The European Investment Bank's capacity to meet the challenges facing Europe at the start of the next millennium, in particular Economic and Monetary Union, the introduction of the Euro and the EU's enlargement, has been strengthened following decisions taken unanimously by the Bank's Governors at their annual meeting in Luxembourg today.
The Board of Governors approved an increase in the Bank's capital to ECU 100 billion from the current level of ECU 62 billion. The increase will take effect on 1 January 1999 and provide the Bank with sufficient headroom for at least the next five years.
The ECU 100 billion subscribed capital raises the statutory ceiling on EIB lending to ECU 250 billion (set at 250% of the subscribed capital). Outstanding loans at the end of 1997 stood at ECU 142 billion. The paid in capital was set at 6% of the subscribed capital and will be met from the Bank's additional reserves. This will increase the paid in capital from the present ECU 4.7 billion to ECU 6 billion.
Commenting on the Annual Meeting EIB President Sir Brian Unwin said: "This capital increase reconfirms the Member States' strong continuing support for and confidence in the Bank. By raising the ceiling on outstanding loans, the capital increase will allow us to continue to finance long-term investment in priority areas that are essential for the continuing convergence and integration of the European Union. This is all the more necessary if the Union is to meet successfully the enormous challenges it faces in establishing EMU and preparing for enlargement."
After reviewing the Bank's strong financial capital and reserve position, and taking into account its capacity to fulfil its future objectives, the Governors on the recommendation of the Bank's Directors, agreed an exceptional payment of ECU 1 billion to be distributed to the Member States. This is to be drawn from the EIB's unallocated 1996 and 1997 operating surpluses.
The Board of Governors unanimously approved the Bank's 1997 Annual Report and balance sheet, which at the end of the year stood at ECU 157 billion. The Bank was congratulated on the launch of its Amsterdam job-support action plan (ASAP), on the increasing level of finance it was committing to underpin the transition to EMU and on the extent of its pre-accession investment in Central Europe. Total lending in 1997 increased by 13% to ECU 26.2 billion, of which ECU 23 billion was in the Member States.
The Governors particularly highlighted the positive initiative the EIB has taken to support the development of the Euro on capital markets. Since early 1997, with the launch of the first ever Euro bond issue, the EIB has placed over ECU 15 billion in 23 Euro issues, either as straight Euro currency bonds, or in the form of Euro-tributary bonds - issues in national currencies to be merged into a growing pool of Euro from 1999. The Board agreed that the Bank should adopt the Euro, the single currency of EMU, as its unit of account from beginning of next year.
The Bank was also warmly congratulated on its rapid response to the Amsterdam European Council's Resolution on Growth and Employment which called on the EIB to step up lending for job-creating investment. The EIB's action plan (ASAP) extends its lending for the first time into the job-intensive areas of health and education, strengthens its financing for urban renewal, environmental protection and Trans-European Network infrastructure, and for the first time provides venture capital for innovative high-growth small and medium-sized enterprises.
Since the action plan was approved in August 1997, the Bank, in close cooperation with the European Investment Fund (EIF), has approved ECU 2.3 billion in new lending for investment in the areas of health and education and some ECU 350 million for risk capital financing under the SME window. The Governors have agreed a cumulative ECU 1 billion to be drawn from the Bank's surpluses over the next three years to cover the EIB's activities to support the development of the risk capital market in Europe.
The extent of the Bank's commitment to supporting the integration of the candidate countries in Central Europe and Cyprus was highlighted. Last year the EIB lent a record ECU 1.5 billion in Central Europe, and with the addition of a special new Pre-Accession Lending Facility it expects to lend some ECU 5 billion between 1998 and January 2000 for investment to bring these countries up to European Union standards.
EIB strategy
The Board of Governors also endorsed guidelines for a new strategic framework drawn up by the Directors for the duration of the new capital increase. Under this the Bank will continue to concentrate its efforts on peripheral economic areas of the Union in keeping with its principal mission to support economic convergence and integration, in particular the less-favoured regions and the integration of those countries seeking membership of the Union.
It will also continue to support key EU policy areas such as development of the TENs, international competitiveness, small and medium-sized enterprises, energy and the environment and the EU's external co-operation and development policies. As well as implementing its Amsterdam initiatives to contribute to the creation of growth and employment, the Bank will continue its innovative Euro policy to help ensure the success of EMU.
While emphasising the need for a sharp focus on priorities and on those areas where the Bank, with its experience and financing capacity, can add the greatest value, the guidelines also endorse the EIB's policy of close collaboration with the financial sector, underlining the principles of subsidiarity and complementarity, the need to develop further its working relationship with the European Investment Fund to explore areas for close cooperation with the European Commission, and to place a particular emphasis on development of the private sector and support for SMEs. In its activities outside the European Union, a key feature will be continuing support for enlargement, in cooperation with other international financing institutions and national agencies.
The EIB was set up in 1958 to finance for capital investment furthering EU policy objectives, in particular: regional development; trans-European networks in transport, telecoms and energy; industrial competitiveness and integration; SMEs; environmental protection; and energy security. It also operates outside the EU within the framework of the EU's co-operation external policy. Owned by the Member States, the EIB raises its funds on capital markets (AAA bond issuer). The EU Member States are represented on the Board of Governors by a government Minister, usually the Minister of Finance. The unpaid portion of the Subscribed Capital acts as a guarantee capital that can be called on to the extent needed to meet the Bank's obligations. The President of the EIB, Sir Brian Unwin, assumed office in 1993 and is the first British President of the institution.
European Investment Fund (EIF) is a public-private partnership established in 1994 by the EIB, the European Community and private and public financial institutions from all 15 Member States. The EIF provides credit guarantees and credit enhancement for debt finance in two fields: Trans-European Networks, and small and medium sized enterprises (SMEs). The EIF's mission is to act as a catalyst in facilitating the partnership of private capital in TENs projects and in facilitating access for SMEs to loan finance at reasonable cost. It also participates as an investor in venture capital funds.
The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 31/03/1998: 1 ECU = 40.98 BEF, 6.65 FRF, 0.94 GBP.