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Chairman Campbell, Ranking Member Clay, and Members of the Subcommittee:
I am pleased to be here today to discuss our recent work on the
My testimony today draws on two reports we issued in March and May of this year in response to requirements in the Export-Import Bank Reauthorization Act of 2012 (Reauthorization Act). n1 The act required us to assess aspects of Ex-Im's risk management and 2012 Business Plan in the context of the agency's growth. The act also increased the statutory ceiling on the agency's total exposure (exposure limit). I will discuss Ex-Im's efforts to (1) forecast exposure levels, (2) manage financial risks and estimate losses, and (3) manage its workload.
For the March and
Ex-Im is an independent agency operating under the Export-Import Bank Act of 1945, as amended. Its mission is to support the export of U.S. goods and services, thereby supporting U.S. jobs. Ex-Im's charter states that it should not compete with the private sector. Rather, Ex-Im's role is to assume the credit and country risks that the private sector is unable or unwilling to accept, while still maintaining a reasonable assurance of repayment.
Ex-Im faces multiple risks when it extends export credit financing. These risks include (1) credit risk (the risk that an obligor may not have sufficient funds to service its debt or be willing to service its debt), (2) political risk (the risk that expropriation of the obligor's property, war, or inconvertibility of the obligor's currency into U.S. dollars may result in nonrepayment), (3) concentration risk (the risk that events could negatively affect not only one entity or location but also many entities or locations simultaneously), (4) market risk (the risk of loss from declining prices or volatility of prices in the financial markets, which could arise from changing macroeconomic conditions), and (5) operational risk (the risk that loss may result from inadequate or failed internal processes, people, and systems, or from external events).
While Ex-Im's business is generally driven by demand for its services from exporters,