On December 31, 2013, MIGA issued guarantees of €150 million ($206.0 million) covering new and existing equity investments from Société Générale S.A. of France to its subsidiary in Serbia, Société Générale Banka Srbija a.d. Beograd. The coverage is for a period of up to 10 years against the risk of expropriation of funds of mandatory reserves maintained by the Serbian subsidiary with the Serbian central bank.
Société Générale has supported the growth of its Serbian subsidiary through equity injections. It aims to reduce the risk weighting for the mandatory reserves maintained by Banka Srbija a.d. Beograd held with the Serbian central bank through obtaining expropriation of funds coverage from MIGA. The resulting capital relief will free up equity previously tied up for country-risk purposes and create headroom for generating new risk-weighted assets for productive investments in Serbia’s economy.
The equity that MIGA’s guarantee frees up will allow Société Générale’s Serbian subsidiary to grow its business and increase its lending activities in Serbia through creating headroom in the risk-weighted asset ceiling for the Société Générale Banking Group’s Serbian business. The bank can extend new loans to borrowers in Serbia over the life of the coverage. Supporting productive businesses through credit extension will stimulate growth, employment generation, and poverty reduction in the country.
The project is aligned with the second Joint IFI Action Plan that seeks to help countries in Central and Southeastern Europe cope with the impact of the euro-zone crisis and its lagging recovery and, more specifically, the ongoing deleveraging by western parent banks.
The project is also aligned with the World Bank Group’s strategy for Serbia as it seeks to address the spillover from the financial crisis.