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EBRD to help Russian commercial banking sector
As part of a programme undertaken in co-operation with the Russian Government and the World Bank to strengthen local commercial banking services, the European Bank for Reconstruction and Development (EBRD) and the Russian Federation signed a US$ 100 million loan agreement yesterday at a ceremony in London.
Signing on behalf of the Russian Federation was Boris Pankin, Russian Ambassador to the United Kingdom. Ron Freeman, First Vice President, signed on behalf of the EBRD. The aim of the programme is to strengthen and develop a core group of between 30 and 40 Russian commercial banks that are expected to assume prominent roles within the developing Russian commercial banking sector.
Mr Freeman said: "This programme lies at the heart of the EBRD's mandate. It means that the EBRD will be able to establish more effective working and co-financing relationships with individual commercial banks and thereby enable the Russian banks to increase their ability to lend to the growing Russian private sector according to sound banking principles."
Mr Pankin said: "In the absence of fully effective capital markets, the commercial banks are likely to play a key role in the transformation and restructuring of the Russian economy."
The proceeds of the loan will be on-lent to the banks via a Project Implementation Unit established within the Ministry of Finance. The project has three main purposes: i) strengthen bank operations by preparing and implementing strategies and business plans for each of the banks; ii) modernise the banks' information technology and automation programmes and; iii) develop measures aimed at enhancing the financial soundness of the banks. Technical assistance will be provided mainly through contractual twinning arrangements with leading foreign banks.
With the first part of the Mass Privatisation Programme complete and an estimated 12,000 medium and large sized companies privatised, the demand for commercial banking services has increased dramatically. Although a large number of new commercial banks have been established in Russia during the last three years, the quality and range of services they are able to provide is, at present, inadequate to deal with that demand. In addition to the programme, a jointly financed EBRD/World Bank credit line for a further US$ 300 million will shortly be in place to provide loan financing to these companies via the core group of banks.
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