Equity Investment in Zagrebacka Banka Mostar

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A DM 2 million equity investment in Hrvatska Banka, Mostar, for on-lending to local enterprises. Project objectives: 1) To assist Hrvatska Banka in strengthening its capital base, 2) to provide guidance and institution building through a seat on the Non-Executive Board and a comprehensive technical assistance package; and 3) to help the bank to attract other shareholders and additional funding sources. The institutional strengthening and guidance for a young but well-managed bank will support the emergence of a private sector in Bosnia and Herzegovina and contribute to the lengthening of maturities in credit markets. In addition, it will set and demonstrate high standards of banking to the country's incipient market-based financial sector. Hrvatska Banka commenced operations in 1993 and was the first new bank to be set up in the Croatian part of the Federation of Bosnia and Herzegovina. Its main founders were Croatian banks which formerly operated in the region. As of June 1996, the bank had a net worth totalling DM 10.6 million and total assets of DM 100 million. A DM 2 million ( ECU 1.1 million equivalent) equity investment in the form of convertible preference shares which will represent approximately 17 per cent shareholding of the enlarged capital of Hrvatska Banka. DM 2 million ( ECU 1.1 million equivalent). This project has no direct impact on the environment and has been classified C/0 (it does not require an environmental analysis or an environmental audit). Hrvatska Banka will carry out its operations in accordance with the EBRD's "Environmental Procedures for Local Banks". In implementing these procedures, the bank will require its borrowers to comply with national /local health and safety, environmental and public consultation requirements. The bank will submit annual environmental reports to the EBRD. Technical Cooperation will be provided to the bank through its proposed twinning partnership with a foreign bank. Funding is being sought.