Board of Governors - Increase in the capital of the EIB and related decisions
Date: 1998-06-05
Institutions: Board of Governors of the European Investment Bank
Subjects: European Investment Bank, capital increase, financial institution, financial policy

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EUROPEAN  INVESTMENT  BANK

BOARD  OF  GOVERNORS

Increase  in  the  capital  of  the  EIB  and  related  decisions

(98/C  269/05)

The  Board  of  Governors  of  the  European  Investment
Bank,  at  its  annual  meeting  on  5  June  1998,  unanimously
adopted  the  following  decisions:

-(cid:217)the  Board  of  Governors  of  the  EIB  decided  to
increase  the  Bank’s  subscribed  capital  from  ECU
62(cid:216)013  million  to  ECU  100(cid:216)000  million,

-(cid:217)the paid(cid:220)in capital shall with effect from 1 January 1999
rise  to  ECU  6(cid:216)000  million,  or  6(cid:216)%  of  the  subscribed
capital  of  ECU  100(cid:216)000  million;  the  increase  in  the
paid(cid:220)in  capital  shall  be  effected,  as  of  1  January  1999,
through  a  transfer  of  ECU  1(cid:216)348(cid:216)014(cid:216)839  from  the
Bank’s free additional reserves,

-(cid:217)the  increase  in  the  callable  capital  shall  in  part  take
effect  subject  to  formal  completion  of  certain  parlia(cid:220)
mentary procedures at the national level; consequently,
the  Bank’s  total  subscribed  capital  shall  rise  as  from
1  January  1999  to  at  least  ECU  95(cid:216)549(cid:216)597(cid:216)250,  in
which  case  the  remainder  shall  take  effect  as  soon  as
the required formalities have been completed,

-(cid:217)of  the  abovementioned  amount  of  free  reserves,  a
further  ECU  3(cid:216)798(cid:216)700(cid:216)000  shall  be  transferred  from
the  free  additional  reserves  to  the  statutory  reserve,
so  as  to  establish  this  at  ECU  10(cid:216)000  million,  or
10(cid:216)%  of  the  ECU  100(cid:216)000  million  subscribed  capital,

-(cid:217)based  on  a  review  of  the  Bank’s  requirements  of  own
funds,  the  Board  of  Governors  further  unanimously
decided  to  distribute  to  the  Member  States,  as  an
exceptional  payment,  pro  rata  of  their  contributions
to  the  Bank’s  subscribed  capital,  ECU  1(cid:216)000  million,
to  be  funded  as  to  ECU  676(cid:216)795(cid:216)744  from  the  unal(cid:220)
located  earned  surplus  remaining  from  1996,  the
balance  of  ECU  323(cid:216)204(cid:216)256  to  be  drawn  from  the
ECU  1(cid:216)105(cid:216)169(cid:216)722  operating  surplus  for  1997,

-(cid:217)on  20  August  1997,  as  part  of  its  endorsement  of  the
(Official
special  action  programme 
Amsterdam 
Journal  of 
the  European  Communities  C(cid:216)10  of
15  January  1998),  the  Board  of  Governors  approved
the  appropriation  from  the  Bank’s  unallocated  earned
surplus  of  ECU  200  million  for  financing  sound
projects  extending  the  scope  of  the  Bank’s  financing
as  specified  in  the  said  decision,  forming  part  of  an
overall  amount  of  up  to  ECU  1(cid:216)000  million  set  aside
for  that  purpose  for  the  period  ending  in  the  year
2000.  The  Board  of  Governors  has  now  decided  to
make  a  further  allocation  of  ECU  300  million  for  the
said  purposes  from  the  1997  surplus,

-(cid:217)in  connection  with  the  capital  increase,  the  Board  of
strategic

following 

the 

Governors  has  endorsed 
framework  of  the  Bank.

ANNEX

THE  STRATEGIC  FRAMEWORK  FOR  THE  BANK

1.  Introductory  background

The  last  increase  in  the  Bank’s  capital  (aside  from  the  upwards  adjustment  to  ECU  62  billion  made  as  a
result  of  the  accession  of  Austria,  Finland  and  Sweden  in  1995)  was  its  doubling  to  ECU  57,6  billion  in
1990.  All  recent  increases  (as  opposed  to  adjustments),  have  also  doubled  the  Bank’s  existing  capital  (1978,
1981,  1986).  In  1990,  the  new  ceiling  on  lending  represented  by  this  amount  (namely  250(cid:216)%  of  subscribed
capital)  was  expected  to  suffice  until  the  end  of  1995:  in  the  event,  operations  have  continued  for  two  years
beyond  the  prospective  horizon  for  the  lending  ceiling.

Since  1990,  Bank  lending  has  risen,  in  current  terms,  from  a  total  of  ECU  13,4  billion  (1990)  to  ECU
26,2  billion  (1997).  This  represents  an  average  annual  growth  of  10(cid:216)%.  Within  the  total,  operations  outside

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the  Union  rose  from  ECU  0,7  billion  in  1990  to  ECU  3,2  billion  in  1997.  Looking  at  the  balance  sheet,
loans  outstanding  increased  from  ECU  61,6  billion  to  ECU  142,4  billion.

The  increase  during  this  period  reflected  a  number  of  fundamental  policy  and  market  developments
affecting  the  Bank,  including  the  integration  of  the  East  German  L…nder  and  the  accession  of  three  new
member  countries.  As  in  the  past,  several  of  the  developments  took  their  origin  or  were  formalised  in  a
number  of  European  Councils.  The  Edinburgh  European  Council  at  the  end  of  1992  decided  the  estab(cid:220)
lishment  of  the  ECU  5  billion  Edinburgh  facility,  with  a  focus  on  trans(cid:220)European  networks  (TENs)  and
the  environment.  It  also  gave  a  decisive  impetus  to  the  process,  launched  by  the  Bank  and  the  Commission,
which  ultimately  led  to  the  creation  of  the  European  Investment  Fund,  in  partnership  with  the  banking
sector.  Another  important  outcome  was  closer  cooperation  between  the  Bank  and  the  Commission  on  the
Cohesion  Fund  and  the  Structural  Funds,  now  in  their  turn  about  to  be  reformed.

In  mid(cid:220)1993  the  Copenhagen  European  Council  decided  to  increase  the  Edinburgh  facility  by  ECU
2  billion,  extending  its  duration  and  adding  an  ECU  1  billion  subsidised  facility  for  stimulating  investment
by  small  and  medium(cid:220)sized  enterprises  (SMEs)  to  support  employment.  In  December  of  that  year,  the
Brussels  European  Council  saw  the  focus  shift  to  growth,  competitiveness  and  employment,  with  the
emphasis  for  the  Bank  on  investment(cid:220)intensive  transport  and  energy  TENs  and  the  environment.  In  1995,
TENs  financing  was  intensified  with  the  process  of  prioritisation  instigated  by  the  Essen  Council.

In  1997,  the  Amsterdam  European  Council  invited  the  Bank  to  step  up  its  activities,  with  special  reference
to  a  number  of  sectors,  in  order  to  promote  the  creation  of  employment  in  the  European  Union.
Accordingly,  the  Bank  introduced  its  Amsterdam  special  action  programme  (ASAP),  involving:

-(cid:217)the  creation  of  a  special  SME  window,  designed  to  provide  support  for  new  instruments  to  help  finance
high(cid:220)technology  and  high(cid:220)growth  small  and  medium(cid:220)sized  enterprises;  this  can  be  backed  where  appro(cid:220)
priate  by  recourse  to  the  annual  surpluses  of  the  Bank,  up  to  a  ceiling  of  ECU  1  billion,

-(cid:217)the  development  and  reinforcement  of  EIB  activity 

in  the  sectors  of  education,  health,  urban

environment  and  environmental  protection,

-(cid:217)a  new  impetus  to  the  financing  of  trans(cid:220)European  networks  and  other  large  infrastructure  networks.

The  Special  Luxembourg  Council  on  employment  in  November  1997  confirmed  the  steps  already  taken
and  encouraged  the  Bank  to  maintain  and  reinforce  the  momentum  of  this  programme.

On  the  external  side,  the  activity  of  the  Bank  over  the  period  in  question  has  been  characterised  by  the
renewal  of  various  mandates,  for  the  African,  Caribbean  and  Pacific  Countries  (Lom~  IV(cid:220)B),  the  Mediter(cid:220)
ranean  (including  also  METAP)  and  the  countries  of  Central  and  Eastern  Europe  (CEEC).  To  these  have
been  added  new  theatres  of  operations,  notably  the  countries  of  Asia  and  Latin  America,  and  South  Africa,
and  most  recently  the  preaccession  facility  for  the  CEEC  accession  countries  and  Cyprus.

Against  this  background,  the  Board  of  Directors  has  discussed  the  strategic  framework  for  the  period
expected  to  be  covered  by  the  proposed  increase  in  capital.

2.  Bank  strategy

The  Bank’s  strategy  will  need  to  develop  in  line  with  changing  circumstances.  However,  the  main  pillars  of
the  Bank’s  strategy  for  the  duration  of  the  new  capital  increase  that  have  emerged  from  these  discussions
are:

-(cid:217)concentrating  the  Bank’s  effort  on  "peripheral  economic  areas’,  in  accordance  with  its  principal  mission
to  support  economic  convergence  and  integration.  The  main  priority  is  to  support  lagging  regions
within  the  Union  and  the  integration  of  those  countries  seeking  membership  of  the  Union,

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-(cid:217)also  continuing  to  support  key  areas  of  EU  policy,  as  authorised  from  time  to  time  by  its  governing
bodies,  taking  account  of  policy  decisions  or  requests  by  the  European  Council,  such  as  the  devel(cid:220)
opment  of  TENs,  international  competitiveness,  small  and  medium(cid:220)sized  enterprises,  energy  and  the
environment,  and  financing  operations  under  specific  mandates  or  other  agreements  in  support  of  EU
external  cooperation  and  development  policies.

This  broad  strategy  was  agreed  by  the  Board  in  January,  1997.  As  mentioned  above,  its  main  thrust  has
been  reinforced  by  recent  developments:

-(cid:217)there  has  been  increasing  recognition  that  the  fiscal  and  monetary  disciplines  of  EMU  must  be  accom(cid:220)
panied  by  a  concerted  policy  to  reduce  unemployment,  including  structural  changes  and  increasing
competitiveness.  The  Bank  has,  among  other  things,  started  implementing  ASAP  in  support  of  the
European  Council’s  resolution  on  growth  and  employment,

-(cid:217)the  European  Council’s  decisions  on  enlargement  have  given  a  sharper  focus  to  the  Bank’s  role  in  this
area,  and  the  Bank  has  now  introduced  its  preaccession  lending  facility  for  the  candidate  countries.

In  the  immediate  future,  within  the  above  broad  strategy,  the  Bank’s  top  priority  is  to  support  economic
and  monetary  union.  On  the  lending  side,  this  is  reflected  in  the  ASAP  programme.  As  regards  its
borrowing  strategy,  the  Bank  will  continue  its  innovative  euro  policy.  This  involves  assisting  with  the  estab(cid:220)
lishment  of  euro  benchmarks,  investor  diversification,  and  the  creation  of  an  organised  market  for  EIB
eurobonds.  Diversification  of  markets,  particularly  in  the  Central  and  East  European  Countries,  will  be
developed  together  with  innovation  into  attractive,  cost(cid:220)effective  products.

3.  Priority(cid:220)setting  in  an  evolving  environment

While  financial  sector  integration  over  time  should  have  the  effect  of  further  increasing  the  access  of
project  promoters  to  alternative  sources  of  capital,  there  will  remain  a  significant  role  for  the  Bank  in  the
coming  years.  Investment  levels  have  fallen,  in  part  due  to  the  macroeconomic  adjustment  of  preparing  for
EMU,  and  public  investment  is  likely  to  remain  constrained.  However,  the  Bank  can  help  to  support
investment  growth  by  providing  low(cid:220)cost,  long(cid:220)term  finance,  and  through  lending  to  new  forms  of  public(cid:220)
private  partnerships.

Owing  both  to  its  own  resource  constraints  and  to  the  principle  of  subsidiarity,  an  assessment  of  the  Bank’s
priorities  is  needed.  These  must  evolve  with  time,  but  there  are  a  number  of  general  observations  that  can
be  made.

It  is  important  for  the  Bank  to  focus  on  those  sectors  that  are  of  highest  priority  for  the  EU,  and  the
projects  financed  should  be  particularly  relevant  for  attaining  these  goals.  However,  this  is  not  sufficient  to
ensure  the  Bank  contributes  added(cid:220)value.  Under  its  Statute  (Article  18(1)),  the  Bank  lends  to  the  extent
that  funds  are  not  available  from  other  sources  on  reasonable  terms.  An  additional  contribution  from  the
EIB  comes  about  when,  in  complement  to  other  sources  of  finance:

-(cid:217)it  can  demonstrate  in  project  financing  proposals  that  an  EIB  loan  is  more  appropriate  than  other
sources  for  the  project  in  question  (for  example,  when  the  project  has  a  long  economic  life,  thus
justifying  a  long  maturity),

-(cid:217)the  Bank  advances  or  improves  the  project  in  some  additional  way.  This  can  come  about  because  its
presence  lends  comfort  to  private  investors  regarding  a  project’s  regulatory  risks  (the  EU  "stamp  of
approval’).  This  also  applies  to  the  political  risks  of  lending  outside  the  Union.  In  this  way  the  Bank  can
act  as  a  catalyst  for  other  sources  of  finance,  not  least  in  public(cid:220)private  partnerships.  Equally,  the
technical  expertise  of  the  Bank  can  itself  add  value.

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In  developing  its  future  lending  strategy,  as  to  both  sectors  and  regions,  the  Bank  should  be  guided  by  the
above  principles.  The  Bank  should  seek  to  focus  on  those  areas  of  highest  added(cid:220)value,  while  lower
emphasis  should  be  accorded  to  projects  of  lesser  added(cid:220)value.  When  adequate  funding  on  appropriate
terms  is  available  from  the  market  and  the  Bank’s  intervention  does  not  otherwise  enhance  the  speed  of
implementation  or  quality  of  the  project,  the  Bank  should  leave  the  financing  of  the  project  to  other
sources  in  accordance  with  Article  18(1)  of  the  Statute.

The  evolution  of  such  priorities  will  be  discussed  with  the  Board  on  an  annual  basis  in  the  context  of  a
forward(cid:220)looking  corporate  operational  plan,  to  be  approved  by  the  Board.  This  is  explained  in  more  detail
below.

4.  Subsidiarity  and  cooperation  with  the  financial  sector

Within  the  above  framework,  cooperation  with  the  banking  sector  and  other  financial  intermediaries
operating  on  the  capital  markets  is  one  of  the  guiding  principles  for  implementing  the  Bank’s  strategy.
Indeed,  the  development  and  diversification  of  this  cooperation  will  remain  a  priority  for  years  to  come.
This  reflects  both  the  goal  of  subsidiarity  and  straightforward  practical  considerations.

In  order  to  maximise  its  leverage,  the  Bank  will  act  in  all  circumstances  according  to  the  principle  of
complementarity  and  will  only  fund  that  share  of  the  project  deemed  necessary  to  fulfil  its  agreed  policy
objectives.  The  Bank  will  work  even  more  closely  with  other  banks  to  make  the  partnership  more  efficient,
and  will  seek  (for  example,  by  developing  new  products)  to  enhance  its  catalytic  role.

This  may  include  encouraging  the  access  of  borrowers  to  capital  markets  as  well  as  collaborating  in  the
financing  plan  with  commercial  lenders.  For  example,  the  Bank  will  assist  regional  banks  and  specialist
institutions  (such  as  for  SMEs)  as  they  face  the  challenge  of  adapting  to  the  single  market  in  financial
services.  Reflecting  the  EIB’s  primary  mission,  this  would  be  particularly  relevant  in  assisted  areas.  A  similar
role  could  be  played  in  the  preaccession  countries,  or  other  neighbouring  countries  of  the  Union.  In
developing  this  collaboration,  as  with  other  spheres  of  its  activity,  the  Bank  will  pay  careful  attention  to
avoiding  any  distortions  to  competition.  One  consequence  of  the  annual  discussion  of  priorities  is  that,  for
investments  of  lesser  added(cid:220)value,  the  Bank  would  reduce  the  proportion  of  project  costs  that  it  finances.
The  complementarity  of  the  Bank’s  loan  will  be  outlined  fully  in  project  documentation.

The  practical  need  for  cooperation  with  the  financial  sector  applies  generally,  but  is  most  prominent  in  the
case  of  lending  to  SMEs.  Indeed,  in  terms  of  cost(cid:220)effectiveness  the  global  loan  instrument  is  the  only  viable
and  economical  mechanism  it  can  deploy  to  support  a  large  number  of  SMEs.  However,  the  global  loan
approach  will  be  reviewed  in  order  to  ensure  that,  among  other  things,  the  maximum  benefits  possible  are
received  by  the  ultimate  recipients  of  SME  financing.  In  the  medium  term,  the  Bank’s  approach  to  SME
finance  could  be  further  enriched  through  experience  gained  with  alternative  instruments  under  the  ASAP
SME  window.

Of  course,  cooperation  with  the  financial  sector  extends  to  the  liability  side  of  the  Bank’s  balance  sheet,
through  its  financial  operations.  Every  year,  reports  on  the  overall  cooperation  between  the  Bank  and  the
financial  sector,  for  both  lending  and  borrowing  activities,  will  be  addressed  to  the  Board  of  Directors.

5.  Partnership  with  the  EIF

An  additional  concrete  example  of  the  philosophy  of  partnership  is  the  creation  of  the  European
Investment  Fund,  as  the  shareholding  structure  of  the  EIF  brings  together  both  public  and  private  partners
in  an  innovative  way.  The  development  of  the  partnership  between  the  Bank  and  the  Fund  is  one  of  the
EIB’s  priorities.  This  was  exemplified  in  the  establishment  in  October  1997  (following  the  Amsterdam
European  Council)  of  the  European  technology  facility  to  act  through  specialist  venture  capital  funds  in
support  of  technology(cid:220)oriented  and  high(cid:220)growth  SMEs.

The  Bank  and  the  Fund  will  continue  to  pursue  the  reinforcement  and  widening  of  their  cooperation.  In
order  to  make  this  as  effective  as  possible,  the  Bank  will  rationalise  its  working  relationships  with  the  EIF,
while  ensuring  that  it  still  provides  the  greatest  possible  operational  support  for  the  Fund.

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Moreover,  to  support  more  effectively  key  EU  policies,  the  Bank  will  consult  with  the  EIF  on  the  possi(cid:220)
bility  of  enhancing  its  operations  in  the  following  two  directions:  firstly,  it  will  examine  the  possibility  of
extending  its  sphere  of  activity  to  the  environmental  sector;  secondly,  within  the  framework  of  the  preac(cid:220)
cession  facility,  it  will  explore  the  possibilities  for  the  selective  extension  of  operations  in  Central  and
Eastern  Europe  to  include  trans(cid:220)European  networks  between  the  countries  of  the  region.  Subject  to  the
views  of  the  Fund’s  other  shareholders  and  the  decisions  of  its  general  meeting,  proposals  along  these  lines
may  in  due  course  be  brought  forward.

6.  Cooperation  with  the  Commission

Within  the  broader  EU  context,  lending  by  the  Bank  for  regional  development  is  complemented  by  EU
budgetary  resources.  Coordination  of  these  two  sources  of  funds,  and  hence  cooperation  between  the  Bank
and  the  Commission,  is  essential  for  effective  support  for  the  regions.

Both  the  Bank  and  the  Commission  already  cooperate  closely,  but  they  have  looked  at  ways  to  improve
their  effectiveness  in  the  next  decade.  Improvements  to  operating  procedures  by  both  institutions  will  make
for  even  better  collaboration  in  the  future.  This  is  a  timely  issue  since  the  Commission  has  produced  its
Agenda  2000,  and  the  next  round  of  negotiations  with  Member  States  concerning  the  Structural  Funds  is
getting  under  way.

The  Bank,  while  taking  into  account  the  respective  roles  of  the  regions  and  the  Commission  in  this  process,
has  proposed  the  following  specific  measures,  approved  by  the  Board  of  Directors:

-(cid:217)the  Bank  will  seek  to  strengthen  its  participation  in  the  preparatory  programming  and  negotiating

stages  of  structural  operations,

-(cid:217)the  Bank  will  seek  to  increase  consultation  between  the  institutions  on  co(cid:220)financing  operations.  Subject
to  any  considerations  of  commercial  confidentiality,  the  Bank  will  make  its  project  analysis  available  to
the  Commission  for  these  projects,

-(cid:217)the  Bank  will  continue  to  offer  its  technical  services  to  the  Commission  on  a  cost(cid:220)covering  remunerated
basis.  Such  services  are  already  used  to  appraise  projects  for  the  Cohesion  Fund,  and,  as  appropriate,
this  could  be  extended  to  selected  ERDF  or  TEN  projects.

7.  Implementing  the  strategy:  Pricing  policy

The  Bank  achieves  its  basic  objective  of  promoting  the  balanced  development  of  the  European  Union  by
making  available  in  all  Member  States,  and  especially  the  less  prosperous  regions  of  the  Union,  the
collective  benefits  of  its  financial  strength.  Its  pricing  policy  is  based  on  the  principles  of  non(cid:220)profit  seeking
(meeting  obligations  and  covering  expenses,  Article  19(1)  of  the  Statute),  non(cid:220)discrimination,  and  trans(cid:220)
parency.  Within  the  specific  ASAP  mandate,  an  additional  guideline  is  the  goal  of  achieving  an  appropriate
balance  between  risk  and  remuneration.

An  important  evolution  in  the  operations  of  the  Bank  is  that  the  variation  in  appraisal  costs  between
projects  is  increasing,  and  this  trend  may  well  accelerate  over  the  coming  years.  The  Bank  has  already
adapted  its  uniform  pricing  approach  to  some  degree  to  take  into  account  the  varying  costs  of  different
categories  of  loans  (notably  a  lower  margin  for  large  loans  and  for  loans  with  repeat  borrowers).  It
proposes  to  modulate  prices  further,  in  particular  through  adding  a  further  mark(cid:220)up  for  certain  high  cost
operations.  These  include:

-(cid:217)structured/project(cid:220)finance  when  obtaining  privileged  status  as  secured  lender  presents  difficulties  for

the  Bank,

-(cid:217)and  certain  corporates  that  are  only  able  to  offer  security  or  collateral  which  is  less  immediately

recoverable.

C  269/14

EN

Official  Journal  of  the  European  Communities

28.8.98

The  Bank’s  Statute  requires  that  each  individual  operation  carry  adequate  guarantees.  The  Bank  continues
to  believe  that  for  normal  operations  there  are  sufficient  ways  to  control  risk  by  externalising  (i.e.  miti(cid:220)
gating  or  transferring)  it  to  third(cid:220)party  guarantees  or  other  securities.  In  this  way,  the  overall  price  of  EIB
finance  also  reflects  credit  risk.  Indeed,  externalising  the  risk  of  projects  is  also  an  important  source  of
collaboration  between  the  EIB  and  the  commercial  banking  sector.

However,  there  are  certain  categories  of  projects,  within  guidelines  and  limits  to  be  agreed  by  the  Board  of
Directors  (such  as  some  TENs,  public(cid:220)private  partnerships,  or  corporate  and  structured  project  loans)  and
workouts  where  it  may  not  be  possible  to  externalise  some  elements  of  risk  in  accordance  with  the  Bank’s
normal  practice.  In  these  cases,  and  subject  to  maintaining  an  acceptable  risk  profile,  the  Bank  will
reconsider  its  approach  and,  where  appropriate,  include  a  premium  in  the  mark(cid:220)up.  The  Bank  will  develop
more  specific  proposals  on  the  above  guidelines,  limits  and  other  aspects,  as  soon  as  possible.  However,  it  is
clear  that  there  will  be  no  change  as  to  the  assessment  of  sovereign  risks  for  Member  States,  and  thus  no
discrimination  on  grounds  of  risk  between  this  group  of  borrowers.

8.  Operations  outside  the  European  Union

The  Bank’s  operations  outside  the  Union  are  based  on  mandates  from  the  European  Council.  The  general
approach  to  such  lending  was  last  reviewed  by  the  Board  of  Governors  at  the  annual  meeting  in  1994,
when  the  key  issues  pinpointed  were  the  indicative  ceiling  on  operations  of  10(cid:216)%  of  the  Bank’s  average
overall  activity  and  the  need  for  further  reflection  on  the  question  of  the  Union’s  guarantee.

An  important  subsequent  development  has  been  the  establishment  of  the  preaccession  facility  for  Central
and  Eastern  Europe.  This  has  no  EU  budgetary  guarantee,  and  is  not  included  in  the  10(cid:216)%  guideline
mentioned  above.  In  general,  a  system  of  risk(cid:220)sharing  by  the  Bank  has  been  established  for  a  range  of
operations.

The  immediate  priority  is  to  execute  existing  mandates:  Lom~  (for  the  African,  Caribbean  and  Pacific
countries),  South  Africa,  Asia  and  Latin  America,  Central  and  Eastern  Europe,  the  Mediterranean.  These
will  progressively  come  to  an  end  over  the  next  two  years,  and  the  governing  bodies  of  the  Bank  will  have
to  consider  its  overall  role  in  supporting  EU  external  cooperation  and  development  policies.

These  issues  cannot  be  decided  immediately,  but,  at  the  present  stage,  there  are  a  number  of  principles  for
guiding  future  strategy  discussions.  For  example:

-(cid:217)the  Bank  will  continue  to  be  the  financial  institution  of  the  Member  States  and  its  core  activity  should
be  within  these  States  or  to  their  direct  benefit.  Lending  outside  the  Union  will  be  carried  out  under
specific  mandates  from  the  Member  States  and  should  remain  a  complementary  activity,

-(cid:217)it  will  pursue  close  collaboration  with  the  Commission,  (in  conformity  with  the  Union’s  overall  devel(cid:220)
opment  strategy  in  the  individual  country  or  group  of  countries  concerned)  and  with  other  international
financial  institutions  and  national  agencies.  It  will  seek  to  coordinate  its  operations  and  project  condi(cid:220)
tionality  with  those  agencies,

-(cid:217)it  will  contribute  to  the  development  of  the  private  sector,  including  the  building  of  appropriate
financing  institutions  and  support  to  SMEs.  As  for  lending  within  the  European  Union,  it  will  finance
investments  to  the  extent  that  funds  are  not  available  from  other  sources  on  reasonable  terms
(Article  18(1)  of  the  Statute),

-(cid:217)the  Bank  will  require  adequate  guarantees  from  budgetary  sources,  though  it  will  continue  to  share

risks  in  appropriate  cases.

The  observations  made  in  earlier  sections  regarding  additionality,  maximising  leverage,  and  partnership
with  the  commercial  banking  sector  also  apply,  mutatis  mutandis,  both  within  and  outside  the  Union.
Among  other  things,  the  10(cid:216)%  indicative  ceiling  on  outstandings  for  loans  outside  the  Union  will  have  to
be  considered  in  line  with  lending  policies.  Further  discussion  of  these  issues  will  take  place  with  the  Board
of  Directors  in  anticipation  of  the  next  round  of  external  mandates.

28.8.98

EN

Official  Journal  of  the  European  Communities

C  269/15

9.  Lending  priorities  and  the  effective  use  of  the  Bank’s  resources

The  evolving  economic  and  financial  environment  means  that  the  implementation  of  the  broad  strategy
must  be  carefully  monitored  and  adapted  in  the  light  of  economic  and  financial  developments  as  well  as  the
Bank’s  past  performance.  To  ensure  the  contribution  to  EU  policies  is  maximised,  and  to  make  the  most
effective  use  of  its  resources,  the  Bank  will  develop  a  forward(cid:220)looking  corporate  operational  plan  for
annual  discussion  with,  and  approval  by  the  Board.  This  will  include  sectoral  analyses  of  lending  both
within  and  outside  the  Union.  The  operational  plan,  to  be  updated  on  a  rolling  basis,  will  provide  a
concrete  framework  for  discussing  priorities  and  objectives,  and  for  setting  new  priorities  and  objectives  on
an  ongoing  basis,  bearing  in  mind  those  tasks  that  may  increasingly  be  left  to  other  sources  of  finance.  This
would  also  provide  a  suitable  context  in  which  to  review  the  annual  report  on  the  cooperation  with  the
financial  sector  mentioned  above.

The  corporate  operational  plan  will  provide  a  framework  for  performance  evaluation.  It  will  integrate
feedback  from  the  analysis  of  the  quality  of  the  project  portfolio  according  to  a  set  of  performance  criteria
and  the  findings  of  the  Bank’s  Evaluation  Unit.  This  could  include  ways  of  improving  operational
procedures,  for  example  a  programme  approach  in  some  areas.  Over  the  last  few  years,  the  Bank  has
considerably  developed  its  systems  to  monitor  its  performance  as  a  financial  intermediary.  The  Bank  will
continue  to  develop  systems  to  monitor  activities,  including  benchmarking  its  financial  operations  and  the
comprehensive  analysis  of  risks.

Taking  a  longer(cid:220)term  perspective,  the  Bank  will  also  consider  further  its  capital  and  reserves  requirements
in  preparation  for  a  review  with  the  Board  of  Directors  in  2001  including  a  review  of  key  ratios.

A  related  issue  to  the  medium(cid:220)term  outlook  is  the  resources  needed  to  achieve  the  Bank’s  objectives.  With
a  small  staff  and  the  objective  of  keeping  administrative  expenses  firmly  under  control,  the  Bank  must
continue  carefully  to  identify  its  human  resource  requirements,  and  appropriate  staff  skills  should  be  devel(cid:220)
oped  in  line  with  the  strategic  priorities.  The  Board’s  discussion  of  the  corporate  operational  plan  referred
to  above  will  also  provide  a  framework  for  setting  strategic  orientations  regarding  the  Bank’s  allocation  of
resources.