The proposed project is a pre-privatisation equity investment in Banca Comerciala Romana (BCR), the largest bank in Romania, in the context of a wider framework to support financial sector reform. The EBRD and the International Finance Corporation (IFC) expect to purchase a minority stake of 25% plus two shares in BCR from the APAPS, the Romanian privatisation agency.
The project has two main objectives. First, the EBRD's investment will facilitate the transfer of ownership of BCR from state to private hands. The Romanian State will commit to privatise BCR by the end of 2006. The project will be structured with put and call options to provide flexibility at the time of full privatisation.
Second, the project will prepare BCR for privatisation by reviewing and upgrading key business and control functions as well as BCR's corporate governance. The EBRD, IFC and the Romanian State will enter into a Shareholders' Agreement that will attach an Institution-Building Plan (IBP). The IBP will set out in detail how BCR will prepare itself for privatisation.
The objectives of the project are fully aligned with its expected impact on the transition process.
First, the project will enable the privatisation process of BCR to continue, which will be a major step towards achieving private sector ownership of the Romanian banking sector. The commitment of the Romanian State to continue the privatisation process for BCR should contribute to positive agreement with the International Monetary Fund (IMF) for the disbursement of the final tranche of the IMF standby agreement. In addition, the share purchase by the EBRD and IFC will have an important demonstration effect for the country, signalling confidence in the Romanian banking sector and in the overall investment environment.
Second, the project will have an important impact on BCR itself, by continuing the process of improving the bank's business and operations. This will include setting standards for corporate governance as well as commercial improvements and important upgrades to the systems and risk management of BCR. The successful completion of the IBP should mean that the bank is well prepared for privatisation and to compete in the wider European markets.
BCR is the largest bank in Romania, with, as at end-2002, a 35% market share of total banking assets. The results of the bank for 2002 according to International Accounting Standards were total assets of €4.5 billion, total equity of €810.7 million and net profit of €99.5 million.
The EBRD will consider purchasing 12.5% plus one share of the share capital and voting rights of BCR for US$ 111 million.
The EBRD and IFC together will consider purchasing 25% plus two shares of BCR for a total amount of US$ 222 million.
BCR will continue to carry out its operations in accordance with EBRD's Environmental Procedures for Local Banks across the full range of its operations. In implementing these procedures, BCR requires its borrowers to comply, at a minimum, with national health, safety and environmental requirements.
Corneliu Cojocaru, Director
Banca Comerciala Romana
Bd Regina Elizabeta 5
70348, Sector 3
Tel: +40 21 312 0056
Fax: +40 21 312 0056
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