Financial stability is the capacity to support long-term development while avoiding excessive volatility and market reversals. This stability is a key quality of well-functioning market economies.
The Bank acts as a catalyst for the growth of strong, sustainable and inclusive financial sectors. It uses a mixture of financial instruments, including debt, equity and trade finance, combined with policy reform and donor-funded activities to support financial institutions.
For example, in 2016 the EBRD extended the SME Local Currency Programme to Georgia in order to mitigate exchange rate risks for SMEs. Donor funding came from the EBRD Early Transition Countries Fund, the Swiss State Secretariat for Economic Affairs and the United States of America.
Non-performing loans (NPLs) undermine financial stability and limit the capacity of the largest banks in the EBRD region to undertake new lending. Donor-funded reform policy seeks to reduce this burden. In Serbia, the Ministry of Finance adopted a strategy in August 2015 for NPL resolution. In 2016, the EBRD supported the strategy through advice and technical cooperation, funded by the UK Government’s Good Governance Fund.
Technical assistance funded by donors focused on helping financial institutions build their capacity to develop credit lines dedicated to energy efficiency investments.
For example, the EU further supported the EBRD Mid-size Sustainable Energy Financing Facility in Turkey. The Facility is now worth €1.5 billion and active through seven local banks. It aims to boost finance for private companies to invest in renewable energy and resource efficiency projects. The EU’s €6.8 million in grant funding for the Facility enables the EBRD to provide expert advice to partner banks and their clients.
The EBRD’s Trade Facilitation Programme fosters trade relations, especially where foreign banks hesitate to engage with companies that lack long financial track records.
In Moldova, the EBRD launched in 2016 a study funded by Luxembourg on the potential of factoring as an alternative method of financing trade.