Report from the Commission to the European Parliament and to the Council on operations conducted under the External Lending Mandates of the EIB and future outlook {SEC(2006) 789} {SEC(2006) 790}
Date: 2006-06-22
Institutions: European Commission
Subjects: EIB loan, European Investment Bank, credit guarantee, financial loss, investment abroad

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 22.06.2006 
COM(2006) 323 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 

TO THE COUNCIL 

On operations conducted under the External Lending Mandates of the EIB and future 
outlook 

{SEC(2006) 789} 

{SEC(2006) 790} 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 

AND TO THE COUNCIL 

On operations conducted under the External Lending Mandates of the EIB and 
future outlook 

Table of contents 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

3.7. 

Introduction .................................................................................................................. 3 

Achievements ............................................................................................................... 3 

Lending volumes .......................................................................................................... 4 

EIB's regional presence compared to other IFIs........................................................... 5 

Co-operation with Community programmes and other financial institutions.............. 6 

Progress towards the risk-sharing objective................................................................. 7 

Value added of the EIB ................................................................................................ 8 

Orientations of future activities.................................................................................... 9 

Regional ceilings .......................................................................................................... 9 

Reserve mandate ........................................................................................................ 11 

Guarantee coverage .................................................................................................... 11 

Country coverage ....................................................................................................... 12 

Linkage with EU policies........................................................................................... 12 

Cooperation with other IFIs ....................................................................................... 13 

Reporting and accounting........................................................................................... 13 

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1. 

INTRODUCTION 

This  report  is  submitted  to  the  European  Parliament  and  the  Council  in  accordance  with 
Article  2  of  Council  Decision  2000/24/EC  adopted  on  22  December  1999,  as  amended  (the 
"Decision")  which  states  that:  “The  Commission  shall  report  on  the  application  of  this 
Decision by 31 July 2006 at the latest.” 

The  guarantees  granted  by  the  Community  under  the  Decision  are  backed  by  a  Guarantee 
Fund for external actions established by Council Regulation 2728/94 of 31 October 1994, as 
amended  ("Guarantee  Fund").  On  5  April  2005,  the  Commission  issued  a  proposal  for 
amending the above Council Regulation. 

This  report  is  presented  in  two  sections:  the  first  section  provides  an  overview  of  the 
achievements  of  the  European  Investment  Bank  ("EIB"  or  the  "Bank")  under  the  existing 
mandate;  the  second  section  details  the  orientations  of  future  activities.  Two  Staff  Working 
Papers, one reviewing regional outlook (SEC (2006) 790, Annex 1) and the other providing a 
detailed assessment of the existing mandate (SEC (2006) 789, Annex 2), are annexed to this 
report. 

Alongside this report, the Commission is presenting a proposal for a Council Decision for the 
renewal of the EIB external mandates (COM (2006) 324) reflecting the orientations outlined 
in this report. 

2. 

ACHIEVEMENTS 

The  EIB  mandate,  as  laid  down  in  the  Decision,  is  to  support  the  Community's  policy 
objectives through the financing of selected investment projects. The Bank was called upon to 
enhance  coordination  with  the  Community's  other  financial  instruments,  and  to  consult 
regularly  with  the  Commission  to  ensure  coordination  of  priorities  and  activities  in  the 
countries concerned. The Bank was also invited to aim to cover the commercial risk on 30% 
of its lending under risk-sharing arrangements from third-party guarantees or other security. 
This  section  summarizes  how  the  Bank  fulfilled  these  objectives;  detailing  in  particular  the 
volume  of  lending,  coordination  with  Community  instruments  and  with  other  IFI's  and 
progress  towards  the  risk-sharing  objective.  It  also  examines  the  value  added  of  the  Bank's 
activities. As mentioned above, a detailed evaluation is included in Annex 2. 

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2.1. 

Lending volumes 

As regards the existing external lending mandates, Table 1 below shows that loan signatures 
as at 31 December 2005 - i.e. around 85% of the duration of the lending mandates - represent 
87% of the overall lending ceiling of EUR 20 660 m, but there are significant differences by 
region. The table includes operations under the "General Mandate"1, the "Northern Dimension 
Environmental  Projects/Russia  Mandate"2  (NDEP),  and  the  "Russia,  Ukraine,  Moldova  and 
Belarus Mandate"3 (Russia/WNIS). 

Table 1: Loans signed as at 31 December 2005 

Mandate 

Region 

Signatures 

Ceiling 
EUR m 

Total 
EUR m 

% of 
ceiling 

Number of 
loans 

Average 
loan size 
EUR m 

South Eastern Neighbours (SEN) 

Mediterranean countries (MED) 

Latin America and Asia (ALA) 

Republic of South Africa (RSA) 
Turkey Earthquake Reconstruction and 
Rehabilitation Action (TERRA) 
EC/Turkey Customs Union Special 
Action Programme (SAP) 

Northern Dimension/Russia (NDEP) 
Russia, Ukraine, Moldova and Belarus 
(Russia/WNIS) 

9 185 

6 520 

2 480 

825 

600 

450 

100 

500 

7 817 
6 2724 

1 942 

757 

600 

85 

96 

78 

92 

100 

450 

100 

85 

0 

85 

0 

87 

120 

89 

44 

14 

5 

5 

3 

0 

280 

65 

70 

44 

54 

120 

90 

28 

0 

64 

Total 

20.660 

17.923 

The  EIB  expects  to  sign  the  balance  of  the  amounts  available  under  the  different  regional 
ceilings  in  2006,  except  under  the  NDEP  mandate  which  expired  in  May  2005  and  in  the 
Russia/WNIS mandate, where it forecasts to commit EUR 225 m in 2006 and the remainder 
in the first half of 2007. 

The  sectoral  breakdown  detailed  in  Annex  2  shows  that  the  Communications  sector 
(Transport and Telecoms) accounted for 35% of total lending. Over half of the loans in this 
sector were granted in the SEN region. The Water and Miscellaneous sector (including areas 

1 

2 
3 

4 

Council Decision 2000/24/EC of 22 December 1999 as amended by Council Decision 2000/688/EC of 
7  November  2000,  Council  Decision  2000/788/EC  of  4  December  2000,  Council  Decision 
2001/778/EC of 6 November 2001, Council Decision 2005/47/EC of 22 December 2004 and Council 
Decision  2006/174/EC  of  27  February  2006.  Council  Decision  199/786/EC  of  29  November  1999  is 
also included in the General Mandate. 
Council Decision 2001/777/EC of 6 November 2001. 
Council  Decision  2005/48/EC  of  22  December  2004.  To  date,  only  Russia  and  Ukraine  have  ben 
confirmed by the Commission to have fulfilled the appropriate conditionality for EIB to start operations 
under this mandate. 
The cancellation of all un-disbursed EIB public sector loans by the Algerian Government will free up 
EUR 407 m for new operations. 

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such as urban rehabilitation) absorbed 20% of total lending, with lending distributed evenly 
between the SEN and MED regions. The Energy sector accounted for 19% of loans granted 
during the period under review with a major part of this going to the MED region. 

2.2. 

EIB's regional presence compared to other IFIs 

The following table compares the 2005 overall EIB lending activity in the different regions, 
including at the Bank's own risk outside the Community mandates, with the lending activity 
of other IFIs. 

Table 2: EIB and other IFIs loan commitments in 2005 (EUR bn)5 

Region 

EIB 

World 
Bank6 

IFC 

EBRD  AfDB 

ADB 

IADB 

Turkey 

Western Balkans 

Mediterranean countries 

Eastern Europe, Southern 
Caucasus and Russia 

0.9 

0.5 

1.3 

0.1 

1.4 

0.3 

0.5 

0.5 

0.3 

0.2 

0.1 

0.7 

Central Asia 

- 

0.2 

<0.1 

Asia (without Central Asia and 
Middle East)7 

Latin America 

South Africa 

0.68 

0.1 

0.1 

6.3 

3.9 

1.2 

1.2 

- 

<0.1 

- 

0.4 

- 

- 

- 

0.7 

2.0 

0.3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

<0.1 

0.1 

4.5 

- 

- 

- 

- 

- 

- 

- 

- 

5.5 

- 

IFC = International Finance Corporation; EBRD = European Bank for Reconstruction and Development; 
AfDB = African Development Bank; ADB = Asian Development Bank; IADB = Inter-American Develop. Bank 

As shown above, the EIB was the main player in the Mediterranean region and in the Western 
Balkans in 2005 and, together with the World Bank, it was the most active IFI in Turkey. As 
compared to the activity of other IFIs, the role of the EIB in the Eastern Neighbour countries, 
Asia and Latin America was marginal, due to the limited size of the respective mandates. 

5 

6 

7 
8 

The  EUR/$  exchange  rate  adopted  is  the  2005  average  exchange  rate  published  by  the  ECB.  Figures 
refer to the respective 2005 Fiscal Years of the various IFIs, which in some cases run from 1/7 to 30/6. 
World Bank figures include IBRD (International Bank for Reconstruction and Development) loans and 
IDA (International Development Association) concessional financing. 
World Bank and ADB figures refer to Asia (without Central Asia and Middle East) and Pacific. 
This includes the EUR 0.5 bn loan outside the Community mandate for the Bejing airport. 

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2.3. 

Co-operation with Community programmes and other financial institutions 

Given the type of projects which the Bank supports, co-financing is a regular feature, and is 
usually  a  necessity,  as  EIB  funding  will  not  cover  more  than  50%  of  the  project  amount. 
Table  3  below  provides  information  on  the  projects  financed  under  the  mandate  where 
Community programmes or other financial institutions, in addition to promoters, contributed 
to the financing of the project. 

Table 3: Cofinancings as at 31 December 2005 (EUR m) 

Region 

Cost 

EIB 

PHARE/ 
ISPA 

Multilateral 
Institutions 

Bilateral and 
national inst. 

Others 

9 344 

3 214

1 122

SEN 

MED 

ALA 

RSA9 

Turkey SAP 

9 041 

2 787

12 423 

1 338

798 

96 

50

40

TERRA 

1 286 

450

-

-

-

-

-

1 330

1 292

881 

2 797

1 182 

3 780

718

2 398 

7 969

-

51

308

148 

600

- 

- 

5

528

TOTAL 

32 988 

7 879

1 122

3 699

4 609 

15 679

The  Bank  is  managing  EU  budgetary  resources  for  different  types  of  activities  in 
Pre-Accession  countries,  in  the  MED  region  and  in  South  Africa.  All  members  of  the 
Economic  and  Financial  Committee  have  clearly  recognized  the  value  of  a  "closer  link-up 
between  EIB  lending  and  EU  budget  resources  in  the  form  of  grant  support  and  technical 
assistance"10.  Furthermore,  in  the  context  of  cooperation  with  the  other  IFIs,  the  EIB  has 
signed several Memoranda of Understanding (MoUs) or letters of intent setting a framework 
for cooperation to exchange information and to coordinate activities either in specific regions 
or in particular projects. The following table lists the EU budgetary instruments managed by 
the Bank and the MoUs with the Commission and IFIs currently signed or under negotiation. 

9 

10 

Excluding  EUR  130 m  lines  of  credit  directly  to  bilateral/regional  institutions  (European  EDFIs  and 
South African development institutions). 
EFC report to the ECOFIN Council of March 2006. 

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Table 4: List of EU-funded instruments and MoUs 

Region 

EU-funded instruments 

MoUs/letter of intent and other 
parties involved 

SME 

Finance 

Facility,  Municipal 
- 
Infrastructure  Facility  and  Municipal  Finance 
Facility.  These 
instruments  combine  EIB 
lending  and  EU  grants  to  encourage  financial 
institutions to increase their lending activity for 
SMEs and municipal investment projects. 

- Interest rates subsidies for selected projects. 

- Technical assistance via the European Agency 
for Reconstruction. 

-  Technical  assistance  for  the  preparation 
and implementation of projects. 
-  risk  capital  investments  supporting  local 
companies  and  the  development  of  local 
equity markets. 
-  interest  rate  subsidies  for  environmental 
projects. 
-The  FEMIP  Trust  Fund,  including  mainly 
resources  from  Member  States,  focuses  on 
upstream 
technical  assistance  and  risk 
capital. 

- 

- 

- 

Pre-Accession 
countries 

Mediterranean 
countries 

Eastern Europe, 
Southern Caucasus 
and Russia 

Asia 

Latin America 

-MoU  with  Commission,  EBRD,  World 
Bank,  IFC,  Nordic  Investment  Bank, 
Finance 
Environment 
Nordic 
Corporation,  Council 
Europe 
Development  Bank  and  the  Black  Sea 
Trade and Development Bank. 

of 

- MoU with Commission and World 
Bank. 
- Mou with Commission and AfDB. 
- Letter of intent with European 
Development Finance Institutions. 
- Letter of intent with Agence Française 
de Développement and Kreditanstalt für 
Wiederaufbau. 

-  Commission,  EBRD,  World  Bank, 
Nordic  Investment  Bank,  Black  Sea 
Trade and Dev. Bank. 
-  Commission,  EBRD  (also  covering 
Central Asia - under negotiation). 

- ADB (under negotiation) 

- IADB. 
- Corp. Andina de Fomento (under neg.). 
- Central American Bank for Economic 
Integration (under neg.). 
-Banco Nacional de Desenvolvimento 
Econômico e Social (under neg.). 

South Africa 

-  Risk  capital  investments  supporting  local 
companies 

- 

2.4. 

Progress towards the risk-sharing objective 

The  existing  Community  Guarantee  covers  all  credit  risks,  unless  the  risk-sharing 
arrangements  apply,  in  which  case  the  Community  Guarantee  covers  only  specific  political 
risks whereas non-political risks are borne and mitigated by the EIB. 30% of the EIB’s loan 
portfolio was expected to avail itself of risk sharing under the current mandate.  

Table 5 shows that the Bank had achieved at the end of December 2005 16.7% in terms of 
risk-sharing  loans  as  a  proportion  of  total  loans  signed  under  the  mandate.  The  proportions 
differ  greatly  between  the  various  regional  headings  of  the  mandate.  The  target  of  30%  for 
mandate  operations  has  been  substantially  exceeded  in  ALA,  but  is  unlikely  to  be  attained 
individually in SEN, MED or RSA. In MED, this essentially reflects the difficulty for local 
promoters to gain access to external (including European) banks willing to provide guarantee 

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acceptable to the EIB under its current guidelines. No call on the EU guarantee has been made 
for political risk coverage under risk sharing. 

Most  of  the  lending  operations  in  the  new  Member  States  before  accession,  however,  were 
carried out without EU guarantee under the Pre-Accession Facility, adopted by the Bank after 
the  Decision  came  into  force.  The  Bank  has,  in  the  meantime,  also  established  its 
Mediterranean Partnership Facility, with a lending envelope of EUR 1 bn, for lending in the 
Mediterranean  countries,  and  has  extended  a  EUR  500  m  loan  for  the  Beijing  airport,  both 
again without EU guarantee. In analysing fully the sharing of risk between the EU budget and 
the  EIB  in  external  lending  operations,  non-guaranteed  lending  must  also  be  considered. 
Table  5  below  shows  the  effect  of  classifying  lending  under  the  Pre-Accession  Facility,  the 
Mediterranean  Partnership  Facility  and  with  the  specific  Article  18  authorisation,  together 
with risk-sharing lending under the mandate. 

Table 5: Risk-sharing achieved as at 31 December 2005 

Mandate 

Signatures 

Region 

Ceiling 
EUR m 

Total 
EUR m 

Risk Sharing
EUR m 

Risk Sharing 
% achieved on 
mandate alone  

Risk Sharing % 
achieved on 
mandate and 
non-mandate 

SEN 
MED 
ALA 
RSA 
TERRA 
Turkey SAP 

9 185 
6 520 
2 480 
825 
600 
450 

7 817 
6 272 
1 942 
757 
600 
450 

830 
601 
1 463 
80 

10.6 
9.6 
75.3 
10.6 

65.3 
14.6 
80.4 
10.6 

EU Mandate Total 

20 060 

17 838 

2 974 

16.7 

52.1 

Pre-Accession Facility II 
Med Partnership Facility 
Article 18 project 

14 000 
1 000 

12 304 
364 
500 

Outside Mandate Total 

15 000 

13 168  

12 304 
364 
500 

13 168 

Overall Total 

35 060 

31 006 

16 142 

2.5. 

Value added of the EIB 

The EIB does not have a general mission outside the EU under its Statute but operates under 
specific mandates to act in support of EU policy as established under strategy documents of 
the  Commission  or  the  Council.  As  compared  to  other  IFIs,  the  EIB  operates  its  external 
lending  mandates  with  fewer  staff  and  is  perceived  by  potential  borrowers  as  a  streamlined 
and efficient lending institution with a closely defined focus. 

The  EIB's  expertise  and  comparative  advantage  lie  in  particular  in  fields  such  as 
infrastructure,  environment  and  SMEs,  where  it  seeks  to  pass  on  to  project  promoters  its 
technical  and  economic  know-how.  Furthermore,  the  Bank  performs  a  rigorous  appraisal  of 

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project conditionality, notably ensuring the application of EU environmental and procurement 
standards11. 

The  EIB’s  project  conditions  also  cover  other  important  issues  such  as  pricing  and  tariff 
policies,  improvements  in  management  capacity,  cessation  of  non-profitable  activities, 
productivity targets and asset disposal, etc. Such conditions form part of the finance contracts 
and  are  monitored  throughout  project  implementation.  In  case  of  non-compliance, 
disbursements  of  the  loan  may  be  withheld  or  suspended.  In  the  Mediterranean  region,  the 
EIB has placed growing weight on sectoral support and reforms, also thanks to the availability 
of technical  assistance  funds  for  project preparation and implementation. It  should  be noted 
that,  at  an  EU  level,  macro-economic  assistance  and  conditionality  are  dealt  with  by  the 
Commission. 

In  addition  to  the  above  benefits,  the  EIB  has  passed  on  in  full  the  financial  advantages 
resulting from the Community guarantee and the attractive funding costs of the Bank to the 
final beneficiaries in the form of competitive interest rates. Moreover, the EIB has extended 
loans with very long maturities, which are generally not readily available in these countries. 
In many cases, EIB’s support for a project also had a catalytic effect on the participation of 
other financial partners. The EIB has also been developing its local currency fund raising and 
lending capacity in some countries, which has contributed to the development of local capital 
and financial markets. 

3. 

ORIENTATIONS OF FUTURE ACTIVITIES 

3.1. 

Regional ceilings 

The  new  mandate  will  build  upon  the  existing  achievements  of  the  Bank,  broadening  the 
geographical and sectoral focus of activity in line with the new political priorities of the EU. 
Foreseeable future needs and potential absorption capacities vary across the different regions. 
Annex 1 to this report reviews the future outlook in the various regions of the mandate and 
analyses  the  orientations  of  the  Bank's  future  activities  in  response  to  these  needs,  thus 
supporting the Commission's proposals for the new EIB external mandate. 

Table  6  below  compares  the  ceilings  of  the  mandates  during  2000-2006  and  the  ceilings 
proposed by the Commission for the period 2007-2013. 

11 

In this respect, it is worth mentioning the recently launched 'European Principles of the Environment', a 
joint initiative between the EIB, the EBRD, the Council of Europe Development Bank, the The Nordic 
Environment  Finance  Corporation  and  the  Nordic  Investment  Bank,  aimed  at  the  harmonisation  of 
environmental principles, practices and standards associated with the financing of projects. Regarding 
procurement, the EIB seeks to ensure that the fundamental EU principles regarding public procurement, 
such as the principles of equal treatment, non-discrimination and transparency, are respected. 

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Table 6: Comparison of current and proposed EIB mandates 

EU POLICY / MANDATE

2000-2006

2007-2013

€ bn

%

€ bn

%

Pre-accession

Pre-accession countries
     - of which pre-accession countries 2007-2013

10,2
5,2

49,5%
25,2%

9,0

28,6%

Sub-total
Neighbourhood

10,2

49,5%

9,0

28,6%

Mediterranean countries (*)
Eastern Europe, Southern Caucasus and Russia

6,5
0,6

31,6%
2,9%

10,0
5,0

31,7%
15,9%

Sub-total
Development Cooperation/Economic Cooperation
Asia and Latin America

Asia
Latin America

Sub-total
ACP - South Africa
South Africa

Sub-total
Total regional mandates
Reserve mandate
TOTAL

7,1

34,5%

15,0

47,6%

0,8
1,7

3,9%
8,1%

2,0
4,0

6,3%
12,7%

2,5

12,0%

6,0

19,0%

0,8

4,0%

1,5

4,8%

4,0%
100,0%

0,8
20,7
0,0
20,7

1,5
31,5
1,5
33,0

4,8%
100,0%

(*) Following the restructuring of the mandates after the mid-term review of 2003, the ceiling for Mediterranean 
countries was de facto increased, since Turkey was excluded from the Mediterranean mandate and included in 
the South Eastern Neighbours’ one. 

The EUR 31.5 bn would represent in real terms a 7-year increase of around 16%12 (or slightly 
more than 2% annually). As detailed in Annex 1, the regional ceilings have been considered 
with regard to political EU priorities as well as absorption capacity perceived by the EIB. 

It should be noted that, while the current mandates have a fragmented geographical coverage, 
the  new  mandate  will  offer  a  global  coverage,  by  supporting  the  three  circles  of  the  EU 
external policy (Pre-accession, Neighbourhood and Development Cooperation and Economic 
Cooperation).  The  level  of  the  amounts  devoted  to  the  different  regions  will  depend  on  the 
relative importance of such regions within the EU’s external policy. The estimated allocation 
per capita implied by  the  proposed ceilings under the different mandates is as  follows: Pre-
Accession  ±  €  100;  Neighbourhood  and  Partnership  ±  €  40;  Development  Cooperation  and 
Economic Cooperation ± € 2. 

12 

Figures deflated on the basis of the ENR International Construction Cost index. 

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3.2. 

Reserve mandate 

Reconstruction  after  natural  disasters  or  conflicts  as  well  as  developments 
in 
politically/strategically  important  countries  may  result  in  large  additional  financing  needs 
where  EIB  guaranteed  loans  can  usefully  complement  or  be  combined  with  EC  budget 
support to ensure timely and visible EU action. In addition, the nature of the EU response may 
need  to  be  targeted  to  selected  sectors  and  conditions.  Over  the  last  few  years,  the  swift 
mobilisation of significant EIB resources in support of such types of activities has proved to 
be  very  difficult  (e.g.  Tsunami  and  Gaza-West  Bank).  Therefore,  to  ensure  that  such 
developments do not put a burden on existing regional ceilings and can, where appropriate, be 
swiftly  combined  with  budget  resources,  it  is  suggested  to  introduce  a  “Reserve  Mandate” 
within  the  general  lending  mandate  in  order  to  facilitate  the  planning  for,  and  increase  the 
speed of, an EU response. 

The main triggers for the Reserve Mandate will be natural disasters (commonly floods, fires, 
earthquakes,  hurricanes/typhoons,  tsunamis)  or  post-conflict  reconstruction.  The  Reserve 
Mandate  can  also  be  activated  for  prompting  EIB  lending  in  certain  countries  or  regions 
politically/strategically important to the EU, which do not fulfil the necessary conditions for 
immediate  EIB  activity  but  with  viable  perspectives  in  the  medium  term,  including  those 
countries with prospects for conclusion of cooperation agreements. Given past experience, it 
would be appropriate to reserve amounts for two/three major events during the lifetime of the 
mandate, which justifies the proposed ceiling of EUR 1.5 bn. 

Potentially  eligible  countries  for  the  Reserve  Mandate  will  be  those  listed  in  the  Council 
decision under the regional mandates. The activation of the Reserve Mandate will be subject 
to a joint Commission/EIB decision, following consultation with the Economic and Financial 
Committee  through  a  comitology  procedure,  which  foresees  parallel  information  to  the 
European Parliament. 

3.3. 

Guarantee coverage 

The  EIB  will  continue  to  extend  the  volume  and  the  scope  of  its  operations  without 
Community  guarantee  wherever  appropriate.  In  particular,  over  the  period  2007-2013, 
financing  in  Croatia,  Turkey  and  the  Former  Yugoslav  Republic  of  Macedonia  would 
increasingly  take  place  under  the  Pre-Accession  Facility  made  available  by  the  EIB,  which 
should be extended over time to cover the rest of the Western Balkans, in line with progress 
of their accession process. The EIB indicative lending without Community guarantee in this 
region would amount to around EUR 4 bn over the period 2007-2013. The Bank would also 
increase its lending in Mediterranean countries without EU guarantee coverage, building upon 
the  already  existing  ‘Nice’  Facility,  to  an  indicative  amount  of  around  EUR  2  bn  over  the 
period 2007-2013. In light of past experiences (Beijing airport project), the Bank could also 
foster the practice of  financing at its  own risk strategic  ad hoc projects in investment grade 
countries, notably in Asia and Latin America. 

The  Commission's  proposal  clarifies  the  nature  of  the  guarantee  coverage  which  will  be 
limited  to  risks  of  a  sovereign  or  political  nature.  The  Community  guarantee  will  provide  a 
full  coverage  for  financing  operations  entered  into  with  or  guaranteed  by  the  State.  Also 
operations entered into with local authorities or government-owned and/or -controlled entities 
can be fully covered, where such operations have an appropriate EIB credit risk assessment 
taking into account the credit risk situation of the country concerned. 

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The  political  risks  covered  under  the  Community  guarantee  will  be  those  established  under 
the current mandate, i.e. non-transfer of currency, expropriation, war or civil disturbance and 
denial of justice upon breach of contract. In order to align the implementing provisions for the 
coverage  of  these  risks,  notably  denial  of  justice  upon  breach  of  contract,  with  MIGA 
provisions, some technical adjustment will be introduced in the guarantee agreement between 
the Commission and the EIB. 

Finally, the Commission proposes to extend the guarantee coverage to both types of financing 
operations  mentioned  in  the  EIB  Statute,  i.e.  loans  and  guarantees.  Under  the  existing 
mandates  only  loans  are  covered.  This  extension  will  not  imply  any  material  change  in  the 
types of projects to be financed by the EIB. For both loans and guarantees, the Community 
guarantee  will  cover  sovereign  or  political  risks  and  thus  the  risk  borne  by  the  Community 
budget  will  be  equivalent  for  both  types  of  operations  (under  equivalent  conditions).  A 
technical  modification  of  the  Guarantee  Fund  Regulation  is  necessary  to  accommodate  this 
extension. 

3.4. 

Country coverage 

In line with the practice established under the existing mandate for Russia, Ukraine, Moldova 
and  Belarus,  selected  individual  countries  covered  by  the  Neighbourhood  policy  and  the 
Development  Cooperation  and  Economic  Cooperation  policy  will  become  eligible  as  and 
when they fulfil appropriate conditionality consistent with EU high level agreements with the 
country  in  question  on  political  and  macro-economic  aspects.  The  Commission,  following 
consultation  with  the  EIB,  will  determine  when  an  individual  country  has  fulfilled  the 
appropriate conditionality. The list of the relevant countries is included in the proposed legal 
act. This approach will ensure that the EIB activity in the selected countries can be triggered 
on  a  sound  political  and  macro-economic  basis,  in  full  coherence  with  EU  action  in  the 
relevant  countries.  EIB  operations  in  a  given  country  can  then  take  place  once  the  relevant 
Framework Agreement between the EIB and the relevant country is signed, ratified and has 
entered into force. 

The proposal foresees that, in view of serious concerns about the subsequent evolution of the 
political  or  economic  situation  in  a  specific  country,  the  Commission  and  the  EIB  might 
decide to suspend EIB's financing operations in such a country. 

3.5. 

Linkage with EU policies 

In  order  to  further  increase  support  for  EU  external  policies  in  each  specific  region,  the 
linkage between EIB priorities and EU policies in the respective area has to be strengthened. 
This can be achieved through a stronger framework for dialogue and cooperation between the 
Bank and the Commission, in the definition of regional policies, country strategies, and at a 
project level. Furthermore, the effectiveness  and visibility of financial support to  EU policy 
may benefit in many circumstances from the synergies and leverage achieved by combining 
EU  budget  and  lending  capacities  (risk  capital,  technical  assistance,  co-financing,  targeted 
interest subsidies). The extent of this cooperation will progress on a regionally differentiated 
basis,  taking  into  consideration  the  EIB's  importance  in  the  region  but  also  the  scope  for 
linkage  with  EU's  policies  in  the  framework  of  the  Pre-Accession  Policy,  the  European 
Neighbourhood Policy and the Development and Economic Cooperation Policy. 

The Commission envisages covering EIB activities in its regional or country strategy papers 
and action plans, setting out priorities and expected outcome. The preparation of these reports 

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will  be  carried  out  in  close  collaboration  with  the  EIB.  The  EIB  will  also  be  invited  to 
participate in the various regional committees set up under the aegis of the Commission 

Furthermore,  the  Commission  envisages  upstream  consultation  by  the  EIB  on  individual 
projects. An EIB financing operation will not be included under the cover of the Community 
guarantee  in  case  the  Commission  delivers  a  negative  opinion  on  such  operation  within  the 
framework of the procedure provided for in Article 21 of the Statutes of the EIB. 

Finally, a yearly reporting process is foreseen to assess the contribution of the EIB financing 
operations to the fulfilment of the EU’s external policy objectives. 

3.6. 

Cooperation with other IFIs 

The Commission's proposal reflects the need for the EIB to further strengthen co-ordination, 
co-operation  and,  where  appropriate  co-financing,  with  IFIs  and  with  European  bilateral 
institutions.  The  intention  is  to,  where  necessary,  develop  an  enhanced  framework  for 
operational cooperation, building on the existing MoUs. 

In  this  context,  a  tripartite  agreement,  in the  form  of  a  MoU,  between  the  Commission,  the 
EIB and the EBRD, will set out cooperation patterns concerning operations in Eastern Europe, 
Southern Caucasus, Russia and Central Asia. The modalities of cooperation envisaged in the 
tripartite agreement foresee intervention by the EIB and the EBRD in these regions with, in 
general,  agreed  ‘joint  offers’  to  borrowers,  each  of  them  bringing  in  most  cases  half  of  the 
financing.  The  final  beneficiary  would  thus  in  general  benefit  from  a  blended  package  and 
pricing.  A  steering  committee  composed  of  high-level  officials  of  the  three  institutions  will 
oversee the application of the tripartite agreement. 

3.7. 

Reporting and accounting 

The Commission proposes enhancing its reporting to the European Parliament and Council to 
allow  them  to  better  monitor  the  external  mandate  of  the  EIB.  Furthermore,  the  accounting 
rules  stemming  from  the  new  Financial  Regulation  require  that  the  EIB  provide  the 
Commission  in  a  timely  manner  with  more  detailed  financial,  accounting  and,  where 
necessary, risk valuation data in order for the latter to prepare its annual accounts and answer 
to requests of the Court of Auditors. 

A mid-term review of the mandate would be carried out by the Commission in 2010, which 
would allow, where necessary, for a refocusing of the priorities set out in the legal basis. It 
would be prepared by the Commission drawing inter alia upon an activity report from the EIB 
as well as an evaluation provided by the independent evaluation department of the EIB. 

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