EBRD fast-tracks asset-backed securities
The European Bank for Reconstruction and Development is helping to develop securitization structures in central and eastern Europe. Sudip Roy reports.
CUTTING EDGE IS A PHRASE not often applied to development banks. But the European Bank for Reconstruction and Development’s strategy in helping to develop securitization structures for financial institutions in central and eastern Europe fits the bill. Asset-backed securities are rare in the region, but the multilateral is at the forefront of the product’s development and expects to participate in a handful of deals over the forthcoming months.
In December, the EBRD’s shareholders approved the first securitization that the bank will be involved in: a transaction from Russian Standard Bank (Bank Russky Standart) backed by consumer loans that could amount to as much as €70 million.
The EBRD is involved in two ways. First, the multilateral will invest in subordinated bonds denominated in euros and securitized by a portfolio of consumer loans originated by Russian Standard Bank. Specifically, the transaction envisages the issuance of up to €70 million in subordinated bonds, with the EBRD subscribing to about 50% and international investors and commercial banks taking the rest. Second, the EBRD will advance Russian Standard Bank a rouble-denominated loan that would be equivalent to $30 million.
The deal will be one of the first securitizations in countries in which the EBRD operates and will accelerate the development of Russia’s capital markets.