Today the World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) launched a joint two-year plan of action to “provide up to €24.5 billion to support the banking sectors” in Eastern Europe, in efforts “to fund lending to businesses hit by the global economic crisis.” The plan also intends to provide financial support to the regional governments’ “macroeconomic and structural reform programs and, where applicable, coordinate with macroeconomic support provided in the context of IMF and EU-led programs” and will primarily include “equity and debt finance, credit lines, and political risk insurance” measures. Disbursement of any funding packages, however, still remains subject to borrowers’ meeting the internal approval procedures and loan eligibility criteria of each institution.
The EBRD has committed to provide up to €6 billion “in the form of equity and debt finance” to banking institutions and small and medium-sized enterprises (SMEs), while the EIB is expected to provide up to €11 billion in “SME lending facilities in Central Eastern, and Southern Europe, of which €5.7 billion is already available for rapid disbursement, with a further €2.8 billion set for approval by end-April and further tranches expected to follow.” The European Investment Fund (the venture capital and SME guarantee arm of the EIB) has indicated that it intends to “increase its activity in the region over the next two years.”
The World Bank in conjunction with the International Bank for Reconstruction and Development (IBRD) (one of the five institutions that comprise the World Bank Group), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) (both members of the World Bank Group), “intends to propose to its respective Boards lending and guarantee support to the banking and real sectors in the region” of up to €7.5 billion. The proposed World Bank aid will be provided as follows:
- IBRD: Anticipated to increase its lending in Europe and Asia to approximately €16 billion of which up to €3.5 billion “is envisaged for addressing banking sector issues in emerging Europe.”
- IFC: Expected to commit €2 billion through its counter response initiatives framework in place that focuses primarily on the banking, infrastructure and trade sectors.
- MIGA: Subject to Board approval, expected to “provide political risk insurance capacity of up to €2 billion for bank lending.”