EBRD takes on Mongolian risk

The European Bank for Reconstruction and Development (EBRD) has extended its risk cover to Mongolia, under its trade facilitation programme.

The first transaction to be completed under the programme will facilitate the imports of cars from Germany and cover 100% of the payment risk of a letter of credit worth US$600,000 issued by Khan Bank to BHF Bank in Germany.

The trade programme was set up in 1999 to support trade to, from and within the 29 countries with the EBRD’s region of operation. The programme can help banks build track records with their correspondent confirming banks, reduce cash collateral requirements and free up clients’ working capital by providing guarantees to confirming banks for payment of various trade finance instruments issued by local banks.

The EBRD is also organising a trade finance advisory services project for Khan Bank and three other banks in Mongolia. This has been created with the help of €170,000 from the Mongolia Technical Cooperation Fund. The project will provide training, know-how transfer and operational guidance in trade finance.

Commenting on the development, Barry Maddams, deputy CEO of Khan Bank, says: “The practical approach by EBRD trade advisor Vincent O’Brien is paying dividends in terms of new trade finance business which will in turn help us maximise the benefits of the trade facilitation programme.”

The EBRD’s trade facilitation programme is on course this year to secure a new record in terms of completed transactions and business volumes. In 2007, the business volume rose to €781mn from €707mn in 2006.