Banking: IFC launches new recap fund
The International Finance Corporation has teamed up with Japan Bank for International Cooperation to launch a new recapitalization fund for struggling private-sector banks in the emerging markets.
With central and eastern Europe at the centre of the financial crisis, attention will inevitably be focused on that region although the $3 billion fund’s strict guidelines mean that its portfolio will be diversified throughout the developing world. No more than 10% of the fund can be invested in any single bank; no more than 20% invested in one country; and no more than 25% invested in one region.
"Eastern Europe is probably the emerging region most affected by the crisis but several other countries will be impacted too," says Jyrki Koskelo, vice-president for Europe, central Asia, Latin America and the Caribbean, and global financial markets at the IFC.
The idea of the Bank Recapitalization Fund first came up in the second half of last year as the economic and financial environment in emerging markets began to deteriorate to such an extent it became clear that national governments on their own lacked the capacity to stem the oncoming crisis. Conversations with banks in the developing world provided a further boost to the initiative. "An overwhelming number of banks told us that there should be an alternative to government help," says Koskelo.
As an organization with offices in more than 100 countries, the IFC feels it is well placed to gauge which banks might need its help.