covering operating expenses and loan loss

reserves.

in FY2014, subject to certain requirements. The legislation

also required Ex-Im Bank to monitor its default rate and

take specific action if it equals or exceeds 2%; develop

guidelines for its economic impact analysis; and review its

domestic content policy. Among other things, it also

required the Secretary of the Treasury to negotiate

internationally to reduce and eliminate government-backed

export credits.

Reauthorization Issues for Congress

The issues facing Congress are twofold. The first issue is

whether to renew Ex-Im Bank’s authority. Scenarios

include a “clean” reauthorization or reauthorization with

reforms; a sunset in authority (raising questions about the

“winding down” of its operations); and a reorganization of

its functions (such as consolidation with other trade

agencies). Second, should Congress choose to reauthorize

Ex-Im Bank, possible issues include:

•

Length of reauthorization. Shorter extensions of

authority in the past arguably have given Congress the

opportunity to weigh in more frequently on Ex-Im

Bank operations through the lawmaking process, while

longer extensions could enhance the Bank’s long-term

planning ability and provide more assurance to clients

of its viability.

•

Policies. Possible revisions to Ex-Im Bank’s policies

could be viewed in the context of the agency’s

effectiveness and efficiency in meeting its statutory

mandate and other requirements; the competitiveness

of its policies relative to those of foreign ECAs; and

implications of any changes for balancing business,

labor, environmental, taxpayer, and other stakeholder

interests.

•

Financial soundness and risk management. Ex-Im

Bank’s increased exposure levels have heightened

congressional interest in Ex-Im Bank’s financial

soundness. Congress may consider the balance between

ensuring that Ex-Im Bank’s credit standards, due

diligence, and other practices allow the Bank to

prudentially manage risk and minimize potential

taxpayer losses, while enabling it to take on appropriate

risks to meet its U.S. exports and jobs mandate.

•

International disciplines. For some stakeholders, the

growth in unregulated financing has raised questions

about the OECD Arrangement’s effectiveness. It also

has prompted consideration of efforts to bring China

and other non-OECD countries into the Arrangement,

as well as U.S. efforts to negotiate separate export

credit disciplines with China. Others call for a focus on

U.S. efforts to reduce and eliminate governmentbacked export financing through international

negotiations in the OECD and other venues.

Figure 2. Ex-Im Bank Activity Composition, FY2013

Source: Ex-Im Bank, FY2013 Annual Report.

Reauthorization Debate

What is the general debate? While Congress has renewed

Ex-Im Bank’s authority many times, reauthorization is

subject to increasing debate—coinciding with questions

over the role of the U.S. government in supporting exports,

the appropriate size and scope of the government, and other

issues. Proponents contend that the Bank supports U.S.

exports and jobs by filling in gaps in private sector

financing and helping U.S. exporters compete against

foreign companies backed by their ECAs. Critics contend

that it crowds out private sector activity, picks winners and

losers through its support, operates as a form of corporate

welfare, and poses a risk to taxpayers.

What was the outcome of the 2012 reauthorization

debate? In the 112th Congress, after active debate,

legislation (P.L. 112-122) was passed on a bipartisan basis

(House vote 330-93; Senate vote 78-20) to extend Ex-Im

Bank’s authority through FY2014 and incrementally

increase its exposure cap from $100 billion to $140 billion

For more information, see CRS Report R43671, ExportImport Bank Reauthorization: Frequently Asked Questions,

coordinated by Shayerah Ilias Akhtar; and CRS In Focus

IF00039, Export-Import Bank (Ex-Im) and the Federal

Budget, by Mindy R. Levit.

Shayerah Ilias Akhtar, siliasakhtar@crs.loc.gov, 7-9253

www.crs.gov | 7-5700

IF00021