UniCredit Bank Hungary Zrt.

On September 30, 2010, MIGA issued a guarantee of $259.4 (€190) million to UniCredit Bank Austria AG’s (UBA), covering its €200 million shareholder loan to its Hungarian subsidiary, UniCredit Bank Hungary Zrt. (UCBH). The guarantee is for a period of ten years against the risks of transfer restriction, expropriation, and war and civil disturbance. This long-term shareholder loan is expected to serve a dual purpose: support the recovery and growth of corporate lending, and improve further UCBH’s long-term liquidity profile.

MIGA’s coverage for this loan falls under the framework of the Financial Sector Initiative, intended to support financial institutions’ cross-border investments into their emerging market subsidiaries, at a time when Hungary’s economy is recovering from economic shocks. Hungary, like many other countries in the Europe and Central Asia region, is currently facing difficult fiscal adjustments along with the need for external financing. This shareholder loan from UBA to UCBH will support an institution of systemic importance to the financial sector, while contributing to the growth of new lending in the economy.

The project will help increase the availability of credit for Hungary’s corporate, retail, and sub-national borrowers and help UCBH strengthen its structural liquidity profile, enabling UCBH to maintain a higher level of financial intermediation than it would have been able to otherwise accomplish. It will also help provide job opportunities in a consolidating sector and a soft labor market. Despite financial sector consolidation and cost-cutting, UCBH has continued to pursue an approach of strategic expansion, resulting in the opening of 19 new branches and the direct creation of resultant jobs.