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| South Region EQ |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 27620 |
| Company name | Bank "Yuzhniy region" |
| Country |
| Russian Federation |  |
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| Sector | Commercial Banking - General |
| Environmental category | FI |
| Department | Reg Ind, Financial Markets, EMENA |
| Status | Completed |
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| Date SPI disclosed | March 2, 2009 |
| Projected board date | April 3, 2009 |
| Previous Events | Invested: July 7, 2009
Signed: June 23, 2009
Approved: June 11, 2009 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
IFC’s Financial Markets strategy in Russia places a high priority on improving access to finance in non-urban areas and on improving the stability of the banking system by assisting in the consolidation of a highly fragmented sector and by reducing the concentration of state-owned banks. As a result, IFC looks to support second- and third-tier banks in regions that are under-served by the banking system.
The proposed project consists of an equity investment of up to $1.5 million in Bank “Yuzhniy Region” (“Southern Region Bank”, or “SRB”), a medium-size bank located in Rostov-on-Don (a frontier region), to purchase up to 20% of the voting shares of SRB.
The branch network of SRB comprises 2 branches and 2 points of sale. The Bank is a member of the deposit insurance system. The Bank’s primary business lines are corporate and retail lending, with focus on SME financing. Primary funding for the Bank is received through corporate and retail deposits. The Bank’s deposit base comprises over 2,600 retail and 1,500 corporate clients. The Bank’s loan portfolio has around 30 corporate and over 520 retail borrowers and is adequately diversified in terms of industry exposures. |
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| Project sponsor and major shareholders of project company |
| As of January 1, 2009 the shareholding structure was the following: Mr. Igor Vladimirovich Kim owned 75% of total shares, Prosperity Capital Management (PCM) owned 25% of total shares. |
| Total project cost and amount and nature of IFC's investment |
| The proposed project consists of an equity investment of up to $1.5 million in SRB, to purchase up to 20% of the voting shares of the Bank. |
| Location of project and description of site |
| SRB has Head Office and four outlets in Rostov-on-Don. |
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| Anticipated development impact of the project |
The project is expected to have a strong development impact. IFC would contribute to the consolidation of Russia’s highly fragmented banking sector and help to develop a stronger banking platform by supporting the expansion of SRB both through organic growth and through mergers and acquisitions process.
The project would create a demonstration effect for other banks active in the Southern Federal District in terms of best practices in social and environmental management, because SRB will need to comply with IFC’s environmental and social management standards and establish the Social and Environmental Management System (“SEMS”). |
| IFC's expected development contribution |
| Through nominating a Director to the Board of SRB, IFC would contribute the much needed global expertise in corporate governance, risk management, and SME and trade finance to a regional Russian bank, with the possibility of developing a longer term financing relationship with the Bank in these areas. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC's Environmental and Social Review Procedure.
During appraisal, IFC will analyze the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determine the Applicable Performance Requirements, if any, that would include a combination of:
- The IFC FI Exclusion List; and/or
- The applicable National Social and Environmental Laws and regulations; and/or
- The IFC Performance Standards.
Although part of an existing client group, SRB itself is a new IFC client. IFC reviewed the Bank's Social & Environmental Management System (SEMS) in the context of this investment and will suggest supplemental actions to address gaps in the SEMS. IFC reviewed the Bank's labor practices according to IFC's Performance Standard 2: Labor and Working Conditions and will also be suggesting supplemental actions in this context.
Based on the Applicable Performance Requirements and SEMS review, the Bank will be required to:
- Develop an, or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Performance Requirements;
- Revise existing labor policies and practices to demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions;
- Submit a periodic report to IFC. |
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| For inquiries about the project, contact: |
Maria Evsyukova, Manager
International Department
Rostpromstroybank (OJSC)
102/2 Metallurgicheskaya Street
Rostov-on-Don, Russia, 344029
Telephone: +7 (863) 211-10-49, ext. 252
Fax +7 (863) 211-10-25
E-mail: maria.evsyukova@rpsb.ru |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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