Export credit insurance backed by the State Treasury vs. capital adequacy of banks. Analysis of the possibility of using an insurance policy of KUKE SA as a recognised agreement on the unfunded credit protection for the exposition constituting the officia

Abstract

The article discusses the use of export insurance backed by the State
Treasury as a recognized credit risk mitigation technique under Regulation
575/2013, concerning the exposure to risk of export credit offered by the
banking sector. Recognition of the insurance policy of KUKE SA [Export
Credit Insurance Corporation], a Polish ECA, as such a technique is one
of the conditions for appropriate determination of the risk weight for the
estimation of the capital adequacy ratio of the bank. The issue is of great
importance for higher engagement of the domestic banking sector in providing
export credits and supporting the domestic companies entering foreign
markets by increased involvement in financing companies importing products
and services from Poland.
In order to illustrate the issues in more detail, the article also analyses
main international regulations requirements that need to be taken into account
in the context of subsidizing export activity as well as main principles of
the officially supported export credits with special focus on the compliance
of unfunded credit protection provided by KUKE SA with CRR.
The article does not deal with the issue referred to in Article 194 par. 5
in conjunction with Article 201 par. 1 Capital Requirements Regulation concerning
the official provider of unfunded credit protection and requirements
that a provider of unfunded credit protection should fulfil to be a recognised
one. The analysis of the above issue will be discussed in a separate article.
Attention must be also drawn to the fact that the considerations presented
in the article concern only an insurance policy and not insurance collateral
applied in foreign trade for the needs of the protection of payment by foreign
trade partners in short-term transactions, which will also be discussed in
a separate article.