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EU and EBRD launch EUR115 mln facility for small municipalities
First transaction signed with ING Bank Slaski SA
The EBRD and the European Commission are setting up a €115 million facility to
deepen the market for municipal finance in EU accession countries, where small
cities and towns face a chronic shortage of long-term finance.
The new facility is providing partner banks in each country with funds for
on-lending for roads, water supply, sewerage, solid-waste management, district
heating, urban transport and similar types of projects. Projects will range in
size between €150,000 and €5 million to municipalities with a population under
100,000.
The first transaction under the EU/EBRD Municipal Finance Facility is with ING
Bank Slaski SA, under which the EBRD will provide €10 million in the form of
risk-sharing for ING loans made to municipal utility companies. EU funds will
help the municipalities prepare projects and help ING develop its municipal
lending policies.
At a signing event in Warsaw, EBRD Vice President Hanna Gronkiewicz-Waltz
underlined the significance of the new facility for the development of smaller
municipalities. Municipalities have investment needs in all areas of
infrastructure to comply with EU and national regulations, to improve the
quality of local public services and to attract investment, she said.
Malgorzata Kotanska of ING Bank Slaski said: "ING intends to expand its
lending to municipalities and utility companies, and we have recently set up a
new municipal financing unit. This EU-EBRD facility is a part of ING's new
strategy for the sector."
Municipal sectors in all EU accession countries, which have a large number of
small and medium-sized municipalities, need substantial long-term investment
on an ongoing basis. Today, smaller municipalities and municipal utilities can
generally access only shorter term financing. The new facility will enable the
Bank to reach these municipalities via partner banks, and it will serve the
European Commission’s interest in deepening the municipal credit markets and
helping to obtain the required skills and financing to fund municipal projects.
Under the facility, the EBRD will provide up to €75 million in long-term
credit lines (10-15 years) and up to €25 million for risk-sharing of loans
made by partner banks. EBRD risk-sharing will be available for up to 35 per
cent of each municipal loan. The EU will contribute a total of €15 million for
participating local banks and municipal borrowers. The funds will be used for
training, feasibility assessments and implementation support, as well as
providing a financial incentive for banks to lend long-term.
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