By Vanora Bennett

The European Bank for Reconstruction and Development (EBRD) is extending an unfunded portfolio risk-sharing facility to Ukraine’s JSC OTP Bank (OTPU), to unlock €120 million(US$129.2million) of new financing for Ukraine’s private sector amidst the ongoing war waged by Russia. 

The EBRD’s facility will cover up to 50 per cent of JSC OTP Bank’s credit risk on newly issued sub-loans worth €120 million to private businesses operating in Ukraine. This credit enhancement mechanism enables OTPU to finance critical industries such as agriculture, manufacturing, transport and logistics, supporting companies’ operations and preserving access to critical goods as a vital step in safeguarding people’s livelihoods    Total enabled financing under similar EBRD guarantees, signed since the start of Russia’s full-scale war on Ukraine, amounted to close to €900 million as of end-2023. 

The EBRD facility will be supported by first loss risk cover funded by the US via the EBRD Crisis Response Special Fund (CRSF) – (USA, France, Canada, Italy, Japan, Norway, Switzerland, the United Kingdom, Germany, Netherlands, Denmark) – as part of the Bank’s resilience package arrangements.

This agreement between the EBRD and JSC OTP Bank is an extension of cooperation in support of Ukrainian businesses which began in 2022. One element of the facility is a programme to enhance the competitiveness of micro-, small- and medium-sized enterprises (MSMEs) in the European Union’s Eastern Partnership countries. 

Up to 15 per cent of the risk-shared loans will support private MSMEs’ long-term investments in EU compliant and green technologies, improving their competitiveness on domestic and foreign markets. Upon completion of their investment projects, eligible sub-borrowers will receive investment incentives financed by the European Union under its EU4Business initiative, as well as technical assistance.

JSC OTP Bank in Ukraine is a 100 per cent owned subsidiary of OTP Bank Plc., Hungary. OTPU is a universal bank offering conventional banking products to MSME, corporate and retail clients, and ranked ninth in Ukraine in terms of total assets as of end-October 2023. 

The EBRD has deployed more than €4.1 billion in Ukraine since the start of the full-scale war. In addition to supporting the private sector, its strategic priorities in the country are to support energy, food safety and critical infrastructure.