Kazkommertsbank capital increase

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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 EBRD approved the acquisition of ordinary shares in Kazkommertsbank (KKB) for an amount of up to USD 40.6 million as part of a new share issue in 2009, to maintain its overall shareholding approximately at then-current level of 8.45%.  The investment was expected to strengthen KKB’s capital base and support the Kazakh Government’s strategy to stabilise the Kazakh banding sector by sending a positive signal to the market. Project Objectives At the time of the transaction, the EBRD was focused on targeting support to systemically important and existing clients through debt and equity instruments, to assist Kazakhstan to respond to the financial crisis, and promote improvements in corporate governance and risk management. Transition Impact There were three components to the transition impact potential to be derived from this transaction: improvements in corporate governance standards such as credit processes and loan to deposit ratio limits, improvement of market stability and incentives to lend to the real economy by strengthening KKB’s liquidity position, and providing a demonstration effect regarding confidence in KKB within the Kazakh financial system as a whole. Additionality At the time of the transaction, local banks in Kazakhstan such as KKB had limited access to international capital markets.  By participating in the transaction, the Bank was able to support KKB and assist the Kazakh authorities to restructure the banking system. Environmental and Social Summary This project was classified as Environmental Category FI, such that KKB was required to continue to apply the Environmental Procedures applied at the time of the EBRD’s initial equity investment. Technical Cooperation n/a - none Implementation Summary EBRD’s equity investment helped KKB to navigate the crisis, facilitated target improvements in corporate governance and sent a signal of confidence to the market, thus, contributing to stabilisation of the sector.