Established in 1927, Türk Ekonomi Bankası (TEB) is a medium sized Turkish bank with a strong tradition of corporate banking, the financing of foreign trade and private banking. In recent years, it has also increasingly focused on retail and SME banking.

In addition to providing a variety of banking services to retail, SME, commercial and corporate clients through its rapidly expanding branch network, it is also active in securities brokerage, leasing, factoring, insurance and portfolio management through its subsidiaries and group companies.

TEB’s shares have been listed both on Istanbul Stock Exchange and London Stock Exchange since February 2000, and currently 15.75% of its shares are freely floating there. The remaining 84.25% is held by TEB Mali Yatirimlar A.S. (TEB Mali). Since February 2005, BNP Paribas of France holds 50% of TEB Mali, with the remaining 50% held by Colakoglu Group of Turkey.

The proposed investment consists of a $100 million note which would qualify as Tier I capital under relevant Turkish banking regulations.

100.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

* These investment figures are indicative

TEB is headquartered in Istanbul, Turkey and has 215 branches throughout Turkey.

This investment is timely as IFC steps in to support the bank’s capital base allowing its continued lending growth. It also introduces an efficient capital strengthening solution to the country’s banking sector. The development impact of this investment would further include:

- creating a best practice example and supporting product innovation through IFC’s work on the new instrument;
- strengthening the bank’s capital structure and balance sheet and enabling it to expand its financial intermediation capacity, particularly to SMEs and households in a way that achieves the highest lending impact possible for each dollar of IFC investment.

IFC’s subordinated loan will strengthen the capital base of the bank. Also, IFC’s active role in the structuring and launching of a new capital instrument to Turkey assures best practice and lends credibility to help its acceptance by the market. The transaction sets an example that can be followed by other banks to optimize and diversify their capital sources, and enhance their lending capacity, particularly to the growing SME and retail segments.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the FI portfolio, for types of transactions, size, tenor and industry sectors and determine the Applicable Performance Requirements, if any, that would include a combination of:

- The IFC FI Exclusion List and/or,
- The applicable National Social and Environmental Laws and regulations and/or,
- The IFC Performance Standards.

While TEB is an existing IFC client, as this project is being reviewed under IFC''s revised Environmental and Social Review Procedure IFC will also review, if required, TEB''s capacity to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, TEB will be required to:

- Upgrade if necessary, its existing SEMS, prior to disbursement to the satisfaction of IFC,
- Identify responsible, qualified persons to manage and implement the SEMS,
- Commit to implement the SEMS, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements,
- Continue to submit a periodic report to IFC.