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EBRD guarantee will assist trade and treasury activities of Estonian bank
A guarantee in the amount of US$ 10 million from the European Bank for Reconstruction and Development (EBRD) to a leading Estonian bank will help enhance trade flows between Estonia and its trading partners. The guarantee to Hansabank Limited, signed today in London, will enable Hansabank to remove cash deposits placed as collateral with international correspondent banks and thus service the trade and treasury requirements of its customers more efficiently.
David Hexter, Director of the Financial Institutions Team of the EBRD, said: "This is the first time the EBRD has provided guarantees for treasury activities, in addition to trade facilitation. This innovative transitional assistance facility enables Hansabank to operate on the international banking markets without the need to place cash collateral deposits with international correspondent banks. It allows Hansabank to assist its customers in financing the imports and exports of goods to and from Estonia."
The transitional assistance facility will take the form of guarantees to reputable corresponding banks of Hansabank's choosing in respect of: confirmation of documentary letters of credit issued by Hansabank; standby letters of credit not exceeding 360 days; and generic types of treasury transactions most closely associated with trade finance operations. Initially, the EBRD's guarantee will cover a maximum of 80 per cent of international correspondent banks' risk associated with such transactions.
Hansabank was founded in 1991, and from its inception has focused its products towards small and medium-sized enterprises with a sound financial track record, and Estonia's emerging middle class. In October 1994, the EBRD signed a DM 17 million loan to Hansabank in the form of a credit line, half of which is being financed from the Baltic Investment Special Fund. As of May 1995, all DM 17 million of the credit line had been committed by Hansabank to sub-projects.
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