The European Bank for Reconstruction and Development (EBRD) will share risk for up to €35m (£31.2m) across loans provided to Baltic by Latvia’s Citadele Bank.
Citadele Bank is Latvia’s fourth largest lender in terms of loan book, providing leasing and asset finance among other commercial banking products.
The risk-sharing facility comes on an unfunded basis, meaning that the EBRD will guarantee up to 50% of each individual sub-loan provided by Citadele Bank to eligible clients.
The agreement was signed in Riga by the EBRD first vice-president Jurgen Rigterink and chairman of the management board of Citadele Bank, Guntis Beļavskis. This is the first roll-out of the new facility in the Baltic states.
The EBRD Risk Sharing Framework (RSF) is one of the three core financing frameworks of the bank’s Small Business Initiative, a strategic programme dedicated to supporting and developing local private companies in the countries where it invests. The facility is designed to allow the EBRD to share partner banks’ exposures to local enterprises through either funded – i.e. syndicated – or unfunded risk participation.
Rigterink said: “We share with Citadele Bank the focus on the private sector, the most vibrant sector of the local economy. We are proud to introduce our risk-sharing facility as an innovative solution to the Baltic market and are confident that it will help the businesses with access to finance.”
Beļavskis added: “This is an important step both for the development of businesses in the local market and the export market as well as for increasing the amount of investment in the Baltic states as a whole. Banks will also increase their competitiveness in the Baltic states in project financing thanks to access to the EBRD guarantee.”
The EBRD has been investing in the Baltic states since they regained their national sovereignty in 1991. To date, total investment stands at more than €2bn through almost 250 projects.
The EBRD has been investing heavily in Turkey since international sanctions closed off Russia to investment in 2014. A report in August suggested the bank’s sheet may come under pressure amid Turkey’s current currency crisis.