Increase National Development Bank's capital by ₹10 billion with bank capital

Objective: Increase NRB's guarantee and lending capacity to finance infrastructure and energy self-sufficiency by up to 7x, by ₹110 billion

Progress: Banks to increase capital of merged entity of NRB and CEB by ₹10 billion. CZK 10 billion in two steps:

The merger of NRB and CEB will allow the banks to acquire a minority equity stake (49%) worth CZK 4.5 billion (1/3 of the book value of the capital of both institutions), NRB alone would allow the increase due to NRB's unprofitability/valuation only in the order of hundreds of millions
The banks will subsequently increase capital by CZK 5.5 billion. The state must do so anyway to maintain the ownership ratio (5.7bn e.g. by merging another institution into NRB)

Limitation for further discussion:

The state's ability to merge CEB/NRB including timing so that capital increase is regulatory possible
A privately owned NRB would likely have to compete for the ability to distribute EU funds (as in Western Europe), we are analyzing this further including the possibility of acquiring a stake in a holding company owning 100% of NRB
Entity valuation and further analysis of competition and other regulatory/legal limits (establishment/state ownership of CEB)

Mission, scope, size:

Effective, fast and targeted allocation of national and EU support and long-term targeted support for the implementation of the economic strategy
Platform for systematic long-term support for the implementation of the economic strategy of the Czech Republic and in times of crisis also fast support for the needed entities
Focus on SMEs, startups, large companies, self-government units. Through a range of financial products (from guarantees, loans and advisory services to capital inputs)
The annual amount of financing gradually up to ~2% of HPD (100 billion CZK), the volume of assets should be about 500-700 billion CZK with equity of 50-70 billion CZK. CZK

Corporate governance, organizational and ownership structure, independence, core competencies:

Independent holding group with unified governance and backed by a special law establishing independence
Independence of bank management stems from the manner of its appointment and limited accountability to the executive
Holding/group of companies with unified management, oversight and corporate governance
The Czech National Bank should be the regulator, the Parliament should be the controlling body

The bank (holding) should be established on the basis of the present NRB either by taking over the agenda or by direct incorporation of concurrent agencies

Concept of National Development Bank as per advanced European economies

Italy: CDP - 83% government, 1% shares, 16% private banking sector (bank foundation)
Austria: OeKB - 100% privately owned (banks), mandate from government, banking license, Export Bank (OeEB) - 100% owned by OeKB, banking license, "development" bank (AWS) - 100% government owned for distribution of EU funds
Netherlands: FMO - banking license, state 51%, private capital 49% (NL banks, unions, associations)
Portugal: SOFID - 80% state, rest private capital (banks)
Germany: KFW - 80% federal government, 20% federal states

Quantification of benefits of the proposed activities from a state perspective

1. Affordable Housing

Funding of affordable housing construction and bank participation in project office, minimum ₹10 billion
with involvement of other sectors + ₹40 billion 2. Funding of SFDI in 2023 and outlook for 2024

Banks' proposals for cooperation with the state