DM 2 million (ECU 1 million) equity investment in Market Banka's share capital, which shall represent approximately 35 per cent of the bank's DM 5.8 million paid-in equity and 20 per cent of the voting rights.
Project objectives: To assist Market Banka in strengthening its capital base; to provide guidance and institution building through the EBRD's seat on the management board and a comprehensive technical assistance package; and to assist Market Banka to attract other shareholders and additional funding sources.
The institutional strengthening and guidance for a young but well-managed bank will support the emergence of a private sector in Bosnia and Herzegovina, contribute to the lengthening of maturities in credit markets, offer a natural contact for potential foreign banking partners and, above all, set and demonstrate high standards for Bosnia's financial sector. These potential impacts are increased to the extent that trade between the different ethnic areas is gradually reintegrated.
Market Banka d.d., Sarajevo was established in 1992 by local companies operating in the Sarajevo area. At the end of 1996, the balance sheet of the bank was DM 36.8 million, shareholders' equity DM 2.4 million, operating income DM 3.6 million and net income DM 273,000. The bank has 50 staff and has recently opened branches in Gorazde, Visoko and Mostar.
The EBRD is proposing to invest DM 2 million (ECU 1 million) equity in Market Banka's share capital, which shall represent approximately 35 per cent of the bank's DM 5.8 million paid-in equity after the EBRD's contribution and 20 per cent of the voting rights. The investment will be in the form of newly issued convertible preference shares, with a prescribed rate of return priced at Libor plus a commercial margin.
Market Banka will carry out its operations in accordance with the EBRD's Environmental Procedures for Local Banks. In implementing these procedures, Market Banka will require its borrowers to comply, at a minimum, with national/local health, safety, environmental and public consultation requirements.
A twinning arrangement with a foreign partner acceptable to the EBRD will be a precondition to the EBRD's investment. This programme is expected to take place over a period of 24 months and will cover all areas where external assistance is deemed necessary. The total cost for this technical assistance programme is expected to be approximately ECU 1.7 million, to be funded by the EU Phare Bangkok Facility.
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