Insuring credit lines as financing bank
Shopping Line cover aims at providing access to the procurement programmes of large foreign customers with good credit ratings. To achieve this, it offers banks the possibility to obtain cover for a credit facility granted to be drawn on for this purpose. It may be used for export transactions which have been executed and paid for in full (reimbursement procedure). For the utilisation, the transactions of various German exporters are pooled in one or several tranches each with a uniform repayment profile. The respective loan receivables are covered by the Federal Government.
Worth knowing: For this type of business, Shopping Line cover provides a solution in the form of a Buyer Credit Guarantee modified by Special Terms and Conditions.
Shopping Line cover at a glance
- German banks
- Branch offices of foreign banks in Germany
- Foreign banks (under certain conditions)
Payment term of the covered transactions
- Short-term (up to two years)
- Medium/long-term (2 years and longer)
In this context, the internationally permissible credit period is reduce by the time during which the credit facility can be drawn on.
Shopping Line cover offers protection against payment default particularly if
- the borrower becomes insolvent
- the borrower fails to make payment within one month after due date (protracted default)
- adverse measures are taken by foreign governments or warlike events arise
- local currency amounts are not converted or transferred
If required, Shopping Line cover can be supplemented with
- Securitisation Guarantee (to refinance export loans – enhanced conditions in favour of the refinancing institution)
- Covered Bond Guarantee (for German Pfandbrief Banks to facilitate refinancing in the their own covered bond business – cover of the receivable seizure risk in favour of the creditors of German covered bonds)
- Securitisation Guarantee for the KfW Refinancing Programme (offers the possibility to participate in the KfW Programme with which funds can be made available by means of refinancing receivables covered under a Federal export credit guarantee)
- the exporters may apply for cover of their own apart from Shopping Line cover in favour of the bank (e.g. manufacturing risk cover).
Shopping Line cover has the following distinctive features:
- Issuing of a Letter of Interest (LoI) to the foreign buyer including an indication as to the amount of the credit line possible at an early stage
- Foreign content of up to 49% of the amount of the credit tranche permissible (rules governing local costs must be respected)
- Special arrangements for small tickets (transactions worth up to EUR 5 million)
- Option to retroactively include transactions already undertaken before the application was made (“reach back”)
- Simplified administrative procedures (among other things: only one credit documentation required, uniform repayment profile, bundling of loan disbursements in tranches)
Shopping Line cover is also available for short-term credits with the exception of exports on credit terms of up to two years to EU and core OECD member states (i.e. EU member states, Australia, Canada, Iceland, Japan, New Zealand, Norway Switzerland, USA and United Kingdom).
The Association of German Banks (Bundesverband deutscher Banken e.v. – BdB) and the Association of German Public Banks (Bundesverband Öffentlicher Banken – VÖB) have jointly obtained a legal opinion on the validity and enforceability of buyer credit cover for the purpose of Art. 194 (1) subpara. 1 of the Regulation (EU) no 575/2013 (CRR). Under certain circumstances the opinion can, upon request, be made available to institutions within the meaning of the CRR. Requests should be directed to the BdB or the VÖB via the respective national banking association of which the institution in question is a member.
- One-off premium calculated as a percentage of the credit facility covered (interest excluded) as well as specific administrative fees
- For a detailed calculation, there is an premium calculation tool available
- 5% for all risks
Shopping Line cover: Your advantages at a glance
You can apply for Shopping Line cover quite easily in our customer portal myAGA.
Shopping Line cover can be combined with many other forms of cover – for example with a Securitisation Guarantee, a Covered Bond Guarantee or a Securitisation Guarantee for the KfW Refinancing Programme – in order to enhance the risk protection.
How does Shopping Line cover work?
Shopping Line cover allows German exporters to gain access to large foreign customers’ procurement programmes. It combines multiple transactions on the part of various German exporters to form one or more credit tranches, each with a uniform repayment profile. The financing bank can obtain cover from the Federal Government for the credit facility drawn upon for this purpose.
Applying for Shopping Line cover
You can apply quite easily for this product online in the myAGA customer portal. Please submit your digital application there in order to apply for cover for your export transaction under Shopping Line cover. For this purpose please register once and comfortably with just a few steps with our myAGA customer portal. If you already use myAGA, you can log on directly with your access data.
If you need assistance with the application or if you have any questions regarding the suitable product for you, please contact our business consultants.
FAQs Shopping Line cover
What additional forms of cover are available?
If required, cover under a Buyer Credit Guarantee can be supplemented with
- a Securitisation Guarantee (for refinancing on the capital market – improved conditions in favour of the refinancing institution)
- a Covered Bond Guarantee (for refinancing in the bank’s own covered bond business – cover of the receivable seizure risk in favour of the covered bond creditors)
- a Securitisation Guarantee for the KfW Refinancing Programme (creates the possibility to participate in the KfW Programme with which funds can be made available by means of refinancing receivables covered under a Federal export credit guarantee)
What are the main differences compared with conventional buyer credit cover?
With Shopping Line cover, banks can make use of their experience with the Federal Government’s buyer credit cover (FKG). However, in comparison to this it offers numerous advantages that simplify the execution of the transactions in particular. For this purpose, the General Terms and Conditions (FKG) are modified through the addition of Special Conditions. At the request of the foreign buyer or bank that will be providing the credit facility later on, it is possible for a letter of interest (LOI) to be issued at an early stage. Among other things, it can be used to obtain a legally non-binding indication of the amount of the credit facility eligible for cover.
The Federal Government’s Shopping Line cover is for amounts owed as a result of drawing on a credit facility which the bank grants to a foreign buyer that satisfies certain minimum requirements with regard to creditworthiness (see box on page 5 for details). This foreign buyer can then place procurement orders with various German exporters. After they have been executed and paid for in full, the export transactions eligible for cover are pooled in tranches with a uniform starting point and repayment profile for refinancing purposes and reported to the Federal Government for inclusion in the Shopping Line cover. All parties benefit from the reduced administrative requirements. The main advantage for the bank is that only a single set of credit documentation is required, while the Federal Government issues only one guarantee document and one invoice.
The bank specifies the individual transactions to be included in the tranche by means of call-down lists (based on the information provided by the foreign buyer). The Federal Government uses this as a basis for deciding which transactions can be included in the Shopping Line cover in the light of their eligibility. Foreign-sourced goods and services (including local costs) are only permissible up to a rate of 49%. This percentage refers to the total order value within a given tranche. This means that individual transactions may have a greater proportion of foreign content provided that this is offset by a higher German proportion in the other transactions included in this tranche. The rules of the OECD Consensus concerning the inclusion of local costs (a maximum of 28,6% of the total order value for OECD high-income countries and 33,3% for all other countries) continue to apply in full.
The following conveniences (special small-ticket rules) apply to individual transactions with an order value of less than EUR 5 million:
- These special rules only apply if the German exporter operates corresponding production facilities in Germany; this is determined by the Federal Government in a plausibility test. If this is the case, the exporter does not have to provide any further information on the proportion of foreign content in the specific individual transaction.
- Only the foreign importer must submit a statement confirming, among other things, due and proper performance and payment of the contracts and the absence of any corruption in the lead-up to the transaction. In this way, numerous special declarations (e.g. letter of undertaking, anti-bribery declaration) on the part of each individual exporter can be dispensed with.
- The special small-ticket rules can be utilised only a maximum of four times per exporter and credit facility. In the case of groups of companies, all affiliated companies are viewed as a single entity and classified as one exporter.
One important possible advantage is that transactions for which contracts have already been signed and which have already been executed in full can also be included in individual cases (“reach back”). In this way, scaling viable for structuring the transactions can be achieved by simultaneously including existing and new transactions.
The environmental, social and human rights (ESHR) audit follows international guidelines, particularly those of the OECD. The fact that certain elements of the audit that may be necessary can be completed at an earlier date (audit of the buyer when the LOI is signed or cover provided for the credit facility) and the results of such audits can be taken into account in an assessment of the specific individual transactions results in a simplification of the procedure.
What horizon of risk is covered?
Cover takes effect when and to the extent that the loan is disbursed in tranches and ends with the full payment of the covered amount owing. Liability is not accepted for amounts that have been allocated but not yet disbursed.
Can the bank receiving the cover use it for refinancing?
The claims arising under Shopping Line cover may – together with the claim to repayment of the loan – be assigned to other banks. It is also possible for the bank to use the Shopping Line cover for refinancing through its own covered bond business by taking out additional covered bond cover. Furthermore, a Securitisation Guarantee can enhance the conditions of Shopping Line cover in favour of the assignee providing the funding, so that the bank can raise funding at a more favourable interest rate (see product information on Covered Bond Guarantees and Securitisation Guarantees).
Do you have any additional questions regarding Shopping Line cover?
Our experts will be pleased to answer any questions regarding Shopping Line cover and will guide you step by step through the application process if desired.