OREANDA-NEWS. On February 04, 2009 The European Bank for Reconstruction and Development has completed a planned US12 million 10-year subordinated loan to strengthen the balance sheet of UralTransBank (UTB), a key partner of the EBRD’s small business lending programme in the Urals, Russia’s industrial heartland. A first tranche of US7 million was announced last December, reported the press-centre of EBRD.

The project is part of a broader EBRD anti-crisis support package for Russia’s banking system aimed at increasing bank to the real sector of the economy.

The second tranche of this unsecured, subordinated loan, will count towards UTB’s Tier II capital under Russian Central Bank regulations. The loan provides for bullet repayment on maturity. The EBRD’s commitments to UTB now total over US 30 million. The EBRD has since 2004 been a shareholder in UTB with a stake of 25 percent plus one voting share.

Loans to micro, small and medium-sized businesses accounts for 65 percent of UTB’s portfolio. This is a top priority for the EBRD and a source of strength for UTB in times of market stress because of this business sector’s traditional resilience.

By providing equity-type support, the EBRD makes it possible for recipient banks to use their broadened capital base to increase the amount of debt they can raise from other lenders. The resulting leverage will thus multiply the effect of the EBRD’s anti-crisis funding.

The initial transaction for Uraltransbank last December represented the first of a series aimed at strengthening the capital base of the EBRD’s banking clients. Other Russian banks to have benefited since from the EBRD’s anti-crisis response include TransCapitalbank and Spurt Bank.
The EBRD pipeline includes similar operations involving other Russian banks and these will be rolled out over the next few months.