More focus on capital markets
The European Bank of Reconstruction and Development (EBRD) formed in the aftermath of the cold war to invest in eastern Europe is launching a new strategy to shift the focus of its investment to Russia, Southeast Europe, the Caucasus and central Asia.
It will thus re-allocate resources from central and eastern Europe where it says “the successful transition to a full market economy is nearing completion”, according to a statement.
Eight east European countries joined the EU in 2004, and two more will join in 2007, assuming all goes to plan. Slovenia will become the first new member state to adopt the euro in 2007.
The new strategy envisages that the eight new member states will have “graduated” from the EBRD by the end of 2010.
The resources released by reduced investment and by consolidating and closing offices in these most advanced countries will be devoted to promoting transition in countries to the east and south of the EU, including Russia.
In addition to shifting resources, the strategy sets overall targets for business volume for the region which rise over the period to about EUR 4 billion per year in the coming five years.
Net profits in 2005 of EUR 1.5 billion make it possible for the Bank to accept higher country or financial risk as well as taking on more participation in equity.
Apart from the geographical shift, the EBRD strategy is based on a new business model that stimulates innovation and carefully adapted investment strategies that align with particular country needs.
More work on capital markets
There will be more work to develop capital markets, including developing securitisation, mortgage markets and local currency financing, such as the recent launch of rouble bonds in Russia and associated establishment of the MosPrime benchmark rate.
According to EBRD President Jean Lemierre, with constant innovations and different investment approaches required for the countries outside the EU-8, the Bank will look very different in five years’ time from how it looks now and certainly from how it looked five years ago.
The EBRD is changing and is confident of repeating the successes of the past in the new environment of the future, he said.
The strategy was unanimously approved by the Board of Directors on 10 May 2006 in the context of the Capital Resources Review which determined the Bank has adequate capital to operate for the next five years.
