Export-Import Bank (Ex-Im Bank) Reauthorization
September 2, 2014
Export-Import Bank (Ex-Im Bank) Reauthorization
small business exports, and not less than 10% to finance
Background
renewable energy-related exports. It also must promote
financing to sub-Saharan Africa, but does not have a
What is Ex-Im Bank? As the official U.S. export credit
quantitative target. While the Bank seeks to support these
agency (ECA), Ex-Im Bank finances and insures U.S.
export goals, it is demand-driven, and its activity depends
exports of goods and services with the goal of supporting
on alignment with commercial interest and opportunities.
U.S. jobs. On a demand-driven basis, it seeks to support
What is the international context? Ex-Im Bank has many
exports that the private sector is unwilling or unable to
foreign counterparts (see Figure 1). It abides by the
finance alone at commercially viable terms for exporting;
Organization for Economic Cooperation and Development
and/or to counter government-backed financing offered by
(OECD) Arrangement on Officially Supported Export
foreign countries through their ECAs. The rationales behind
Credits (the Arrangement), which establishes disciplines on
Ex-Im Bank’s activities are subject to congressional debate.
the terms and conditions for government-backed export
financing, such as minimum interest rates, risk fees, and
Ex-Im Bank Products
maximum repayment terms. The Arrangement is intended
Direct loan: Fixed-rate loan to foreign buyers of U.S. exports—
to ensure that price and quality, not financing terms, guide
usually capital-intensive exports (e.g., aircraft, mining equipment).
purchasing decisions. Over time, unregulated ECA
Loan guarantee:
financing has grown, with emerging economies that are not
Guarantee to a lender that, if default by the
buyer, payment of outstanding principal and interest on the loan.
a part of the OECD providing export financing through
their ECAs and OECD members providing certain forms of
Insurance: Protects U.S. exporters against risk of loss from non-
export financing not regulated by the Arrangement.
payment should a foreign buyer or other foreign debtor default.
Working capital: Short-term, secured working capital loans and
Figure 1. New Medium- and Long-Term Official
guarantees, usual y to smal businesses.
Export Credit Volumes for Selected ECAs, 2013
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? Ex-
Im 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
Source: Ex-Im Bank, 2013 Competitiveness Report, June 2014.
on total outstanding credit and insurance) to $160 billion by
Note: Data subject to analytic assumptions and limited by availability
FY2018—up from the $140 billion cap for FY2014.
of information. OECD ECAs’ unregulated financing may be omitted.
What are statutory requirements for Ex-Im Bank’s
support? Under its charter, Ex-Im Bank’s financing must
What does its activity look like? According to Ex-Im
offer a “reasonable assurance of repayment” and should
Bank, in FY2013, it authorized $27.3 billion in credit and
“supplement and encourage, and not compete with, private
insurance transactions worldwide (see Figure 2),
capital.” The Bank considers a proposed transaction’s
supporting an estimated $37.4 billion of U.S. exports. U.S.
potential U.S. economic and environmental impact, among
small businesses account for the majority of Ex-Im Bank’s
other policy issues. Based on its jobs mandate, Ex-Im Bank
transactions by number (89% in FY2013), while larger
requires a certain amount of U.S. content (85% for
companies represent the majority by dollar amount. In
medium- and long-term transactions) for an export contract
FY2013, the Bank’s worldwide exposure, subject to a
to receive full financing from the Bank. In addition,
statutory limit of $130 billion for that year, reached a
products generally must be shipped on U.S. flag vessels.
reported $113.8 billion—a record high following increased
demand after the 2008-2009 financial crisis.
Congress further requires Ex-Im Bank to support certain
types of exports. For example, the Bank must make
How does Ex-Im Bank manage risk? Ex-Im Bank
available not less than 20% of its total authority to finance
assesses credit and other risks of proposed transactions,
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Export-Import Bank (Ex-Im Bank) Reauthorization
monitors current commitments for risks, and maintains
in FY2014, subject to certain requirements. The legislation
reserves against losses. It reported a default rate of 0.194%
also required Ex-Im Bank to monitor its default rate and
as of June 2014 (provided quarterly to Congress). It also
take specific action if it equals or exceeds 2%; develop
has reported a recovery rate of 50 cents on the dollar on
guidelines for its economic impact analysis; and review its
average for transactions in default since 1992.
domestic content policy. Among other things, it also
required the Secretary of the Treasury to negotiate
What is Ex-Im Bank’s appropriation? Ex-Im Bank’s
internationally to reduce and eliminate government-backed
revenues include the interest, risk premia, and other fees it
export credits.
charges for services. Such revenues in excess of forecasted
Reauthorization Issues for Congress
losses are recorded as offsetting collections. As part of the
annual appropriations process, Congress and the President
The issues facing Congress are twofold. The first issue is
set an upper limit on the amount of these offsetting
whether to renew Ex-Im Bank’s authority. Scenarios
collections available to Ex-Im Bank to fund its operations;
include a “clean” reauthorization or reauthorization with
provide a direct appropriation for its Office of Inspector
reforms; a sunset in authority (raising questions about the
General (OIG); and allow it to retain carryover funds for a
“winding down” of its operations); and a reorganization of
limited period of time. For FY2014, the Bank was provided
its functions (such as consolidation with other trade
a limit of $115.5 million for administrative expenses,
agencies). Second, should Congress choose to reauthorize
funding of $5.1 million for the OIG, and up to $10 million
Ex-Im Bank, possible issues include:
in carryover authority until September 30, 2017. Ex-Im
•
Bank reported providing $1.1 billion to the Treasury in
Length of reauthorization. Shorter extensions of
FY2013 after covering operating expenses and loan loss
authority in the past arguably have given Congress the
reserves.
opportunity to weigh in more frequently on Ex-Im
Bank operations through the lawmaking process, while
Figure 2. Ex-Im Bank Activity Composition, FY2013
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
Source: Ex-Im Bank, FY2013 Annual Report.
prudentially manage risk and minimize potential
taxpayer losses, while enabling it to take on appropriate
Reauthorization Debate
risks to meet its U.S. exports and jobs mandate.
•
What is the general debate? While Congress has renewed
International disciplines. For some stakeholders, the
Ex-Im Bank’s authority many times, reauthorization is
growth in unregulated financing has raised questions
subject to increasing debate—coinciding with questions
about the OECD Arrangement’s effectiveness. It also
over the role of the U.S. government in supporting exports,
has prompted consideration of efforts to bring China
the appropriate size and scope of the government, and other
and other non-OECD countries into the Arrangement,
issues. Proponents contend that the Bank supports U.S.
as well as U.S. efforts to negotiate separate export
exports and jobs by filling in gaps in private sector
credit disciplines with China. Others call for a focus on
financing and helping U.S. exporters compete against
U.S. efforts to reduce and eliminate government-
foreign companies backed by their ECAs. Critics contend
backed export financing through international
that it crowds out private sector activity, picks winners and
negotiations in the OECD and other venues.
losers through its support, operates as a form of corporate
For more information, see CRS Report R43671, Export-
welfare, and poses a risk to taxpayers.
Import Bank Reauthorization: Frequently Asked Questions,
What was the outcome of the 2012 reauthorization
coordinated by Shayerah Ilias Akhtar; and CRS In Focus
debate? In the 112th Congress, after active debate,
IF00039, Export-Import Bank (Ex-Im) and the Federal
legislation (P.L. 112-122) was passed on a bipartisan basis
Budget, by Mindy R. Levit.
(House vote 330-93; Senate vote 78-20) to extend Ex-Im
Shayerah Ilias Akhtar, siliasakhtar@crs.loc.gov, 7-9253
Bank’s authority through FY2014 and incrementally
increase its exposure cap from $100 billion to $140 billion
IF00021
www.crs.gov | 7-5700