OREANDA-NEWS. On May 08, 2009 The EBRD’s Board of Directors has approved two loans worth a total of US125 million to financial institutions in Ukraine, to support the Ukrainian economy in response to the global economic crisis, reported the press-centre of EBRD.

The loans are aimed at providing a continuing flow of finance to the real economy in Ukraine at a time of scarce alternative commercial funding.

Subject to the conclusion of legal documentation, the Bank would provide a US 100 million subordinated loan to Ukrsotsbank, part of the UniCredit group, supporting the bank’s capital base while at the same time sustaining lending to enterprises in Ukraine. It would also be making a loan of US 25 million to UniCredit Leasing Ukraine.

The loan to Ukrsotsbank is an integral part of the EBRD’s response to the impact of the financial crisis on Ukraine, with a focus on taking part in the recapitalization of viable and systemically important banks. The subordinated loan will be counted fully as Tier 2 capital.

The loan to UniCredit Leasing acknowledges the importance of leasing as an alternative form of financing for smaller businesses that do not have the resources to buy capital intensive equipment outright. In the current liquidity crisis, channelling long-term funding through leasing companies provides much-needed support to the real economy.

Both of the loans are part of a joint initiative with the UniCredit group to continue investing in eastern Europe and so keep funding open to the real economy.

The EBRD is making investments worth a total of EUR432.4 million in UniCredit subsidiaries across eight eastern European countries, as part of a joint effort to tackle the impact of the global economic crisis on the region. The aim is to provide medium and long-term debt and equtiy financing through UniCredit subsidiaries in support of SMEs, lease finance and energy efficiency projects.

UniCredit is the largest banking group in the central and eastern European region, with over 4,000 branches in 19 countries. The group has invested around EUR 10 billion of equity in central and eastern Europe and has around EUR 85 billion of total customers loans in the region. Beside its own funding programs to its subsidiaries, it cooperates with international institutions including the EBRD in order to ensure continuing support to the local economies during these challenging times.

The EBRD investment is part of the joint pledge by the EBRD, the World Bank Group and the European Investment Bank (EIB) to provide over EUR 24 billion in support of the banking sectors in the region and to fund lending to businesses hit by the global crisis.

The International Financial Institutions (IFIs) are working with key banking groups active in eastern Europe to deliver a rapid response to the financing requirements of individual subsidiaries and complementing the funding plans of the parents. This project with UniCredit is expected to be followed by similar investments in the eastern subsidiaries of other banking groups.

In response to the crisis, the EBRD has increased its planned investments in the financial sector by 50 percent to EUR 3 billion this year. It has also announced a doubling of its funding to support important cross border commerce via its Trade Facilitation Programme.

In the first quarter of this year, the EBRD had made investments of EUR 1.1 billion, a rise of 64 percent from the same period in 2008. Total investments of EUR 7 billion are expected this year, up over 30 percent from 2008.