A price increase in Export Import financings is not immediately evident following the United States' downgrade by Standard & Poor's, but the move has "induced a lot of uncertainty among financiers" who are active in this space, says a European banker.
"The unthinkable has happened - the US lost its AAA rating and this is causing banks to review whether these financings make sense anymore, particularly at the margins they were being done at," says the banker. "Financiers are now asking themselves 'could some of these deals come under water as they were done at very low margins and the US is no longer AAA?' or 'is this a good space to be in going forward?' A lot of uncertainty exists."
The banker says if Ex-Im pricing "increase enough", more banks could "step into this space".
"Certain banks could not participate in Ex-Im financings as their funding costs were too high, but if margins go up enough, these banks could participate on future deals."
On Tuesday, Fitch Ratings affirmed the US' long-term foreign and local currency issuer default and treasury security ratings at "AAA", less than two weeks after Standard & Poor's downgraded the country to "AA-plus" with a negative outlook. Moody's Investors Service affirmed its top US ranking last week.
Standard & Poor's downgrade of the US prompted aviation financiers to speculate a lower US credit rating could require banks to apply capital to export credit loans, making the transactions more costly.