- The synthetic securitisation agreement with the EIF, backed by EIB, will support sustainable investment.
- The EIB Group’s support will help reduce credit risk, allowing ProCredit Bank to commit about €416 million in new financing for smaller businesses.
ProCredit Bank Bulgaria EAD (PCBB) will expand its support to small and medium-sized companies (SMEs) in Bulgaria via a synthetic securitisation agreement with the European Investment Bank Group (EIB Group). This financial instrument offers a risk-reducing mechanism for PCBB, liberating capital to support lending for sustainable investment.
Under the arrangement, PCBB pledges to supply fresh lending of BGN 813 million (€416 million) to SMEs and small mid-caps over a three-year period. Approximately 30% of this financing is allocated to projects aligned with climate action and environmental sustainability, highlighting the commitment of PCBB and the EIB Group to supporting the transition to a low-carbon economy.
The enhanced lending capability of PCBB is made possible through the unfunded protection provided by the European Investment Bank (EIB) and the European Investment Fund (EIF). More specifically, the EIF is providing protection to a mezzanine tranche (€41 million) and a senior tranche (€254 million) of a portfolio of SME loans with a total outstanding balance of about €300 million. Close to half of the EIF’s exposure is in turn counter-guaranteed by the EIB and allows the redeployment of PCBB’s capital to support the real economy.
“Inflation and the tightening of financial conditions have undermined the capacity of smaller companies to invest,” said EIB Vice-President Lilyana Pavlova. “The EIB Group is determined to mobilise the full scale of its resources and instruments in support of the real economy in these challenging times, and especially in cohesion regions. Our cooperation with ProCredit Bank is a prime example of our comprehensive approach to accelerating green and sustainable lending.”
This is the first capital relief transaction between the EIB Group and PCBB and is one of the first synthetic securitisations in Bulgaria, contributing to the development of a functioning securitisation market in the country.
A synthetic securitisation is a transaction whereby the credit risk associated with a pool of exposures is tranched, and where part of this credit risk (not the exposures themselves) are transferred to a protection seller (EIB Group) by the means of guarantees or derivative contracts, effectively reducing the credit risk and related capital requirements for the protection buyer.
The new financing is expected to benefit less developed regions of the European Union in terms of per capita income, underlining the EIB Group’s commitment to equitable growth and social and territorial cohesion.
“The deal will make a meaningful contribution to employment and economic growth in Bulgaria,” said EIF Chief Executive Marjut Falkstedt. “It shows how the EIF and the EIB Group can leverage innovative financial instruments to support sustainable investment.”
Executive Director and Member of the Management Board of PCBB Ivan Dachev said: “Thanks to the good and long-standing cooperation with the EIF and the EIB, we have been able to provide efficient support to SMEs’ growth and development in a difficult economic environment. Moreover, under this agreement we will fund green investments, in alignment with the ProCredit's strategic priority to support our clients in their transition to a sustainable future.”
Background information
The European Investment Bank Group (EIB Group) is the European Union’s long-term financing institution, owned by its Member States. We finance sound investments that contribute to EU policy goals, including social and territorial cohesion, and the just transition to climate neutrality. We support projects in infrastructure, innovation, climate and environment, and small and medium-sized enterprises.
The European Investment Fund (EIF) is part of the EIB Group. It supports Europe’s SMEs by improving their access to finance through a wide range of selected financial intermediaries, such as banks, guarantee and leasing companies, micro-credit providers and private equity funds. The EIF designs and offers equity and debt financing instruments fostering EU objectives in support of entrepreneurship, growth, innovation, research and development, the green and digital transitions and employment.
ProCredit Bank Bulgaria (PCBB) is a full-service bank focused on small and medium-sized enterprises working mainly in the production, trade and agricultural sectors. PCBB’s business lending is based both on an understanding of each client’s situation and on sound financial analysis, enabling PCBB to build long-term partnerships with its clients based on mutual trust. PCBB is active in Bulgaria and Greece and is fully owned by ProCredit Holding AG & Co. KGaA (PCH), based in Frankfurt, Germany, the controlling entity of the ProCredit group of banks. In addition to Bulgaria, the ProCredit group further provides access to finance in Greece, Serbia, Ukraine, Kosovo, North Macedonia, Ecuador, Georgia, Romania, Bosnia and Herzegovina, Albania, Moldova and Germany.
