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EBRD, EIB and WB join forces to support Central and Eastern Europe

Up to EUR 24.5 billion committed for banking sectors and bank lending to enterprises.

The largest multilateral investors and lenders in Central and Eastern Europe - the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) Group, and the World Bank Group (WB) - have pledged to provide up to EUR 24.5 billion to support the banking sectors in the region and to fund lending to businesses hit by the global economic crisis, a press release informs. Under the two-year plan, the EBRD will provide up to EUR 6 billion for the financial sector in 2009-2010 in the form of equity and debt finance, to banks and directly to SMEs, and trade finance. The EIB will provide some EUR 11 billion in SME lending facilities in Central, Eastern, and Southern Europe, of which EUR 5.7 billion is already available for rapid disbursement, with a further EUR 2.8 billion set for approval by end-April and further trenches expected to follow. The European Investment Fund (EIF), the EIB Group's venture capital and SME guarantee arm, is also aiming to increase its activity in the region over the next two years.

The World Bank Group will provide support of about EUR 7.5 billion. International Finance Corporation (IFC), through its crisis response initiatives in sectors including banking, infrastructure, and trade as well as through its traditional investment and advisory services, is expected to contribute up to EUR 2 billion. International Bank for Reconstruction and Development (IBRD) intends to increase lending in Europe and Central Asia up to EUR 16 billion in 2009-10 out of which up to EUR 3.5 billion is envisaged for addressing banking sector issues in emerging Europe.

Multilateral Investment Guarantee Agency (MIGA) will provide political risk insurance capacity of up to EUR 2 billion for bank lending, subject to Board approval.

This initiative complements national crisis responses and will deploy rapid, large-scale and coordinated financial assistance from the International Financial Institutions (IFI) to support lending to the real economy through private banking groups, in particular to small and medium-sized enterprises. The financial support will include equity and debt finance, credit lines, and political risk insurance.

EBRD President Thomas Mirow said: "The institutions are working together to find practical, efficient and timely solutions to the crisis in Eastern Europe. We are acting because we have a special responsibility for the region and because it makes economic sense. For many years the growing integration of Europe has been a source of prosperity and mutual benefit and we must not allow this process to be reversed." "This joint action plan will help speed up the delivery of vital finance through the banks to support the real economy of hard-hit countries in Central, Eastern and Southern Europe, and particularly to help small businesses survive in these turbulent times," said EIB President Philippe Maystadt.

On the other hand, World Bank Group President Robert B. Zoellick said: "This is a time for Europe to come together to ensure that the achievements of the last 20 years are not lost because of an economic crisis that is rapidly turning into a human crisis," and continues: "I welcome the close cooperation among the EBRD, the EIB and the World Bank Group, and am committed to making this partnership work as we move forward to address the risk of a crisis of the banking sector in Eastern Europe."

The response to Europe's integrated financial markets requires fast and coordinated action; from parent banks, which own a large part of the region's financial sectors; from systemically important local banks; from home and host country authorities of cross-border banking groups and from the European institutions and the IFIs. By jointly addressing urgent financing needs, the three institutions in this initiative are drawing on their own mandates and specific capabilities to provide financial support.

 

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Tags: billion europe provide crisis finance group financial banking central eastern support lending

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