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European Investment Bank (EIB)
The creation of the EIB was part of the founding treaty of the European Economic Community, the Treaty of Rome of 1957. The EIB had to make sure that growth would not concentrate around the areas that fared well while backward areas (like the Italian Mezzogiorno) would stay behind. Some member states were unwilling to create the EIB as an institution with similar tasks already existed: the World Bank. However, the political motive to found an institution besides the US-dominated World Bank in recovered Europe turned out to be stronger. By now the EIB is the biggest of the Multilateral Development Banks, the value of approved loans rose from EURO 35 Billion in 1999 to EURO 41 Billion in 2000 exceeding the financial size of the World Bank. Where three multilateral banks now serve Central and Western Europe, competition has emerged. As the EIB is the most closed and least accountable of the MDB's and has virtually no policies concerning environmental and social safeguards, it seems willing to fund projects which the other banks reject. Moreover the EIB often offers cheaper loans than the other MDB's made possible by its lower costs resulting from the absence of clear mandatory environmental, social and public information/consultation policies. Another reason for the low lending costs of the EIB is the amount of staff they employ; although the EIB equals or even exceeds the World Bank in size they employ only about 1000 people compared to over 10.000 at the World Bank.
Objectives. The main task of the EIB is to contribute to the development of the common market of the European Union. To that end, it provides long term loans and guarantees. Twenty percent of EIB lending comprises so-called Global Loans. These are loans through intermediaries, usually national or local banks, meant for small and medium scale enterprises.
Governing system. The EIB is an autonomous institution. All EU member states participate in it. The highest body of the EIB is the Board of Governors which convenes once a year and decides on the general policy of the EIB. The Board of Directors is responsible for the allocation of credits and determines interest rates. Different from other MFIs, this Board is non-residential. The Board is appointed by the governors and comprises mostly high ranking government officials but also people from the private sector. The function of director is only part-time as the board meets only about ten times a year. "During each of these short meetings the directors have the responsibility to make decisions about an amount of loans equal to what the directors of the EBRD (who work full time) decide on in a year" (J. Feiler. M. Stoiczkiewicz, The European Investment Bank: Accountable Only to the Market?. CEE Bankwatch Network 1999.) As a consequence, the position of the president and the six vice-presidents is very strong. They are responsible for daily matters. Also, they initiate credit proposals (so these are not imposed from above by political players).
Financial structure. All member states contribute to the EIB. Less than ten percent of their contribution is actually paid in; the remainder is callable capital. Most of the ElB's resources are borrowed from the international capital market. The gearing ratio of the EIB is higher than that of other development banks (which have a gearing ratio of 1): credits outstanding can grow to an amount of 250% of signed in capital. This is because the guaranteed capital is in the hands of industrialised countries which are considered highly creditworthy.
Tasks. Besides projects in member states of the EU the EIB finances more and more projects outside the EU. Starting with the APC countries of the Lomé Treaty the EIB has steadily expanded its mandate and now conducts operations in some 130 countries all over the world. The last few years the lending outside the EU accounted for an average of 15% of total lending. The future lending of the EIB outside the EU is expected to increase as the EIB is given a leading role in the pre-accession fund for the EU candidate countries in Central and Eastern Europe (CEE) and the reconstruction of the infrastructure in South Eastern Europe trough the Balkan Task Force. It is questioned whether loans to these "other' countries really follow the EU rules. As mentioned in the introduction the policy statements of the EIB are weak and the closed nature of the Bank makes it difficult for civil society groups to monitor the Banks compliance with these policy statements. This forms a problem especially in countries with weaker environmental and social legislation or high levels of corruption. A case in point is the EIB financed Lihir Goldmine Project in Papua New Guinea (for more information on this project see the websites of CEE Bankwatch Network and the Berne Declaration).