Thursday, December 18, 2008

‘Anti-crisis’ loan to boost eastern Europe

By Thomas Escritt in Budapest
Published: December 17 2008
The Financial Times

The European Bank for Reconstruction and Development has unveiled the first in a series of loans designed to lessen the impact of the downturn on businesses in central and eastern Europe.

The €1bn ($1.4bn) “anti-crisis” programme is on top of €5.9bn the EBRD already committed to the region for 2009.

Some of this money will be used to provide credit to banks of systemic importance, including foreign owned subsidiaries and state-backed institutions.

The EBRD is poised to help other banks in the region that it judges to be of importance, according to Nick Tesseyman, the EBRD’s director for financial institutions.

“BT [Banca Transilvania] is systemic in terms of its importance to Romania’s small businesses,” he said. “Systemic banks will have to take priority.” Such banks included Hungary’s OTP, in which the EBRD had an investment.

Although banks across the region face a scarcity of capital, he thought it unlikely that any big investors would rethink their strategies, avoiding the risk of capital being “sucked out”. “Banks who have invested in Romania as a central part of their strategy really don’t have a way back. Revisiting the decision may do more harm than good.”

The first loan is a €100m credit to BT. It is designed to provide much needed liquidity to Romania’s struggling small and medium enterprise sector, which has suffered a dramatic downturn in orders since October. The EBRD owns 15 per cent of BT, Romania’s largest independent bank, which is a dominant player in the SME sector, with over 125,000 small business clients.

Claudia Prendred, the EBRD’s country director for Romania, said: “We are very keen to support the production side of the economy in Romania, and the SME loans are very important in that context.”

The bank estimates 7,500 existing clients will benefit from the funds.

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