Международная финансовая корпорация Член Группы Всемирного банка Corporate Governance as Integral Part of Risk Assessment – The IFC Approach Yerevan May 2005

2 из 12 Presentation Purpose and Outline Outline Outline: 1.About IFC 2.Working with banks on Corporate Governance

3 из About the IFC

4 из 12 IFCs role: Promote economic development by encouraging private investment in developing member countries IFC products and services include: Long-term financing (corporate / project / equity / quasi-equity) Mobilizing capital (syndication, co-financing) Providing technical assistance and consulting. Private Sector Arm of the World Bank Group International Bank for Reconstruction and Development (IBRD) Established in 1945 International Finance Corporation (IFC) Established in 1956 International Development Association (IDA) Established in 1960 Multilateral Investment Guarantee Agency (MIGA) Established in 1988 The World Bank Group 1

5 из 12 IFC in Brief Largest financier for private sector in emerging markets Global: US$ 17.9 bln. portfolio (own account, as of FY04) In Armenia: about 9 million US$ Hotel Armenia: about 5 million US$ Equity ACBA Leasing: 2 million US$ Loan and equity Armeconombank : 2 million US$ Credit Line for SME and Mortgage 1

6 из 12 IFC and Armenian Financial Sector Problems: small sector, low monetisation ( total assets/ GDP about 20%, Loans/GDP less than 10% ) absence of long term funding Relative small banks with small equity IFC: difficult to find projects because of small amounts cheap funding combine investment with TA work Sectors of interests: SME, Mortgage, Leasing

7 из 12 Procedure 1.Initial review by the region 2.Structuring the deal 3.Management Approval 4.Mandate Letter 5.Appraisal/Due Diligence by HQ team 6.Credit Committee 7.Board Approval 8.Transactions Documents 9.Commitment 10.Disbursement Total time: not less than 3 months, average 8 months

8 из 12 How IFC works Key Criteria assessed: Financial Status Management Market Position Corporate Governance Environmental and Social Issues

9 из Working with Banks on Corporate Governance

10 из 12 IFC Methodology to Identify Risk & Opportunity Level 1 Complies with law Level 2Level 3Level 4 CG leadership Commitment to CG Board Practices Shareholder Rights Disclosure & Transparency Systematic part of investment process Adapted to different types of companies small vs. large, listed vs. closely held, banks vs. real sector Purpose: To reduce portfolio risk and to contain reputational risk Output: CG assessment, consultations, improvement program 4

11 из 12 Commitment Substance over form Full set of documents Public recognition Officer and Board committee to implement & review cg The Four Basic Parameters Disclosure & Transparency Ownership structure disclosed Financials prepared with IFRS Internal control procedure External, independent auditor Risk mgmt. policy implemented Shareholder Rights Well organized GMS Cumulative voting Dividend policy in place Protection of minority rights Independent registrar Good Board Practices Independent directors Expertise, competence & skill Proper organization Presence of specialized committees 4

12 из 12 Contact Details Moscow Bolshaya Molchanovka 36 Теl.: (095) Fax: (095) Web: