EBRD plans €4bn capital increase to hike Ukraine funding

EBRD plans €4bn capital increase to hike Ukraine funding
By bne IntelliNews November 15, 2023

The European Bank for Reconstruction and Development (EBRD) board of directors proposed on November 15 that the bank's governors approve a €4bn paid-in capital increase. 

The aim of the capital increase is to facilitate an increase in investment in Ukraine to €3bn a year, effectively doubling the level of investment since the start of the war, and raising it to three times the pre-war average.  

“Today’s decision is in line with the governors’ recognition that support for Ukraine should be the Bank’s highest priority, now and in the future, following Russia’s full-scale invasion of the country,” said an EBRD statement emailed to bne IntelliNews

The capital increase will strengthen the EBRD’s balance sheet and ensure the bank can raise its investment in Ukraine while fully supporting the other economies. 

“This support is particularly important in the context of the increased need to face geopolitical tensions and their economic consequences, and the climate crisis and the long-term challenges it poses,” the press release said. 

Endorsement by the board of directors is the first stage in the formal process of raising the EBRD's shareholding from its existing €30bn level. The ultimate decision on the suggested capital increase will rest with the governors, who are expected to make a decision by the end of 2023.

At the EBRD's 2023 Annual Meeting in Samarkand, held in May, the development bank’s governors unanimously acknowledged the need for additional shareholder support to enable the bank to fulfil its role effectively. Paid-in capital was deemed the most efficient and effective to provide such support.

Should the governors greenlight the proposal, this would be the third capital injection in the EBRD's history, after previous increases 1996 and 2010. It is expected to take effect from the end of 2024, with initial payments in early 2025.

The EBRD is the largest institutional investor in Ukraine, with cumulative investments exceeding €18bn in over 500 projects. In October, the EBRD achieved its target of deploying a minimum of €3bn in financing to Ukraine's real economy in response to Russia's war on the country in 2022-23.