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EBRD reinforces its support for Georgia's banking sector
Continuing its work to strengthen Georgia’s banking sector, the European Bank for Reconstruction and Development (EBRD) will become the biggest shareholder of Bank of Georgia (BoG), the country’s second-largest bank. The EBRD will acquire an 18 per cent stake in the bank by converting into ordinary voting shares US$ 1.8 million (€1.9 million) of the US$ 7 million (€7.3 million) convertible senior loan it extended to BoG in July 1998.
"This is the EBRD’s first conversion of debt into equity in Georgia," said Kurt Geiger, the EBRD’s Financial Institutions Director. "As one of the strongest banks in the country, BoG will play an essential role in the consolidation of the banking sector. Acting as a shareholder, the EBRD plans to work with BoG’s management to further improve the bank’s operations and to help attract a strategic investor."
As a lender, the EBRD has been influential in the development of BoG. The conversion will allow it to take a greater role in determining the bank’s strategy, to provide guidance at this important stage in the expansion of the financial sector and to have the right to nominate a member to BoG’s supervisory board.
BoG has a sound financial standing. The bank weathered the Georgian currency crisis in early 1999 and became a stronger institution as a result. BoG is also an active user of the EBRD's Trade Facilitation Guarantee Facility.
The senior convertible loan that the EBRD extended to BoG in July 1998 has enabled it to provide financing of US$ 4 million (€4.21 million) to 24 enterprises. In September 2000, BoG will begin to offer micro-enterprise credits with the assistance of the EBRD’s advisors and using funding from this loan.
BoG was established following the break-up of the Soviet Union's Sakbinsotsbank (Social Development Bank) after Georgia acquired independence in 1991. Its primary activities included servicing light industry and trade as well as distributing housing development credits and collecting household deposits. BoG has been a client of the EBRD since 1995 and is the leading bank in the country in terms of overall soundness and profitability.
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