Lending Policies

Generally, the Bank selects, analyzes, reviews and finances projects in accordance with criteria provided for in its internal regulatory documentation.

The following principal tasks were set, based on principal strategic objectives provided for in the Charter and Provisional regulation concerning the investment activity of the Bank approved by the Council:

  • upgrade of power, transport, communication and agroindustrial infrastructure with the view to intensify trade and economic cooperation between member states;
  • achievement of structural shifts in the economies of member states;
  • increase in the output of competitive high-tech products with high added value in non-primary sectors of the economy; and
  • creation of a financial and investment vehicle to support integration processes.

In general these criteria are viewed as standard selection criteria in the course of the review and financing of projects.

The Bank provides financing if the following general conditions have been met:

  • investment projects implemented by the Bank comply with its mission and strategic objectives, as well as facilitate the solution of tasks set for the Bank;
  • the Bank, inter alia, finances investment projects when such financing cannot be sourced from the market upon suitable terms; and
  • projects are financed in compliance with the basic principles of international banking practice.

Investment vehicles are used by the Bank in compliance with international banking practice and specific project requirements include, inter alia, the following:

  • investment loans provided in accordance with conditions of maturity, serviceability, recoverability and security;
  • equity participation for the duration of the investment project period;
  • mixed project financing with a combination of debt and equity financing instruments;
  • provision of guarantees and letters of credit;
  • financial and operational leasing; and
  • services of a financial consultant.

The Bank strives to maintain a heavily diversified portfolio of credits and investments, as well as to ensure competitive terms and conditions of financing and high quality of services, including a high speed of measured credit and investment decisions. Decisions concerning project financing, except for certain cases requiring approval of the Council, are made by the Management Board.

Syndicated lending as a form of financing is used by the EDB as part of its project operations (usually in the form of «club» syndications arranged by several banks co-financing a particular project), as well as part of its cooperation with financial institutions («FIs»). In the latter case, participation in the arrangement of syndicated financing is restricted by base limits set for each FI, as well as by the recommendations of the analytical, legal and security departments and decisions made by the EDB credit committee and the Management Board. Engagement in this type of operations allows the Bank to facilitate the development of the financial sector of the EDB's member states, as well as to diversify the Bank's asset base using medium-term investments, including, inter alia, with an approximate one year maturity. In a wider context, the arrangement of financing for FIs and other clients of the Bank is an important element of investment and banking operations that is planned to be further developed with the growth of the Bank's loan portfolio and the expansion of its client base.

Trade financing forms a part of the structured financing provided by the Bank. We are planning to actively participate in trade financing of clients within the framework of project operations, primarily by attracting guarantees of export-credit agencies covering supplies of equipment and machinery from relevant countries, as well as by opening short-term trade financing lines for FIs covering relevant operations of their clients. In both cases financing is provided in strict compliance with declared objectives and tasks that comply with the EDB's mission.

The project cycle comprises the following major stages:

  1. Pre-investment.
  2. Project approval and financing.
  3. Project implementation and monitoring.

At the pre-investment stage, the relevant division of the Bank:

  • conducts negotiations with project initiators;
  • collects data and carries out a preliminary project data analysis;
  • develops a project concept paper for review by the Chairman of the Management Board.

At the stage of approval and financing, the relevant division of the Bank:

  • prepares the necessary project loan portfolio of documents;
  • defines the volume and cost of  support;
  • prepares the credit proposal and finalizes the terms and conditions of financing in the Indicative Terms of Financing; and
  • submits a set of credit documents to the credit committee and further to the Management Board for approval and commencement of project financing.

In compliance with the Provisional regulation concerning investment activity of the Bank, certain projects may be subject to further review and approval by the Council of the Bank.

At the stage of project implementation and monitoring, the relevant division of the Bank:

  • executes financing of the project in accordance with the approved disbursement schedule;
  • monitors the project by collecting updated information concerning the actual financial profile of the borrower and identifying potential issues;
  • completes a comparative analysis of actual and planned indicators;
  • controls compliance of the borrower with the terms and conditions of financing; and
  • assesses the actual status of security provided.

The Bank does not open client accounts and is not engaged in the provision of settlement and cash services. Therefore, all project transactions are carried out through a selected agent bank on the basis of a signed agency agreement.