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Revised repayment terms under the OECD framework on export credits could be challenging for banks, prompting increased demand for alternative means of funding, according to industry experts.

Negotiators secured a modernisation of the OECD Arrangement on Officially Supported Export Credits in March, which saw maximum repayment terms for export credit agency (ECA)-supported, climate-friendly projects extended to 22 years, while the maximum tenor for all projects was upped from 10 to 15 years.

Speaking at GTR Nordics last week, Chris Mitman, head of export and agency finance at Investec Bank, asked panellists whether “these extended tenors go too far” and suggested that banks may struggle to fund these longer-term deals at the same volume.

“The demand is definitely there. But of course it will be challenging for certain banks, especially in the current macroeconomic climate. All the banks are struggling with much higher funding costs compared to two or three years ago,” said Nazli Konac Edgu, director of export and agency finance at Citi.

The revised terms will likely see more direct lending coming from ECAs, alongside increased demand for refinancing guarantees, Edgu said.

“I think we will see more and more non-bank institutional investors with more appetite for longer tenors coming to fund these projects and managing these longer tenors,” she said. “There will be lots of demand to accommodate alternative solutions in terms of funding, because just with commercial bank funding, it’s a bit too far. We need to find these alternative solutions.”

Pontus Davidsson, head of international finance at the Swedish Export Credit Corporation (SEK), added that some banks may put limits on “doing floating or fixed rates for these tenors”, but overall the changes don’t go too far.

“We have yet to see this type of long request coming to us,” Davidsson said. “But we definitely see this as a win-win for all parties. The borrower will get attractive funding for long-dated tenors for needed climate financing, the commercial or international banks will engage in a stronger relationship with the borrower, and SEK will make sure that there is a strong export financing link to the Swedish exporter.”

More education is needed to spread the word about the updated terms, Mitman added, after 75% of the audience reported they were unaware of the modernisation.

And discussing whether the modernisation has resulted in more deals, the panellists agreed it was too early to tell what effects the terms were having, though Edgu anticipated a spike in deal flow for renewable projects in future that would benefit from the update.