Local Roots, Global Reach: How RBI Empowers Financial Institutions

The world of international trade has become increasingly uncertain, with shifting trade routes, new business partners, expanded markets, and heightened risks. “Often, when doing new business, the exporter and importer do not know each other well. Trade finance instruments, such as guarantees and letters of credit (LC), are a perfect solution to mitigate counterparty risk. However, local banks representing importers, especially in emerging markets, might not have credit ratings satisfying the requirements of the exporters,” Evgeniya Sharkova, RBI Head of Trade Finance Sales, explains one of the most common scenarios in international trade. “That’s where RBI steps in with the confirmation of a letter of credit or issuing a guarantee upon a counter-guarantee from a local bank.”

But even if a local bank has a sufficient rating to be accepted directly, there are still more boxes to be checked. “Another common struggle for local banks might be the lack of worldwide RMA connections and that’s where we can make an impact with our strong network,” the expert states. “RBI can issue and advise trade finance instruments worldwide by leveraging our strong network with over 2,000 partner banks across the globe.”

In general, local banking practices, rules, and habits can be complex to navigate. Thanks to RBI’s close relationship with international correspondence banks, our experts are familiar with all the specifics. “What makes RBI unique is our CEE footprint,” Evgeniya Sharkova notes. “We have eleven subsidiary banks, each with a fully-fledged trade finance desk. So, they are capable of issuing all kinds of instruments for our corporate and institutional clients.”

Additionally, local banks might need attractive funding for their international transactions. RBI supports institutional clients with trade loans, post-financing, and export UPAS LC (usance payable at sight export letter of credit). Some of those products combine the features of risk mitigation and attractive short-term funding. 

A good example is the export UPAS LC that can accelerate payment under the letter of credit. With an export UPAS LC, the bank of the importer issues an LC with deferred payment and a maximum total tenor of up to 360 days. RBI confirms the LC issued by the local bank to reduce risk. Thus, the exporter will mitigate the counterparty risk by taking the first-class payment risk of RBI instead of the risk of a local bank or local importer. One of the main features of the export UPAS LC is that the exporter will receive its payment under the LC at sight, which means upon presentation of the compliant shipping documents. This special form of discounting under an LC offers the exporter the possibility to improve its cash flow and optimize its balance sheet. At the same time, the export UPAS LC offers the importer an extended reimbursement obligation towards the issuing bank. 

“When it comes to mid to long-term financing, the biggest value proposition of RBI to support their clients abroad is its experience in export finance solutions and its strong cooperation with export credit agencies (ECAs),” explains Sanin Merdžan, RBI Head of Export Finance Sales. “With this we can offer a unique service: granting attractive long-term loans to importers’ local banks, so-called bank to bank buyer’s credits, for the purchases of goods and related services from abroad by their customers.”

ECA-covered buyer’s credits are usually set up for at least two years tenor up to ten years, or even longer – in certain cases allowed by the OECD Arrangement, which sets minimum standards for financing terms. RBI offers loans starting from EUR 5 million upwards, guaranteed against commercial and political risk by ECAs in the exporters’ countries, such as the Austrian OeKB, German Euler Hermes, or another Western European ECA. 

“Importers’ banks benefit from our ECA-covered finance solutions, not only thanks to attractive long-term financial conditions, but also through optimized use of their credit lines,” Sanin Merdžan highlights. “Because of the ECA guarantees, which usually cover 95% of the risk, only 5% or less of the residual risk consumes the limits of the borrowing banks and thus leaves room for other business needs, providing them with greater financial flexibility and debt capacity. Also, it may enable the importers to place larger orders and negotiate better payment terms with exporters. 

On the other hand, exporters benefit from the risk assessment, market knowledge, and payment guarantee taken on by the lending bank. “When offering financing solutions on top of the supply deal, exporters can improve their cash flow and liquidity and enhance their competitiveness in the global market,” the expert states. “Our RBI Export Finance team in Vienna has gained a lot of know-how through years of experience with different banking partners and ECAs in Europe and beyond.” Both importers and their respective local banks as well as exporters can approach RBI for an export finance solution tailored to their needs.

“We at RBI combine short-term trade finance solutions and long-term export finance services to form a seamless, comprehensive package for financial institutions and their corporate customers,” Evgeniya Sharkova summarizes. 

“With our local expertise, global network, and strong position in Central and Eastern Europe, we support international trade and help local banks stay competitive in emerging markets,” Sanin Merdžan adds. "At RBI, we want to strengthen local banks as the backbone of international trade and listen closely to our customers in order to offer effective solutions for a constantly changing business environment.”