Ukraine's largest bank, Privatbank has joined the European Bank for Reconstruction and Development's (EBRD's) Trade Facilitation Programme (TFP), which provides guarantees to international commercial banks, thereby covering the political and commercial payment risk of transactions undertaken by partner banks in the EBRD regions.

The EBRD has also established a US$25 million trade finance line for Privatbank in a deal that supports the Ukrainian bank's growing trade finance business, and helps safeguard Ukraine's food exports.

Instruments issued or guaranteed by participating banks in the TFP may be secured by guarantees issued under the TFP. These include documentary letters of credit (L/Cs); trade-related standby L/Cs from issuing banks; deferred payment L/Cs, and L/Cs with post-financing advance payment bonds.

TFP in Ukraine

The TFP has played a key role supporting Ukraine's trade with the rest of the world since Russia began its military action in the country in 2022, since when EBRD has invested EUR 4 billion (US$4.3 billion) in the country, with food security and trade among priorities.

Since Moscow commenced operations in Ukraine, access to financing for Ukrainian importers and exporters has been severely constrained, with international banks shying away from taking direct risk on trade finance transactions with the war-torn country.

The TFP has supported EUR 972 million in 355 trade transactions for the most crucial goods for the Ukrainian economy in that period. Privatbank will join eleven other TFP partner banks of EBRD in Ukraine.

L/C benefits

Gerhard Boesch, CEO of PrivatBank, is in no doubt that EBRD support will help sustain the bank's L/C business.

"Thanks to the EBRD guarantees, the cost of banking services for documentary operations is significantly lower than standard loans. This new agreement allows us to issue confirmed L/Cs with post-import financing, which in turn gives opportunities for our clients to increase the period of payment deferral for foreign economic contracts," he says.

Boesch says he is also confident that all groups of customers who import goods - from machine tools to aggregates - along with small- and medium-sized consumer goods businesses will benefit from the deal.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.