ACCUMULATED CAPITALAccumulated profits. The state does not withdraw a dividend from this capital before the guarantee schemes are wound up.
BERNE UNIONInternational Union of Credit and Investment Insurers – an international organisation for public and semi-public guarantee agencies and for private agencies that administer state guarantee schemes.
COUNTER GUARANTEE FRAMEWORKGIEK’s Counter guarantee relieves parts of a bank’s risk tied to a guarantee the bank has issued on behalf of an exporter. There are different types of counter guarantees. The guarantee from the bank may for instance be issued as security for an advance payment from the customer to the exporter, or as a guarantee the exporter will meet his contractual obligations. A Counter Guarantee framework is a relief agreement between GIEK and a bank with regard to certain exporter. Such an agreement makes it easy for the bank to seek relief for guarantees up to a stated maximum amount.
BOUND UNDER THE EXPOSURE LIMITThe sum total of current guarantees and binding offers of guarantee, stated in NOK. This total must never exceed the exposure limit – the ceiling determined by the Storting (Norway’s parliament). Interests and costs are not included in this calculation.
BREAK-EVEN (REQUIREMENT)GIEK guarantees are issued under four different schemes. The break-even requirement is defined in the Regulations for the guarantee schemes: “The term balance for the various guarantee schemes means that balance shall be achieved between premiums, recoveries, financial income and any grants for coverage of losses on the one side, and administration costs, financial expenses and payments under guarantees on the other. Accounts for each guarantee scheme are used to measure the degree to which the break-even requirement has been achieved. Transfers of capital from GIEK to the Treasury must be made visible in the accounts of the different guarantee schemes.”
BUYER CREDITCredit provided by a financial institution in the exporter’s country to a buyer or the buyer’s bank abroad.
BUYER CREDIT GUARANTEEGIEK’s most commonly used guarantee; it is provided to a lender.
CHARTER PARTYA lease contract to charter a ship for a certain voyage or period, with or without crew and equipment. A charter party for an offshore vessel would be signed by an oil company and a shipping company, for example. The shipping company uses the income to pay down the loan and the guarantee relating to the vessel.
CLAIM PAY-OUTSee payment under the guarantee.
CO-GUARANTORA commercial bank or other actor that shares risk with GIEK.
COLLATERALWhen GIEK requires security for a guarantee, it is to be provided in the form of collateral security and/or guarantees. In the event of default and payment under the guarantee, GIEK can realise the collateral in order to reduce any loss.
COMMITMENTAt GIEK: a guarantee or group of guarantees.
COVENANTSKey financial figures or conditions which the exporter or customer must fulfil while a guarantee is current, such as equity ratio, approval of new loans, etc.
DEFAULTA debtor’s breach of the loan agreement. Payment default refers to a lack of payment and may lead to GIEK paying out under the guarantee. A technical default is a breach of other terms and conditions. See loss, provision, impairment, covenants.
DRAWDOWN PERIODSome loans are disbursed to the customer in several parts. The drawdown period is the total period during which the loan is paid out, before the customer begins paying it back. The drawdown period is part of the guarantee’s term.
EARLY REDEMPTIONCustomer’s repayment of an entire loan and guarantee before the agreed time. Early redemption occurs mostly when the customer refinances a loan guaranteed by GIEK.
ECAExport credit agency – financial institution that issues guarantees for export on behalf of a state. The majority of the world’s ECAs (including GIEK) are members of The Berne Union.
EXPORTSExports that qualify for a GIEK guarantee must consist of goods, services or investments. In practice, what GIEK guarantees are capital goods (machinery, equipment) and associated services, usually for two years. As a general rule, 30 per cent of the contract must be of Norwegian origin, or there must be some other relevant Norwegian interest involved.
EXPOSURE LIMITAn upper limit set by the Storting for the sum of current guarantees and offers. GIEK has four guarantee schemes, each with its own exposure limit, totalling NOK 173.15 billion in 2015.
FEEAn administrative one-off charge levied by GIEK for processing or facilitating a new guarantee, or for changing an existing guarantee. Fees and premiums are GIEK’s two main sources of revenue.
FUNDSSee schemes.
GIEK KREDITTFORSIKRINGA state-owned company that provides short-term guarantees for less than two years. GIEK Kredittforsikring was originally spun off from GIEK as a subsidiary and remained under GIEK until the end of 2014. Since 2015, GIEK Kredittforsikring has reported directly to the Ministry of Trade, Industry and Fisheries, though it still reinsures some of its risk with GIEK.
GUARANTEE(Previously called a policy or a guarantee policy.) Under a guarantee, GIEK takes over the risk in a loan or other financial transaction. If the loan is defaulted or the transaction in some other way leads to a loss, GIEK must compensate for this loss. The customer pays GIEK a premium and fee for this. Once the guarantee has been fully paid down, it is removed from the portfolio, outstanding liabilities and bound under the exposure limit.
IMPAIRMENTThe fall in value of an asset in the balance sheet; at GIEK, often a receivable.
LENDERA company providing loans to the importer/ buyer/debtor. Most GIEK guarantees are buyer credit guarantees tied to loans provided by Export Credit Norway and/or commercial banks.
LETTER OF CREDITA conditional payment confirmation from the buyer’s bank to the exporter’s bank and then to the exporter. A letter of credit ensures that the exporter will be paid, but can also provide security for the buyer that the exporter will dispatch the goods before receipt of payment. GIEK can relieve some the risk borne by the exporter’s bank.
LIABILITYAn amount for which GIEK has guaranteed by issuing a guarantee, and which GIEK will have to pay out if the loan is defaulted and must be compensated for in full (interest and costs will come in addition).
LOSSSee payment under the guarantee.
LOSS PROVISIONProvisions made from profit reflect the uncertainty of a guarantee or group of guarantees.
MORATORIUM (AGREEMENT)An agreement that defers a debtor country’s payment of debt to a creditor country. Used especially for agreements organised by the Paris Club.
MORATORIE (-AVTALE)Avtale som utsetter et debitorlands betaling av gjeld til et kreditorland. Brukes særlig om avtaler i regi av Parisklubben.
NORWEGIAN INTERESTA guarantee from GIEK must relate to a specific export contract and its associated financial transaction. In exceptional cases, GIEK may accept a low share of exported Norwegian goods and services if the contract in some other way promotes Norwegian value creation.
OFFER OF GUARANTEEIf the application for a guarantee is approved, GIEK offers the customer a guarantee. This offer is binding for GIEK and will therefore be included in the amount that is bound under the exposure limit. If the customer accepts the offer and meets certain preconditions, GIEK will issue the guarantee.
OUTSTANDING LIABILITYGIEK’s current guarantee portfolio, expressed in NOK. The guarantee liability is “outstanding” since all guarantees are being paid down continuously. The sum of current guarantees and offers is described as “bound under the exposure limit”.
PARIS CLUBAn association of certain industrialised creditor countries, hosted by France, for restructuring/refinancing of state-tostate debt. GIEK administers moratorium agreements because some developing countries have defaulted on loans taken out to pay Norwegian exporters.
PAYMENT UNDER THE GUARANTEE(Previously called “claim pay-out”). If GIEK has guaranteed an exporter’s or importer’s loan or other liability, and that loan or liability is breached or defaulted, GIEK must pay out to the party covered by the guarantee (the bank, exporter or foreign customer, depending on the type of guarantee). If GIEK has collateral in the goods, the collateral might be realised. If GIEK’s payment was greater than the income derived from selling the asset, the difference is considered a loss.
POLICYSee guarantee.
POLITICAL RISKRisk that loans will not be repaid because of political issues. For GIEK, the term covers risk of war, social unrest, expropriation and intervention by the authorities. State buyers may also represent political risk.
PORTOFOLIOAt GIEK: The sum total of guarantees.
PREMIUMThe price a customer pays for a guarantee from GIEK. Premiums are paid either at the same time as principal payments during the loan’s term or in advance, when the guarantee is issued. One of two main types of revenue at GIEK.
PRIMARY CAPITALFor the Developing Countries Guarantee Scheme, the Storting has allocated “initial capital” to compensate for the particularly high risk. This capital is deposited in an account with Norges Bank. The primary capital counts as part of the Developing Countries scheme capital.
PRORATA PRINCIPLEPrinciple of sharing risk on equal terms and conditions (although percentages may differ) among several risk-takers.
RECEIVABLEA claim GIEK has on another party.
RECOVERIESAmounts that GIEK receives from a debtor or from the collection and realisation of collateral after GIEK has paid out a claim. If the recovery is as large as the pay-out, GIEK loses no money on the guarantee (disregarding present value).
REINSURANCEA way of reducing one’s own risk by passing it on to another insurance company or financial institution. For example, GIEK may use another guarantee agency to reinsure some of the risk associated with certain of its own guarantees, while GIEK Kredittforsikring reinsures some of its risk with GIEK.
REVENUEGIEK receives three main types of revenue from the schemes: from customers (premiums and fees); from the state (grants, primary capital, etc.); and from Norges Bank (interest on bank deposits). With the Storting’s approval, a small proportion of revenues finances GIEK’s annual operations.
RISKGIEK has two main types of risk in its portfolio: commercial and political risk. Most cases involve both types.
SCHEMEA system stipulated by the Storting to cover certain risks by means of issuing guarantees. GIEK is assigned an exposure limit (upper limit or ceiling, in NOK) for each scheme. Each scheme issues a financial statement and needs to break even in the long term. The General Guarantee Scheme is the primary scheme, but GIEK has separate schemes for shipbuilding loans, energy purchases and developing countries. In addition, GIEK manages a tender guarantee scheme for participation in aid projects on behalf of Norfund.
SUPPLEMENT TO THE MARKETGIEK does not compete with commercial banks; if banks wish to guarantee an entire loan, GIEK remains outside the transaction. When GIEK guarantees the greater part of a loan, banks can take a smaller share. GIEK thus strengthens exports while expanding the capital markets.
SUPPLIER CREDITCredit provided by an exporter to a buyer abroad.
TERMThe duration of a guarantee. The term of a buyer credit guarantee is linked to that of the loan. The maximum term for GIEK’s guarantees is regulated by OECD’s “Arrangement on officially supported export credits”.
WAIVERPermission to deviate from a previously agreed condition in the loan agreement. Made by the bank and guarantor.