Optimizing Your Capital: A Key Challenge for African Banks
As we approach mid-year, bank executives across Africa are likely facing a major challenge: how to meet commercial objectives while complying with increasingly stringent regulatory constraints?
Managing your institution’s capital and adhering to Basel III’s concentration risk limits is now more critical than ever. The end of transitional provisions related to risk division — with the shift of the large exposure limit to 25% of Tier 1 capital — places additional pressure on financial institutions.
So, how can you continue financing large-scale projects without burdening your balance sheet?
How do you optimize the use of your capital while staying within the Single Obligor Limit (SOL) and expanding your financing capacity?
In short, how can you finance your key clients or major infrastructure projects without breaching these regulatory thresholds?
ETC’s Concentration Risk Bond (CRB) provides an effective solution. This instrument enables you to mitigate credit risk, adjust exposures to your top-tier clients, secure your commitments, free up capital, and finance more deals.
Let’s explore how this risk coverage tool supports your business development while ensuring full compliance with prudential regulations.
The Concentration Risk Bond (CRB): A Solution to Free Up Capital and Drive Growth
Key Benefits of the CRB
The Concentration Risk Bond (CRB), also known as Risk Division Guarantee, offered by ETC – Export Trading Cooperation, provides a wide range of benefits, including:
- Effective Risk Mitigation
The CRB reduces your Exposure at Default (EAD) in the event of a counterparty default, thus protecting your balance sheet from potential losses. - Capital Allocation Optimization
By using ETC’s public credit rating (A-), you can adjust the risk-weighting of your exposures and release capital. This enables you to allocate more resources to high-impact projects that drive African economic development. - Increased Financing Capacity
The CRB helps you stay within the regulatory limits on risk concentration, giving you the ability to finance more large-scale projects and support the growth of your strategic clients. - Regulatory Compliance Secured
The CRB is a valuable tool for ensuring compliance with large exposure rules under Basel III, maintaining your institution’s regulatory soundness.
Use Cases for the CRB
The CRB is particularly suited for:
- Financing essential infrastructure projects: roads, ports, energy, telecommunications
- Supporting SMEs by applying the CRB as a portfolio guarantee
- Assisting national and regional champion companies in scaling up
- Promoting financial inclusion by facilitating credit access to a broader range of economic actors
ETC offers a flexible, tailored solution that meets both the specific needs of the African market and strict regulatory requirements. With the CRB, you can support economic growth while safeguarding your institution’s financial health.
About ETC
ETC is a European guarantee institution that supports banks and financial institutions operating across Africa. It provides technical and financial services in support of investment and international trade projects.
ETC holds a public rating of A3- (risk category 2 according to the EU) from the European Securities and Markets Authority (ESMA) and a long-term AA and short-term A1 rating from Bloomfield Investment Corporation, valid within the AMF-UMOA zone.
A recognized member of SWIFT (code ETCGIT2T), ETC issues guarantee instruments such as Standby Letters of Credit (SBLCs) in accordance with International Chamber of Commerce (ICC) rules.
