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The European Bank for Reconstruction and Development (EBRD) is furthering collaboration with Privatbank, the leading bank of systemic importance in Ukraine, by granting a trade finance facility of $25 million.
This move aims to bolster the Ukrainian entity’s expanding trade finance operations.
Since the onset of the full-scale war by Russia against Ukraine in 2022, Ukrainian importers and exporters have faced significant challenges in securing financing, as global banks have been reluctant to assume direct risk in Ukrainian trade finance operations.
The EBRD’s Trade Facilitation Programme (TFP) has been instrumental in supporting the resurgence of key global and regional supply chains for food and energy. The programme has facilitated 355 trade transactions, amounting to €972 million, vital for the Ukrainian economy’s most essential goods.
The EBRD’s commitment in Ukraine spans five key investment areas, including trade, food security, energy security, essential infrastructure, and the private sector, with Privatbank becoming the twelfth Ukrainian bank to partner with the EBRD under the TFP.
This provision of trade finance for Privatbank by the EBRD is crucial for sustaining trade activities in Ukraine, essential for the continuous flow of vital goods, revenue generation, economic reconstruction post-conflict, job creation, and enhancing the nation’s resilience.
In 2023, the EBRD initiated a strategic partnership with Privatbank through the Resilience and Livelihood Guarantee (RLG), facilitating guarantees for lending by Ukrainian banks.
The agreement with Privatbank last year encompassed guarantees for €240 million in new loans, primarily targeting micro, small, and medium-sized enterprises in the agribusiness sector and other vital industries.
Privatbank, established in 1992 and currently state-owned, has seen positive outcomes from Ukraine’s ongoing reforms of state-owned banks.
In 2023, the bank accounted for approximately 43% of the net profit within the Ukrainian banking sector, demonstrating adaptability to war-related risks through measures like transitioning to remote banking, enhancing cyber-attack protections, and beginning to develop its trade finance operations.
During the signing ceremony in Kyiv, EBRD First Vice President Jurgen Rigterink said, “With a strong franchise across Ukraine and a focus on business with agricultural producers, Privatbank has the potential to find its own niche in the trade finance business and support the EBRD’s efforts to restore the food supply chain. Importantly, it will also effectively align Privatbank’s operations with EBRD standards, thus enhancing its privatisation prospects in the future.”
Gerhard Boesch, CEO of PrivatBank, said, “PrivatBank is honoured to sign a second large agreement with the EBRD within one year, which contributes to enhancing stability and resilience of the market, and expands the platform for reconstruction of Ukraine.”
“Thanks to the EBRD guarantees, the cost of banking services for documentary operations is significantly lower than standard loans. This new agreement allows us to issue confirmed letters of credit with post-import financing, which in turn gives opportunities for our clients to increase the period of payment deferral for foreign economic contracts. We are confident that all groups of customers who import goods – importers of production equipment, agricultural machinery, machines, machine tools, aggregates, along with small and medium consumer goods businesses will benefit from this major deal between the EBRD and PrivatBank.”
Following the invasion by Russia, the EBRD significantly ramped up its financial support for Ukraine, allocating €4 billion in the first two years of the conflict. Additionally, the bank’s Governors recently approved a capital increase of €4 billion, allowing for sustained lending at these levels and paving the way for further investment in the country’s reconstruction phase.
