KERESKEDELMI ES HITELBANK RT

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The project consists of a facility for Kereskedelmi és Hitel Bank, Hungary, in the form of a convertible subordinated bond of US$ 30 million for a term of seven years. The principal objectives of the project are to: By helping the restructuring and privatisation of the last major state-owned bank in Hungary, the EBRD will contribute to the promotion of a sound private banking system in that country and will facilitate the financing of private corporate customers. K&H is one of the largest commercial banks in Hungary in terms of total assets and branch network following its merger with its retail banking subsidiary IBUSZ Bank. In 1995 a new management team transformed the institution into a leading universal bank with its primary focus on wholesale activities. The Government of Hungary has approved a decree on the privatisation of K&H, requiring a strategic investor to hold a minimum of 25 per cent of K&H by the end of 1997 and requiring the Government to fully divest its shareholding in K&H by that time. A subordinated bond which will form part of K&H's capital base, with an option to convert into ordinary registered shares of K&H. Up to the equivalent of US$ 30 million (ECU 23.4 million), all of which will be financed by the EBRD. The project has been classified as medium. K&H will carry out its operation in accordance with the EBRD's Environmental Procedures for Local Banks, which provide for the integration of environmental due diligence into its credit and investment appraisal processes, and for a requirement that borrowers comply with national and local health and safety and environmental regulations and standards. K&H will submit annual environmental reports to the EBRD. Technical cooperation funds for the external due diligence have been made available under the Framework Contract for Financial Institutions.