Intesa Sanpaolo Regional Finance Package

complete

Project Description This PSD relates to a historical Bank project approved some years ago, and does not represent a new approval, or allocation of new funds.  Disclosure of this PSD was deferred in accordance with the transparency framework in place at the time, but due to an administrative oversight, was not subsequently disclosed In February 2010, the EBRD approved a financing package  consisting of three senior loans in the aggregate amount of up to EUR 100 million, signed with three subsidiaries of  Intesa Sanpaolo (ISP) Group , in order to support a systemically important banking group in EBRD’s countries of operations Hungary, Serbia, Bosnia and Hercegovina.  The financing package to selected subsidiaries of Intesa Sanpaolo Group was part of the EBRD’s crisis response in the region in the context of the Joint IFI Action Plan to address the impact of the 2008 global financial crisis on the availability of funding from banks in favour of the real economy and SMEs in particular. Project Objectives The objective of the financial package was to provide medium and long term debt to support financing of SMEs in the respective three countries (Hungary, Serbia, Bosnia and Hercegovina).and thereby to enhance the ability of ISP subsidiaries to continue lending to the real economy and dedicate funding particularly to the SME sector, which was one of the most affected by the global financial crisis and the most funding-deprived part of the economy. Transition Impact Market expansion - the project increased the SME sector’s access to finance by providing long-term funding to ISP subsidiaries with strong presence in their markets, thus providing a good platform for the channelling of funds to the real economy. The Project also contributed to increased business conduct standards by increasing transparency of disclosure of the FX risks to the sub-borrowers as the three ISP network banks were required to inform their customers of risks related to borrowing in foreign currency and make them fully aware of these risks through appropriate disclosures. Additionality In providing long term financing during a period of financial crisis when medium-longer financing tenors were not offered in the market, the Bank’s lending was additional in relation to this financial package. Additionality was enhanced by the use of local currency loans to SMEs and agreement by  client banks to provide FX risk information disclosures for FX loans to SMEs or elimination of FX loans from the client bank’s product range to SMEs. Environmental and Social Summary As a Category FI project, the project was required to comply with the EBRD’s applicable environmental Performance Requirement, in turn requiring that local loans and borrowers conduct their business in accordance with Performance Requirement 2 (Labour and Working Conditions) to the full range of their commercial lending/leasing activities. All borrowers were also required to comply with applicable national environmental, health and safety and labour requirements, adhere to the EBRD's Environmental and Social Exclusion and Referral Lists, and submit annual environmental and social reports to the Bank. Technical Cooperation n/a - none Implementation Summary The financial package assisted ISP Group in diversifying the funding base of its selected subsidiaries through provision of medium-long term financing that was at the time not available in the market. The financial package allowed ISP subsidiaries in the region to continue lending to the private sector on a sustainable basis without creating maturity gaps in their balance sheets. The financial package thereby demonstrated support for the ISP group in its business in EBRD’s countries of operations, encouraging the continued involvement of the parent in providing to its subsidiaries both funding and, where needed, equity. At the operating bank level, the three loans under the financial package encouraged continued or expanded SME lending in all three cases as well as brought further pressure to reduce FX lending to retail and SME clients. Policy statements to this end were included in the loan agreements and were highly relevant to ISP’s Hungarian and Serbian subsidiaries, where both bank clients reduced or ceased FX lending to SMEs and retail clients.