Following a consultation with the government, UK banks and other interested parties, ECGD has launched a risk sharing scheme (Letter of Credit Guarantee Scheme) which will enable UK banks to confirm Letters of Credit issued by overseas banks.

The scheme is a direct response to the decreased supply and increased price, of export finance. The contraction in the availability of export finance has become a major hurdle to companies seeking to take advantage of a favourable exchange rate in order to grow their international sales.

Banks have come under increasing pressure as capital bases have been eroded and they have been forced through both regulatory and internal policy to meet capital adequacy requirements. This has resulted both in a significant reduction in their ability to provide credit as well as an increase in pricing which has been reflected in risk margins and Letter of Credit fees charged to exporters..

The role of ECGD will be to offer a master guarantee to UK banks who confirm LCs from overseas banks in favour of UK exporters. The banks will then be able to cede potential exposure to ECGD which they would incur by virtue of confirming letters of credit issued by overseas banks. The scheme will primarily assist with exposures to 282 banks in 36 emerging or difficult non-OECD countries.

ECGD announced the launch of the scheme on 21st October 2009. It is due to run until March 2011 and will see the ECA offering short term guarantees for the first time since 1991 when it privatised its short-term business.

Details of ECGD services, together with further information regarding the Letter of Credit Guarantee Scheme, including a list of participating UK banks and relevant countries can be found at the website: