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Sid bank lecture

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    • 1. International EconomicDevelopment for SloveneEconomy with instruments ofLong Term Financing andInsuranceSibil Svilan, President of Management BoardRoman Rojc, Director, Research and Strategy
    • 2. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future roleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 3. MissionWe develope and provide long-termfinancial services, designed tosupplement financial markets and insuch way stimulate competitive positionof the economy, creating new jobs andsustainable development of Slovenia.ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 4. • Established as a Stock Company, 1992, under the Law of Slovenianexport company for insuring and financing Slovenian export.• Transformation to national Export and Development Bank 2005 –2008.• Ownership: Republic of Slovenia - 100%.• Meeting customers’ demands and business needs in the area ofmarket gaps and failures.• Current credit rating: Ba1 (Moody’s).Company profile46 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 5. Key Figuresmillion EUR 2008 2009 2010 2011 2012Rating / Aa2(Moody’s)Aa2(Moody’s)A1(Moody’s)Baa2(Moody’s)Total Assets 2.088 3.025 3.896 4.029 4.088Equity 161 322 328 332 340CIR29,3 22,4 15,1 13,1 8,5Net Profit2,8 0,9 5,7 6,5 5,0CapitalAdequacy11,1% 16,7% 13,5% 14,4% 14,2%No. of Employees76 87 94 112 12456 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 6. Legal Status, Purpose & Visibility6SID Bank is a specialized promotion and development bank with its own legal nature of creditinstitution and Export Credit Agency/Bank (ECA), equity and cash assets.SID Bank has the legal status of a State-owned bank as has been established by:• The Law of Slovene Export and Development Bank• The Law on Insurance and Financing of International Business TransactionsIt operates under the supervision of the Bank of Slovenia, Agency for Insurance Supervision, Ministryof Finance and Ministry of Economy.• Sustainable finance and insurance• Good reputation - responsible lending• SID Bank’s loan programs are offered through majority of Slovenias commercial banks• SID Bank’s extensive involvement in government’s anti-crisis measures confirmed its central andleading role among all public-promotion institutions• SID Bank’s importance for national economy and sustainable development of the Republic ofSlovenia is highly acknowledged among all stakeholdersSID Bank’s purpose is development and promotion of tasks and services that address market gaps andfailures across the following areas:• International trade and economic cooperation,• SMEs,• RDI - Research, development and innovation,• Enterpreneurial and educational activities,• Ecology, energy and construction of infrastructure,and other areas, which are important for development of Republic of Slovenia.VisibilityPurposeLegal Status6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 7. Covering market gap – complementary servicesFinancing,bonds/guaranteesInsurance(as a national ECA)Other financial &information servicesStrategy and business modelSpecialized (public) export, promotion and development bank withThe Role of SID Bankmandate for promotional and development financial services76 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 8. 8Position of SID BankTIMEYIELDMARKETCommercial banks,insurancecompanies…RISKSStateFundsAgenciesICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 9. 9• Financing projects important for sustainable development, (Re/Co) financing banks• Risk participation (funded, unfunded)• Guarantees• Credit rating informationTwo WaysOn its own account, SID Banks provides:On account of the State, SID Bank offers:• Insurance of– medium/short term export credits against commercial and non-commercial risks– outward investments against non-commercial and commercial risks– Interest Rate Equalization Program• Lead mandate on administrative procedures for state guarantees in financial crisis• Other transactions on special authorization6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 10. Business Model of DFISource: UN-DESA, 2005ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 11. DFI’s Main FunctionsICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 12. Appearances of DFIICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 13. Typical Development Banks - IMultilateral DBWorld Bank EIB + EIF CEB EBRD BSTDB NIB050100150200250300350400VolumeofBusiness(blnUS$)Durban, SA, March 2013:BRICS Development BankICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 14. Typical Development Banks– IINational DBKfW Group, Germany Development Bank of Japan HBOR, Croatia SACE + Mediocredito, Italy EXIM, USA1101001000Obimumrd€• INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI)• INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI)• INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI)• NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT(NABARD).• SMALL INDUSTRIAL DEVELOPMENT BANK OF INDIA (SIDBI)ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 15. Export Credit AgenciesMULTILATERAL NATIONAL (PUBLIC) PRIVATEGlobal- MIGA/WBRegional- ATI, KenyaDirect Insurers- Atradius, Holland- Euler Hermes, Nemačka- Coface, Francuska(Re)insurers- Munich Re- Swiss RePure cover ECA- SACE, Italy- AIC, USA- Chubb, USA- Euler Hermes, Germany- Coface, FranceExport Creditors- Czech Export Bank- Hungarian Export Import BankInsurance + Creditors- EDC, Canada- US EXIM, USA- Eximbank SR- OeKB, Austria- Finnvera, FinlandICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 16. Peer ComparisonHBORKfWBankengruppeOeKB ICOKoreaDevelopmentBankBNDESCountry Slovenia Croatia Germany Austria Spain Korea BrazilFounded 2007 1992 1948 1946 1971 1954 1952Ratings Baa2 (Moodys) Baa3/BB+ Aaa/AAA/AAA Aaa/AA+ Baa3/BBB/BBB- A1/A/A+ Baa1/BBB-/BBBOwnership100% StateOwned100% StateOwned80% Fed. Gov.20% Fed. StatesWholly ownedby AustrianBanks100% StateOwned100%GovernmentOwned100% FederalRepublicState SupportGuarantee to AllObligationsGuarantee to AllObligationsGuarantee to AllObligationsAuthorized bythe StateGuarantee to AllObligationsGuarantee toSomeObligationsImplicit SupportSupervisionMin. of FinanceBank of SloveniaParlamentParlamentMinistry ofFinanceMinistry ofFinanceMinistry ofEconomicAffairsFinancialServicesCommisionMinistry ofEconomicDevelopmentTotal Assets US$5.5 bn US$3.9 bn US$640.4 bn US$50.5 bn US$125.6 bn US$128.4 bn US$336.7 bnTotal Equity US$0.5 bn US$1.3 bn US$23.0 bn US$0.8 bn US$4.8 bn US$17.7 bn US$34.5 bnICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 17. SID Bank Group17SID - First CreditInsurance CompanyInc., LjubljanaPro Kolekt d.o.o.,LjubljanaPrvi Faktor d.o.o.,LjubljanaCMSR - Centre forInternationalCooperation andDevelopment, Ljubljana(Export) credit insurance(ST – marketable)Debt collection, CreditinformationFactoringResearch and analyses,Consulting, Informationactivities, Bilateral ODA,Soft loans, Mixed credits100% of Total Assets 100% of Total Assets 50% of Total Assets 100% of Total Assets6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 18. SID Bank Group - Main ServicesExport, promotional & development financeExport credit and investment insurance(non-marketable), IREP – as national ECA(Export) credit insurance (ST – marketable)Debt collection, Credit informationFactoringResearch and analyses, Consulting, Information activities,Bilateral ODA, Soft loans, Mixed creditsICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 19. Usage of SID Bank’s ServicesFor the purpose of the Internalization - 8 bln €ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 20. SID Bank’s response on crisisInsuranceLoansSupport for 5.900 companies(small, middle, big, export oriented, project, new business models,develop,ment investments…)Slovenian economy business financing and insuranceThe volume of supportedSlovenian exports amounting toEUR 25.3 billionWith € 4.5 billion financed projectsacross SloveniaFinancing 28 developmentprojects of the automotive industry- € 211 millionImplemented 3 guarantee schemefor the RS - the total quota €1.6billionICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 21. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future roleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 22. Openess of the SlovenianeconomySource: J. MencingerRelativelly open economiesRelativelly “closed”economies6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 23. Merchandise trade – realICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 24. ST indicators of economic activityICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 25. Change in Slovenia’smarket sharesICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 26. Global economic circumstancesSource: FT6 June 2013 ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 27. The New (Ab)normalNormal?- insolvent banking systems- insolvent sovereigns (and sub-sovereigns) - zero-risks investments?- rock-solid countries with 200% debt to GDP ratio- misinformation and manufactured "News", mistrust and "violent" markets volatility- expectation of "unexpected"? (no one knows anything...)- downgrades, increased corporate defaults, "voluntary" haircuts- flood of unregulated derivatives, high frequency trading- higher anticipated inflation and subsequently erosion of wealth- concentration of wealth among few- unemployment insurance, mortgage debt restructuring, credit counseling, betteraccess to health insurance?....- liquidity-constrained consumers, low confidence, job insecurity, discount retailers....--- Abnormal is the new "normal"------ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 28. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future RoleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 29. • Preparing companies to enterforeign markets• Support to companies enteringnew markets• Strengthening of the presenceon traditional markets• Ensuring safety andpossibilities of competitiveappearance on traditional andnew foreign markets• Introduction of higher forms ofinternationalizationExport support systemSource: MI 2011PRESIDENT OF THE RSPREMIERME, MFASPIRIT, SPS, STO, UKOMASSOCIATIONS,CHAMBERSCOMPANIESSID BANK, CMSRICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 30. Goals I.• Programme of the Government of the RS for PromotingInternactionalization of Companies 2010-2014• Action Plan “International Challenges” – on yearly basis• Supporting Activities (Economic Diplomacy; Informational andInstitutional Support, Financial Support), Budget, Indicators, Volumes• Priority Sectors• Perspective• Traditional• Priority Countries/Markets• Existing• Markets with need for repositioning• New Markets• High Technology Advanced Countries• Reconciliation of Work and Needs of all Participators• Strategic Council fo Internationalization (Chambre of Commerce)ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 31. Goals II.• Harmonized performance of all government institutions in the field ofinternational directing and promotion of the Slovenian economy• Increase in Slovenian export growth• Increase in new market entrance by Slovenian companies• Increase in share of total export to selected markets• Increase in number of exporters outside SEE and EU• Increase in recognition of Slovenia as good location for foreigninvestments; decreasing obstacles for FDI• Increase in inward FDI to the level of 33% of BDPICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 32. Academy of InternationalizationICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 33. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future RoleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 34. 34Financing facilities provided by SID Bank include:• Loans (incl. suppliers’ credit, buyer’s credit, syndicatedloans)• Project financing• Purchase of receivables• Acquisition of assets• Risks participation and guarantees• Mezzanine financing (in preparation)Main characteristics:• Long-term financing• Multi-currency financing• Variable or fixed interest rate• Individual approachFinancing6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 35. Promotional Export FinancingSupported Export Projects and Outward FDI (2008-2012)70 projects in total sum of 460 mio EUR2 projects with ODA included EU regulation – limitation; WTO and OECD RulesINSTRUMENTS (for export companies financing,foreign buyer financing, investors investors• Ensuring favourable long-term funds to domesticcommercial banks (for export purpose)• Coffinancing with commercial banks• Direct lending to foreign buyer or foreign bank• Outward FDI financing• Credit lines for acceleration of Slovenian export• Financing in combination with ODA• In preparation: export credits refinancingOTHER SUPPORTIVE FORMS• In the frame of the Action plan oninternationalization• Cooperation with diplomatic – consular net• Bilateral cooperation with other stakeholders• Correspondent net of foreign banks andcofinancing with third countries banksICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 36. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future RoleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 37. 37Insurance I.Insurance services of SID Bank include:• Medium/short term export credit (re)insurance againstcommercial/non-commercial risks.• Investment insurance against commercial/non-commercial risks.• Insurance of banking guarantees, linked to export transactions• Interest Rate Equalisation Programme (IREP).• Other transactions on special authorizationFor the account and on behalf of RS (non-marketable risks)*For the account and on behalf of SID-PKZ (marketable risks)Insurance services of SID-PKZ include:• Short term export credit insurance against commercial/ non-commercial risks.• Integral Risk Management*Risk of the nature and level for which private (re)insurance market lacks either willingness orcapacity to cover.6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 38. 38SID Bank Group – Business insured (EUR million)Insurance II.6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 39. Export CoverageSID EDC CESCE COSEC ECGC Euler Hermes EKF OeKB SACE Finnvera0510152025PEER Comparison%**Source: Berne Union** Activities in more countries; SID Bank = only Slovenian exportsICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 40. 40Volume of Business – State Accountmio €6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 41. 412002 2003 2004 2005 2006 2007 2008 2009 2010 2011 11/2012024681012020000000400000006000000080000000100000000120000000140000000Cash flow Cumulative cash flow Claims paid Contingency reservesCashFlow(000EUR)ContingencyReserve(000EUR)Cash Flow and Contingency Reserves6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 42. Business cycle – export creditinsurance (OECD - 2g+)Source: OECD6 June 2013 ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 43. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future roleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 44. Claims InsuranceWHY TO INSURE?• Risk Management - Business Philosophy• Sales Multiplying - Existent and New Buyers• Favourable Financing Conditions - Assignment of Insurance Rightsto Commercial BankWHAT TO INSURE? OBJECT OF INSURANCE:• Claims on open account with payment terms up to 180 days(exceptionally up to 360 days)- to foreign buyers - to domestic buyers INSURED RISKS:• Permanent insolvency or bankruptcy of the buyer• Protracted defaultICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 45. Claims Paid (SID-PKZ)Paid claims (mio €) and y-o-y changeICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 46. Services:• Out-of-court debt settlements• Assistance with legal procedures abroad• Credit reports, monitoringGlobal Appearance:• Cooperation with debt-colection agencies all over the world• Special emphasis on SEEDebt CollectionICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 47. Factoring• Factoring is a financial service that makes possible to seller:- financing (80% - 90 % - 100 % of the claim),- claims insurance (100 %),- bookeeping (open items, received payments, delay and administrativemonitoring of claims),- Monetization of claims (repeated remining and debt collection).Factoring is flexible and state-of-the-art financial service, which offers companiesof all sizes and industries sollutions with doing business with deffered paymentson local and foreign markets.ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 48. CMSR:• Non-profit institution in the frame of SID Bank Group, which offerswide range support and promotion of Slovenian export• According to the Law on International Development Cooperation andgovernment resolution CMSR is authorized for performing a partof technical-operative activities under internationaldevelopment cooperation• Central institution in Slovenia for country risk evaluations andinformation about foreign markets (market and sector analyses)• Business portal offers all needed information about SlovenianBusiness environment in english (www.poslovniportal.si)ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 49. CMSR enables grants for investment projects in ODA recipient countries (as a rule up to30% of the project with grants and concessional loan in cooperation with SID Bank ifneeded)CRITERIA FOR ODA ALLOCATION:•ODA recipient country (OECD standard)•Partner country of RS•Final recipient is a public institution•Development project (commerxialy non-viable)•Priority sector (environment protection, energetics...)•Transfer of knowledge or technologyPerforming bilateral development cooperation in the form ofofficial development aid (ODA)ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 50. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future roleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 51. Global appearenceSupported export in red countriesSupported Export in 115 countriesICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 52. SID Bank Group Impact34,54 bn € of sales13,86 bn € of GDP15,53 bn € of export84.000 new jobsSource: Independent study, Faculty of Economics(2007-2010) (2013)9,03 bn € of sales3,63 bn € of GDP4,12 bn € of export21.800 new jobsICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 53. Contents1. SID Bank’s Profile2. Importance of Export for Slovenia3. Export Promotional System4. Export Financing5. Export Credit Insurance6. Other Supportive Services7. Impact8. Future roleICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 54. SID Bank in the Future2030A new development model RS -Financial Pillar SID Bank:• One Stop Shop: integration / consolidation• return assets / grants - sustainable lending• horizontal objectives• quality and sustainable development2011 2020The slovenianeconomiccrisis2000 2007RegionalDevelopmentInstitutionsin RS2010Changes / EUentryThe intern.financial andeconomiccrisisICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 55. The transformation factors:• Combining resources• More favorable financingconditions• Provision of long maturity• Adjusted fundinginstruments• Targeted promotion ofsectors areas• Synergies within thegroup SID fin.institutionsSOURCES OF ASSETSBanking sources• Unions• Promissory notes• Bonds (domesticEurobonds)• OtherSpecial banking sourcesEIB• CEB• KfWPossible to combinewith fiscal resources:• EU funds• State budgetSID Bank – future roleA d d e d v a l u e r e a l i s a t i o n o f d e v e l o p m e n t p r o j e c t s6 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 56. Sustainable LendingFuture as a consequence of past decisionsSelection of priorities and projectsLong term vs. short term viewRESPONSIBLE LENDING ISSUSTAINABLE LENDINGICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 57. Basic principlesResponsible LendingAccessible, honest and understandable informationAffordability, AccountabilityAn in-depth risk assessment (in particular credit rating)Verified cash flow,income and assetsImprovements in assessing credit worthinessImproved disclosureAdaptability to changing circumstancesDifferent collateral optionsICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 58. The sustainability webICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 59. DFI Role in FutureBORROWERSIDELENDERSIDENEED OF SUSTAINABLE FINANCEwith:Special assessment &Careful reviewOfCompanyIndustryCountryRISKDFI should play important role to:1.Overcome credit crunch2.Financial crisis3.Reduce risk4.Reduce financial costs5.Promote sustainabledevelopmentICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia
    • 60. Thank you for your attention!www.sid.si606 June 2013ICPE - NIFM International Training programme - SID Bank,Ljubljana, Slovenia