The proposed project envisages an equity investment in Armeconombank. The project will strengthen Armeconombank’s capital base to be used for anticipated growth in lending and development of its infrastructure. Management guidance and institution building is envisaged through technical assistance and EBRD’s seat on the bank’s Supervisory Board.
This project will be the first equity participation in an Armenian-owned financial institution. The combination of additional capital and institution building through technical assistance is expected to support strengthening of a key player in the Armenian banking sector. By promoting competition and consolidation in the sector the project will contribute significantly to the development of the banking sector in Armenia. The project is also expected to provide a demonstration to other market players of the benefits of having an international institutional investor as a shareholder.
Armeconombank is one of the largest banks in Armenia at 31 December 2003 with total assets of US$ 33.4 million. The bank is based in Yerevan and has a network of 24 branches. The bank offers all major services currently available on the market.
Equity investment of AMD (Armenian Dram) 566,670,000 (EURO equivalent of 789K at 1 June 2004).
Armeconombank will carry out its operations in accordance with the EBRD’s Environmental Procedures for Financial Intermediaries, which provide for the integration of environmental due diligence into Armeconombank’s credit appraisal processes and a requirement that the bank complies, at a minimum, with national and local health, safety and environmental regulations and standards and public consultation requirements. Armeconombank will submit annual environmental reports to the EBRD.
The bank has benefited from access to a Japanese-funded credit advisor tied to a loan under the Multi-bank facility for Armenian banks. This has assisted in all aspects of screening, approving and monitoring of potential borrowers and sub-loans.
It is proposed that this equity investment be made together with technical assistance for institutional development. Funding is expected to be provided under the 2002 Action Program for the EU-EBRD Investment Preparation Facility. EBRD approval will be sought in 3q2004.
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