Japan Bank for International Cooperation (JBIC; Governor Kyosuke Shinozawa) signed an agreement for a bank-to-bank loan totaling 8 billion yen with the Bank for foreign trade (VTB), one of the top commercial banks in Russia, on March 6 (local time} in Moscow to help finance Japanese exports. The loan is cofinanced with the Bank of Tokyo-Mitsubishi (lead bank), North Pacific Bank and Michinoku bank, A bank-to-bank loan is a form of export loan which is extended to importers through financial institutions in the borrowing country.
The agreement will set up a credit line for VTB to provide financial support for exports of machinery from Japan to the Russian Federation- The proceeds of this loan will be used for the purchase of small- and medium-scale equipment and facilities from Japanese exporters by Russian firms. This is the first case to provide a bank-to-bank loan without requiring a counter-guarantee from the Russian government by taking and controlling risks through reviewing the creditworthiness of the borrower to promote Japanese plant exports as a governmental financial institution.
After the Russian economic crisis that erupted in August 1998, the Russian economy has turned around and recorded a positive performance. Thus growing investment demand is foreseen to replace aging facilities and put in place new capital facilities, as Russia`s economy is looking toward sustainable growth. Under these circumstances, the Japan Federation of Economic Organizations (Keidanren), which visited Russia in June last year, requested JBIC to set up an export credit line as one means to boost trade between Russia and Japan.
The purpose of this loan is to increase Japanese exports by promoting trade between Japan and Russia through the export credit provision for the Russian manufacturing sector by way of VTB. The loan will thereby contribute to the country`s economic development. Since the collapse of the Soviet Union in 1991, private financial institutions in Japan have suspended medium- and long-term lending to Russia. By making cofinancing arrangements with commercial banks, JBIC has supplemented its financial operations.