UPDATE 3-EBRD directors recommend 4 bln euro capital increase to boost Ukraine funding
(Adds comments from the EBRD president in paragraphs 5-6)
By Libby George
LONDON, Nov 15 (Reuters) - The European Bank for Reconstruction and Development (EBRD) has taken the first step to enable a 4-billion-euro capital increase that would allow it to double its annual investment in Ukraine, it said in a statement on Wednesday.
The EBRD, which already deployed 3 billion euros ($3.26 billion)to Ukraine for 2022-2023, said its board of directors had recommended that the bank's governors approve the capital increase "to enable it to provide significant and sustained investment for Ukraine, now and in the future".
"Today's decision is in line with the governors' recognition that support for Ukraine should be the Bank's highest priority, now and in the future, following Russia's full-scale invasion of the country," it said in a statement.
The endorsement is the first step in the formal process to allow it to boost annual Ukraine funding to 3 billion euro. If approved, the first payments from the added funds would be available in 2025.
EBRD President Odile Renaud-Basso said there was no specific timeline for when it expected to begin spending $3 billion a year - its current estimated costs for reconstruction - but said it would aim to be agile.
"What's very important is that this capital increase will help us being able to support Ukraine, whatever the circumstances are, and even in a long war scenario, if the war is longer, we can continue to invest...the order of magnitude of what we've been doing."
The governors will make a final decision on the proposal by the end of the year, the statement said. Approval would increase EBRD's authorised share capital from its current level of 30 billion euros and mark the third capital increase in its history, following two others in 1996 and 2010.
The EBRD has been the largest institutional investor in Ukraine over the past 30 years, and increased its support markedly after Russia's invasion last year.
In June, ratings agency Fitch pegged the EBRD's net exposure to guarantees to Ukraine at 2.5 billion euros, accounting for 12.8% as a ratio of shareholder equity. It warned that the bank could lose its coveted triple-A credit rating if the country defaulted on the loans.
It made the same warning for the World Bank's International Bank for Reconstruction and Development (IBRD), which has a 13.4% net exposure to Ukraine as a ratio of shareholder equity.
Renaud-Basso said the capital increase would "give us the capacity to absorb any shock" and thus protect their rating. ($1 = 0.9216 euros) (Reporting by Libby George, additional reporting by Marc Jones, editing by Karin Strohecker, Emelia Sithole-Matarise and Louise Heavens)