Konsolidacni Banka

completed

The project would have the following developmental impacts:Development of the Domestic Financial Sector. The project would comprise the first attempt to resolve the Czech Republic''s large overhang of bad debt and it would help stimulate the development of the local financial market.Mobilization of a New Class of Investors. Notwithstanding the success of NPL sales in the US, Japan, and Italy, it has been, and will continue to be, difficult to attract international insitutional investors to participate in emerging market NPL sales. IFC''s participation in these projects would help attract a new class of international institutional investor to this asset class.Enhanced Credit Culture. Shifting NPLs from the government to the private sector, creates a credit culture where liens are enforced and borrowers are required to repay debts. Such credit culture would increase banks'' incentives to make new loans.IFC would have a strong role in the project as a honest broker and neutral partner. The Czech government could lose its appetite to support the terms of the bidding process and/or terms of the transaction, making it difficult to select an appropriate manager or to properly execute the asset management and disposition plan. IFC''s presence would provide support to the Czech government. Such support is crucial because of the highly politicized nature of large-scale government NPL disposition programs. By participating in the bidding process and in the NPL resolution program, IFC would provide the government with much needed support during this critical period of restructuring the Czech financial sector.