Statement of the European Bank for Reconstruction and Development
- Susana Almuina, Ian McCarthy, Gabriel Sensenbrenner, and Justin Zulu
- Published Date:
- December 1995
Following its reorganization in late 1993, the European Bank for Reconstruction and Development (EBRD) now has a strong private sector and country focus. The banking division is organized on a country basis, which has resulted in more focused business and marketing activity. The Financial Institutions Team, together with certain other functions such as Communications and Energy, remain as central groups responsible for all countries.
The EBRD’s Financial Institutions strategies include private sector development; activity in all our countries of operation; improving the effectiveness of commercial banks (financial intermediaries are particularly important); aiming to reach the private sector through the commercial banks; the insurance industry; specialized financial institutions; capital markets; and restructuring and privatization.
The EBRD therefore has a niche in the private sector separate from the IMF and the World Bank and with more geographical focus than the International Finance Corporation.
The EBRD is providing technical assistance and institution building of different kinds in many private sector areas. Clearly, the requirements vary with the different levels of economic development in the countries.
As a result of our private sector focus, the EBRD will not always be directly involved with technical assistance for central banks. However, where there is a role to be played, we are interested in providing this assistance or financing. For example, we are assisting in payments systems projects for the Kyrgyz Republic, Tajikistan, the Russian Federation, Uzbekistan, and Ukraine.
Assisting with payments systems is important to the EBRD because they link the central banks with commercial banks and assist with the development of the economy and private sectors in general. Coordination of the commercial banks and the central banks in the payments area is critical.
The EBRD is interested in financing computer systems, trading rooms, and telecommunications systems in central banks where the IMF may not be able to provide the financing. For example, the EBRD is cooperating with the IMF on the Russian Treasury project.
The EBRD is active in cofinancing and is working with the World Bank in the Financial Institutions Development Project in Russia, a major technical assistance and institution-strengthening project; the Enterprise Restructuring Project in Russia; a credit line to the Kyrgyz Republic; and a credit line to Belarus.
In the Development Project in Russia we expect to provide successful technical assistance to a wide selection of commercial banks through twinning arrangements with Western banks. This provides ongoing long-term cooperation and support that can provide real benefits from close working arrangements and skills transfer. These long-term arrangements can lead to cooperation in many areas such as equity participations, direct credit lines, trade finance, and joint ventures.
In other countries we have been successful in implementing technical assistance through operational audits that looked at the whole business in detail, including the preparation of business strategies and detailed reviews of the different parts of the business. These are being followed up with ongoing audits and the attachment of Western advisors (credit, marketing, planning and financial management, and so on). This provides a gradual approach toward training and institution building.
In the area of information technology, we are proposing a two-phased approach in the Russian Development Project, that is, a quick-fix core solution followed by a more strategic approach once the business strategies and planning have been defined. This provides immediate help to the banks without having to wait for the completion of long-term business plans. There is sometimes less value in going for a total solution when the financial environment, products, business, and customer services are changing rapidly.
The EBRD has been instrumental in establishing the Banking Schools in Tashkent (for Central Asia), Bucharest, and Moscow. We have assisted in the schools in Budapest and Albania. These schools are adding real value.
Technical assistance is a long-term process and cannot happen overnight. We need ongoing feedback from the recipients about the quality and value of the assistance and how it can be improved. Coordination between the international financial institutions and the central banks is also clearly an issue in many countries. We need to coordinate closely to ensure maximum benefits.