IFC deploys Russian bank stabilisation fund(3)

The fund will invest in second-tier Russian banks in an effort to improve economic stability and strengthen the region’s banking industry.

The International Finance Corporation has launched a private equity fund that will provide Russian second tier banks with equity, according to documents.

The IFC Russian Bank Capitalization Fund includes a $250 million commitment from the IFC, and had raised at least $275 million as of 28 June, according to US Securities and Exchange Commission documents. The fund’s target was not disclosed. 

The fund, which launched earlier this month, will invest directly in banks and is designed to help stabilise the second tier banking industry’s capital base. This will, in theory, hasten economic recovery and job creation in the region, both of which have languished since the financial crisis. 

“There are few potential stable sources of capital for second-tier Russian banks in the aftermath of the crisis and IFC is uniquely positioned to gather financial resources from both the public and private sectors to enable and encourage the development of a more efficient financial infrastructure in Russia,” according to the IFC’s fund documents. 

The fund will be managed by IFC Asset Management, a subsidiary of the development institution that mobilises and manages funds on behalf of a wide variety of institutional investors.  

A recent Standard & Poor’s assessment of the Russian banking industry concluded that the market has considerable risks, particularly in relation to economic resilience, credit risks and systemwide funding.  The industry faces only moderate growth prospects, largely because of a reliance on commodities, an uncompetitive export economy the slow pace of economic reform, according to the paper. 

The IFC did not respond to a request for comment.

The IFC is a member of the World Bank Group, a global development institution focused on the private sector. The asset management group has around $4.1 billion in assets under management. 

In June, the IFC committed $35 million to Convergence Partners Communications Infrastructure Fund, a $500 million vehicle that will target investments in Africa’s communications sector.