Risk Sharing Facility Direct
Manufacturing and Services
08 Apr 2015
13 Mar 2015
The EBRD is considering increasing the size and expanding the geographic coverage of its risk-sharing and co-financing instruments with Partner Financial Institutions (PFIs) to support their loans to local companies. The Bank will create the “Risk Sharing Facility” (RSF) to share risk on these loans in the Bank’s countries of operations. The RSF will be modelled on the success of the “Medium-Sized Co-Financing Facility” which it will replace.
Under the RSF, the Bank will participate in the risk of loans by local PFIs to local companies, with the EBRD’s risk participation possible on a funded basis similar to a syndicated loan or an unfunded basis similar to a guarantee – depending on the needs of the PFI.
Under either approach, EBRD’s risk participation is an unconditional and irrevocable obligation designed to allow the partner financial institution to achieve capital relief, fully consistent with the rules of the Basel Capital Accord.
Eligible loans will be denominated in local currency or foreign exchange for amounts up to EUR 50 million (with EBRD’s risk participation capped at EUR 25 million) and have tenors of up to 10 years (15 years for project finance).
The RSF will provide the EBRD with an integrated instrument covering all countries of operations to meet the growing business needs of local small and medium-sized enterprises, currently not sufficiently supported by other financing sources. The Bank’s proceeds will be used for financing acquisitions, expansion and/or modernisation investments, efficiency improvements as well as working capital.
Transition impact is expected in the following key areas:
Transfer of skills. Through the framework the EBRD will assist PFIs (banks and leasing companies) in establishing a prudent approach in their portfolio risk diversification and managing larger and longer-term facilities. The Bank will provide assistance to its partners by strengthening their skills in risk assessment and financial modelling as well as in structuring project finance and working capital facilities (more sophisticated risk-taking vs full reliance on collaterals). The Bank will also provide training to partners tailored to their specific needs.
Setting standards for corporate governance and business conduct. PFIs should apply high requirements to companies' corporate governance and business standards in line with the Bank's policies and practices, such as transparency of ownership, adequate management capacity, sound reputation and integrity, application of international financial reporting standards (including IFRS, where applicable). In addition, PFIs will be required to carry out integrity checks on the corporate structure and management team of each potential client in accordance with the EBRD's Red Flag Integrity Checklist. By supporting companies with higher standards of corporate governance and business conduct, the Bank contributes to the promotion of sound business standards and corporate practices in its countries of operations and sends a signal to the local private sector that observing these standards will facilitate access to finance.
Partner Financial Institutions: Local private banks and leasing companies in all EBRD countries of operations.
Local companies: Local private enterprises operating in all EBRD countries of operations.
EUR 150 million (for the 12 months following the date of Board approval) to share risk on PFI loans to local companies.
EUR 300 million (estimated).
Environmental and social categorisation, impact, and mitigation
Sub-projects financed through this framework will be categorised and appraised on a case-by-case basis in accordance with the Bank’s Environmental and Social Policy (“ESP”). Where the Bank is investing in projects or companies that present a potentially higher environmental and/or social risk, commensurate studies will be carried out with assistance from external consultants to fully understand all related liabilities and risks associated with a company’s operations, as well as to develop and agree upon an environmental action plan as required. Further, the environmental and social due diligence undertaken on a case by case basis will look to identify and/or confirm potential environmental and social benefits to be realised through the delivery of the projects. Target borrowers/ investee companies will be required to comply with the Bank's Performance Requirements and provide the Bank with an annual report on environmental and social issues.
The RSF will continue benefiting from Technical Cooperation funds raised for the MCFF that it succeeds. The Bank will approach other donors for activities outside the Early Transition Countries.
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Text of the PIP
Project Complaint Mechanism (PCM)
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