October 6, 2010

2nd UPDATE:EBRD Makes Loans To Albania, Romania, Bulgaria, Serbia

 by Paul Hannon 
LONDON (Dow Jones)--The European Bank for Reconstruction and Development Tuesday said it will provide EUR630 million in loans to the subsidiaries of three Greek banks operating in Albania, Bulgaria, Romania and Serbia.
The loans will be provided as part of the Joint International Financial Institutions Action Plan, an initiative that also includes the World Bank and the European Investment Bank, and which was launched in February 2009 with the aim of providing EUR24.5 billion over two years to help eastern Europe weather the global financial crisis.
Before the crisis, eastern Europe had relied heavily on foreign borrowing, particularly from foreign banks, to drive its rapid economic growth. With the onset of the crisis, those banks struggled to gain access to finance, and the EBRD and other institutions stepped in to prevent a collapse in financing in the region and a more severe downturn.
The EBRD's loans will be channeled through Eurobank EFG's subsidiaries in Bulgaria and Serbia, Alpha Bank's subsidiaries in Romania and Serbia, and Piraeus Bank's subsidiaries in Albania, Bulgaria and Romania.
The EBRD's funds are intended to enable those subsidiaries to make loans to private businesses operating in south-eastern Europe, a region that has been slow to recover from the recession that followed the international financial crisis.
In July, the EBRD said it expects the seven economies in the region to contract by 1.5% this year, having previously forecast an expansion of 0.3%. It expects Romania's economy to contract by 3.0% this year, and Bulgaria's to contract by 1.2%.
"This project will help ensure a continuous flow of credit to private companies...at a time when businesses continue to face difficulties in obtaining funding for their development," said Nick Tesseyman, the EBRD's managing director for financial institutions.
All three bank groups are headquartered in Greece, and have been hit hard by that country's debt crisis. Their deposit bases have shrunk, and they have been frozen out of the interbank markets, depending instead on the European Central Bank and government guarantees for funding.
The EBRD has previously made loans to the regional subsidiaries of banks headquartered in Italy, Austria, France and elsewhere.
The EBRD will lend EUR90 million to Pireaus Bank Romania, EUR70 million to Pireaus Bank Bulgaria and EUR40 million to Tirana Bank, Pireaus' Albanian subsidiary.
It will lend EUR150 million to Alpha Bank Romania and EUR50 million to Alpha Bank Serbia. It will lend EUR75 million to Eurobank EFG Bulgaria, EUR95 million to Bancpost S.A.--Eurobank's Romanian subsidiary--and EUR60 million to Eurobank EFG Beograd, its Serbian subsidiary.
In all, EUR335 million will go to banks operating in Romania, EUR145 million to banks operating in Bulgaria, and EUR110 million to banks operating in Serbia.
The EBRD was established in 1991 with the aim of helping countries in eastern Europe and the former Soviet Union make the transition from centrally planned to market economies.
-By Paul Hannon, Dow Jones Newswires; +44 20 7842 9491; paul.hannon@dowjones.com