REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Assessment of the effectiveness of the existing system of European public financing institutions in promoting investment in Europe and its neighbourhood
Date: 2016-02-04
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EBRD, EU financing, Europe, European Investment Bank, European neighbourhood policy, International Bank for Reconstruction and Development, International Finance Corporation, financial institution, investment promotion

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 4.2.2016  COM(2016) 46 final   REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Assessment of the effectiveness of the existing system of European public financing institutions in promoting investment in Europe and its neighbourhood {SWD(2016) 22 final}  
 
 
1. INTRODUCTION 

On  16  November  2011,  the  European  Parliament  and  the  Council  adopted  Decision  No 
1219/2011/EU concerning the subscription by the European Union (EU) to additional shares in 
the capital of the European Bank for Reconstruction and Development (EBRD).  

This  report responds  to  the  invitation  in  recital  8  of  the  Decision  to  the  Commission  (EC)  to 
present to the European Parliament and the Council, by the end of 2015, a report assessing the 
effectiveness  of  the  existing  system  of  European  public  financing  institutions  in  promoting 
investment in Europe and its Neighbourhood - including recommendations on the cooperation 
between the respective banks and the optimisation and coordination of their activities.  

The  EC  actively  supports  European  and  neighbouring  countries  through  a  wide  range  of 
financial  programmes  and  instruments  which  are  also  channelled  through  International 
Financial  Institutions  (IFIs).  These  involve,  amongst  others,  the  EBRD  and  the  European 
Investment  Bank  (EIB)  Group,  which  comprises  the  EIB  and  the  European  Investment  Fund 
(EIF).  The  cooperation  between  the  EC,  the  EIB  Group  and  the  EBRD  is  framed  by  the 
Memorandum of Understanding on activities outside the EU1 (the so-called "Tripartite MoU", 
signed in 2011 and revised in 2013).  

2. SCOPE AND METHODOLOGICAL APPROACH   

The analysis covers the period of 2010-2014 and focuses on those EU countries where EBRD 
is  active  and  on  the  European  Neighbourhood  ("the  Region")  which  for  the  purposes  of  this 
report are divided into the following distinct geographical areas: Eastern and Central European 
EU  Member  States  (EU-11);  Southern  and  Eastern  Mediterranean;  South  Eastern  Europe; 
Eastern Europe and Caucasus; Central Asia; Russia and Turkey2.  

Throughout  the  Region,  the  EIB  Group  and  the  EBRD  are  by  far  the  most  active  IFIs  and 
therefore the conclusions and the recommendations are based on the in-depth analysis of these 
two IFIs and on an assessment of their cooperation. A more general review, which can be found 
in the Staff Working Document (SWD) submitted together with this report, was also carried out 
for  other  IFIs  active  in  the  Region  that  include:  the  World  Bank  Group  including  its 
subsidiaries  the  International  Finance  Corporation  (IFC)  and  the  International  Bank  for 
Reconstruction  and  Development  (IBRD),  the  Black  Sea  Trade  and  Development  Bank 
(BSTDB),  KfW  Entwicklungsbank  (KfW),  Agence  Française  de  Développement  (AFD),  the 
Council of Europe Development Bank (CEB) and Bank Gospodarstwa Krajowego (BGK).  

In  the report  preparation,  the  EC  was  assisted by  an  external  consultant  in  the  collection  and 
analysis of the data. Four different operational tools were used in the process: desk research and 
literature review; stakeholder interviews; database analysis; and case study analysis.  

3. OVERVIEW OF EBRD AND EIB GROUP 

The two IFIs have different shareholders, distinct mandates and particular business models. 
These differences bring the two IFIs their own specific comparative advantages enabling them 

1 The Tripartite MoU aims to maximise synergies between the activities of the three partners in common countries 
of operation by supporting collaboration and cooperation between the two banks along the lines of their respective 
strengths, expertise and capacities. 
2 Detailed description of the countries and definitions are provided in the Staff Working Document. 

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to  maximize  the  effectiveness  and  efficiency  of  their  respective  public  financing,  thus  also 
benefitting the economies in the Region.  

As regards the IFIs' shareholders, EBRD is a Multilateral Development Bank (MDB), whose 
shareholders are the EU Member States, the EU and the EIB, as well as a number of non-EU 
countries. Its countries of operation include both EU and non-EU countries. As member of the 
EBRD,  the  EU  is  represented  by  the  EC  with  a  seat  in  the  EBRD's  Board  of  Governors  and 
Board of Directors. EIB is also represented in the EBRD by a Governor and by an Executive 
Director  on  the  Board  of  Directors.  The  EU,  EIB  and  Member  States  have  an  aggregate 
shareholding of 63%. Furthermore, the EU is one of the largest grant donors to the EBRD for 
technical  cooperation,  investment  grants,  risk-sharing  facilities,  performance  fees  and 
concessional  financing.  In  2014,  the  EU  contributed  EUR  105  million  to  the  EBRD 
(representing 31% of received donor funds).  

The  EIB's  shareholders  are  the  28  Member  States  and  the  EIF's  shareholders  are  the  EIB 
(63.7%),  the  EU  (24.3%)  and  26  public  and  private  financial  institutions  (12%).  EC  is  a 
member of the Board of Directors of the EIB and of the EIF. 

As to the IFIs' mandates, the Agreement establishing the Basic Documents of the EBRD (the 
EBRD's  Statutes)  sets  up  the  institution  with  its  own  privileges  and  immunities.  EBRD's 
mandate  is  to  "foster  transition  towards  open  market-oriented  economies  and  to  promote 
private  and  entrepreneurial  initiative"  across  Central  and  Eastern  Europe,  Central  Asia  and, 
more recently, the Southern and Eastern Mediterranean region3. EBRD is engaging in countries 
that are committed to the principles of multiparty democracy, pluralism and market economies; 
it also contributes to the aim of fostering democracy and the rule of law. While EBRD does not 
have  a  specific  mandate  to  pursue EU  policies,  as  it  is  the  case  for  EIB,  it  is  guided  by,  and 
seeks  to  promote  in  its  operations,  EU  policies  (e.g.  under  the  Environmental  and  Social 
Policies, where EU standards are specifically referenced). The EBRD’s transition mandate also 
highlights  another  point  of  distinction  in  that  EBRD  actively  works  with  its  countries  of 
operations  on  policy  reform  to  enhance  the  business  and  investment  climates,  promote 
competitive and appropriate regulated markets which will attract private capital. 

The EIB is an EU financial institution established by the Treaty on the Functioning of the EU. 
It is also considered an MDB. According to its Statute, the EIB has a clear mandate to support 
the  achievement  of  EU  policy  objectives.  It  uses  its  financing  operations  to  bring  about 
European integration and social cohesion. More than 90% of its activity is focused on the EU 
internal objectives but it also supports the EU's external and development policies. Outside the 
EU,  the  EIB  operates  on  the  basis  of  specific  mandates  from  the  Council  and  the  European 
Parliament or at its own risk in compliance with its Statute. Within the EIB Group, the EIF is 
the specialist provider of risk finance to SMEs across the EU and Candidate Countries.  

Article 19 of the Statute of the EIB requires that all requests for financing from the EIB on its 
own resources are submitted to the EC for opinion before being presented to the EIB Board for 
approval. In 1975, the EC set up the ‘Groupe Interservice BEI’ (GIB) through which it prepares 
a  collegiate  opinion  on  the  compliance  with  EU  rules  and  policies  of  requests  for  financing 
received by the EIB. This provides the EC with a strong and formal influence on the activities 
of the EIB at an early stage of project preparation. Regarding the EBRD, informal coordination 

3 More details on how such transition takes place can be found in the SWD.  

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meetings between the EU Director and the Directors representing the EIB and the EU Member 
States are organized in order to achieve a maximum effect of the aggregate 63% shareholding 
of the EU Member States, the EIB and the EU and to agree on a coherent position in the Board. 
Furthermore,  formal  coordination  on  more  strategic  issues  takes  place  in  the  meetings  of  the 
Economic  and  Financial  Counsellors  (EFC)  in  Brussels.  The  EC  does  not  have  a  formal 
influence on the EBRD's project preparation at an early stage similar to that achieved through 
the Article 19 procedure for the EIB projects. 

As a subsidiary of EIB and part of the EIB Group, the EIF is an EU financial institution which 
provides  risk  finance  to  SMEs  and  fosters  the  implementation  of  EU  policies  in  the  fields  of 
entrepreneurship, technology, innovation and economic development. The EIF operates on the 
basis  of  specific  mandates  from  the  EU  institutions,  from  the  EIB,  from  EU  Member  States, 
and other third parties or at its own risk.  

Furthermore,  the  EIB  and  the  EBRD  have  different  business  models.  The  EBRD's  business 
model is based on assessing the transition impact as well as on principles of sound banking and 
additionality of the EBRD projects, on environmentally sound and sustainable development, on 
a  higher,  but  prudent  risk-taking  capacity,  on  leveraging  additional  finance  from  the  private 
sector  and  on  having  a  strong  presence  on  the  ground  in  each  of  its  countries  of  operations. 
Furthermore,  EBRD  works  with  its  countries  of  operation  through  policy  dialogue  and  the 
application of conditionalities. 

In  comparison  with  the  EBRD,  the  EIB's  business  model,  while  equally  rooted  in  sound 
banking  principles,  is  primarily  based  on  the  three  pillar  methodology  assessing  the  value 
added of their operations and how they contribute to the balanced development of the internal 
market by financing productive investments to the extent that funds are not available from other 
sources  on  reasonable  terms.  Projects  have  to  be  consistent  with  EU  policies,  support  EU 
priority objectives and dialogue with partner countries outside the EU, and undergo a technical, 
economic,  environmental  and  social  appraisal  of  the  EIB's  financial  and  non-financial 
contribution. 

Based  on  the  EBRD's  and  the  EIB  Group’s  different  mandates,  the  two  institutions  follow 
distinct pricing policies in the financing of their operations. In particular:  

  EBRD  finances  projects  when  the  beneficiary  is  unable  to  obtain  sufficient  financing 
elsewhere on terms and conditions that the EBRD considers reasonable according to its 
three  principles  of  sound  banking,  transition  impact  and  additionality.  To  reflect  its 
mandate to support market-based economies, in making a loan or in participating in the 
sale of securities, the EBRD’s margin and/or fee charged are commensurate to the risk 
undertaken,  reflect  commercial  market  conditions  and  allow  for  some  commercial 
return (“market-based pricing policy”). 

  EIB provides loans or guarantees where the execution of the investment contributes to 
an  increase  in  economic  productivity  in  general  and  promotes  the  attainment  of  the 
internal market and funds are not available from other sources on reasonable terms. The 
pricing  policy  is  based  on  the  notion  of  risk  pricing  of  technically  and  economically 
viable projects covering the costs associated with projects on a not-for-profit basis and 
the  statutory  requirement  to  build  up  reserve  funds.  The  risk  pricing  is  individual  for 
each project (“risk-based pricing policy”). 

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These complementary business models also imply differences in the two banks' balance sheets. 
As  shown  below,  the  EIB  operates  with  higher  leverage4  and  higher  lending  volumes  than 
EBRD (please note that the below figures relate to the total balance sheets of the two banks). 

Diagram 1: Loan signatures and leverage of  EIB and EBRD  

In terms of loan origination of the two IFIs, the EBRD has very strong focus on direct lending 
(86%  of  its  commitments,  EUR  45  billion  in  absolute  terms).  Also  the  EIB  Group  finances 
most of its operations in a direct manner (72% of its commitments, EUR 67 billion in absolute 
terms). Besides, it can be highlighted that EIB's direct lending is focused on large projects with 
well-known and creditworthy counterparts.  

The loan size is an aspect which differentiates EIB's and EBRD's lending model. For the period 
2010-2014, for EBRD the average loan size was EUR 19 million per operation, while for EIB 
this was EUR 66 million per operation.  

In  terms  of  regional  split  (in  total  for  the  examined  period),  EBRD's  lending  in  non-EU 
countries  amounted  to  EUR  34.1  billion  in  the  Region  and  EUR  9.6  billion  in  the  EU-11, 
whereas EIB Group financing reached EUR 27 billion in non-EU countries of the Region and 
EUR 49.4 billion in the EU-11. The relative importance of EU-11 and non-EU countries on the 
total signatures of the two banks in the Region can be seen in the following chart:   

Diagram 2: Total signatures of EIB Group and EBRD in the Region 

4 Leverage = total debt/shareholders' equity 

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4. ASSESSMENT OF THE EFFECTIVENESS OF THE INSTITUTIONS  

In order to assess the effectiveness of the existing system of IFIs in promoting investments in 
the Region, the following areas have been analysed (a more detailed analysis is presented in the 
attached SWD).  

  Effectiveness in meeting market needs: the analysis showed that the EIB Group and the 
EBRD  have  developed  a  broad  array  of  different  financial  instruments  and  technical 
assistance that cover a wide range of market needs. However, a number of factors limit 
the  effectiveness  of  their  operations,  as  has  been  highlighted  by  the  stakeholder 
consultation,  such  as  insufficient  development  of  the  regulatory  framework  in  the 
countries of operation or the fact that joint financial instruments have  not  managed to 
provide equity investments due to the additional complexity compared to intermediated 
loans.  

  Other  effects:  The  positive  externalities  resulting  from  the  operations  of  the  two 
institutions  can  be  considered  as  a  very  important  element  of  enhancing  the 
effectiveness of their interventions. These positive externalities are therefore part of the 
IFIs’  intervention  logic.  Positive  effects  of  the  two  institutions'  operations  can  be 
identified in various forms, notably:  

o  Financial (including demonstration) effects that both IFIs have on the financial 
sector, in particular through structuring of new products and the identification of 
new types of beneficiaries. The financial effects are also obtained via support to 
open  financial  markets  for  private  investors  and  the  development  of  market 
economies, support for domestic capital markets and promotion of international 
financial and risk-related standards. 

o  Economic  effects  such  as  the  boost  to  employment,  the  impact  on  the  real 
economy, skills upgrading or the promotion of international technical standards.  
o  Social, environmental and governance effects. In particular, sectoral reforms and 
policy  dialogue  including  changes  to  the  legal  and  regulatory  framework; 
corporate  governance  including  tackling  illegal  capital  flows  and  potential  tax 
evasion; social performance; tackling climate change and energy efficiency; and 
improving environmental quality. 

  Leverage of private financing: The analysis of the data showed that the EIB Group and 
the  EBRD  manage  to  leverage  private  sector  financing.  However,  their  success  in 
leveraging  private  funding  varies  across  sectors,  countries  and  the  types  of  financial 
products and instruments provided. 

The analysis also reviewed the relation between the two banks in terms of their cooperation. It 
is  important  to  highlight  that  the  analysis  showed  that  there  is  some  form  of  exchange  of 
information,  coordination  or  cooperation  between  EIB  Group  and  EBRD  in  almost  all 
operations.  This  can  be  ascribed  to  the  fact  that  there  is  a  very  dense  network  of  formal  and 
informal  contacts  between  them  at  all  levels,  from  the  technical  staff  to  the  top  level  of 
management.  The  two  institutions  also  strive  to  avoid  duplication  of  work  particularly  in  the 
project  appraisal  and  due  diligence  procedures,  in  negotiations,  financing  and  in  monitoring 
jointly  financed  operations.  The  analysis  also  identified  a  number  of  formal  and  informal 
mutual reliance mechanisms which enable the coordination of actions between the EBRD and 
EIB Group, especially with regard to the exchange of information on projects and clients, joint 
monitoring and reporting. 

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Additionally, the analysis demonstrated an increased volume of co-financed  operations in the 
areas  where  almost-perfect  synergies  have  been  identified  in  terms  of  sectors  (i.e.  municipal 
and environmental infrastructure, energy and transport). The EC plays a role in facilitating the 
communication and coordination between  the EIB, the EBRD and peer institutions. This  role 
could  be  further  enhanced,  by  exploring  inter  alia  the  possibility  for  closer  involvement  of 
EBRD  in  the  implementation  of  EU-funded  financial  instruments,  to  the  extent  allowed  e.g. 
under shared management. However, co-financing or co-investment should not be considered 
as an objective in itself and should not be imposed in cases where the operation sizes are too 
small or in situations where private finance may be crowded out, where the financial products 
needed are not suitable to be provided by more than one IFI, or where the policy objectives of 
the IFIs are not perfectly aligned.  

In  terms  of  complementarities  and  comparative  advantages,  the  analysis  considered  the 
following  aspects:  geographical focus, sectoral  coverage,  the nature of their  beneficiaries and 
financial  products  provided.  The  analysis  showed  that  the  two  IFIs  as  well  as  their  peer 
institutions are aware of their comparative advantages - depending on the characteristics of the 
financial  transactions, the  types  of  the  financial  products  and  the  features  of  the  regional  and 
national  markets  -  and  take    them  into  account  when  screening  potential  operations  and 
identifying cooperation opportunities. 

5. CONCLUSIONS AND RECOMMENDATIONS  

Based  on  the  analysis  above,  the  EC  believes  that  the  existing  system  of  European  public 
financing institutions in promoting investment in Europe and its Neighbourhood is effective: a 
wide  range  of  market  needs  are  being  well  served  with  significant  positive  effects,  and 
accompanied by the efforts of the IFIs to leverage private financing.  

The EC also recognises that the two institutions, the EBRD and the EIB Group, have distinct 
capabilities  that  stem  from  their  specific  know-how,  business  models  and  capital  structures. 
They strive to avoid duplication of efforts particularly in the project appraisal and due diligence 
procedures, in negotiations, financing and monitoring of financed operations. Furthermore, on 
an  institutional  level,  a  formal  information  exchange  resulting  from  regular  operational  and 
institutional meetings under the MoU framework were also observed.  

The analysis also demonstrated that the two institutions co-finance on a project-by-project basis 
and  through  joint  facilities  or  funds  whenever  it  makes  sense  from  an  investment  and  policy 
perspective.  This  includes  in  particular  large  projects  (e.g.  energy,  transport  and  municipal 
infrastructure) where the investment costs and risks are high and each institution can leverage 
its own comparative advantage, and operations where the two institutions' policy objectives and 
interests  are  perfectly  aligned  (again,  energy,  transport  and  municipal  infrastructure  projects 
can be mentioned but also projects with a focus on the positive climate change impact, such as 
energy efficiency and renewable energy projects, as well as operations that support the growth 
of SMEs).  

Overall, it can be concluded that both IFIs are well aware of their comparative advantages in 
terms  of  their  respective  mandates,  lending  models  and  pricing  policies  and  in  general  make 
good use of such comparative advantages.  

Notwithstanding 
following 
recommendations  (their  rationale  can  be  found  in  the  SWD)  in  order  to  further  enhance  the 
effectiveness of the IFIs' interventions. 

the  overall  positive  conclusions, 

the  EC  makes 

the 

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Recommendation 1  

Although  there  is  already  an  existing  and  close  high-level  inter-institutional  dialogue  in  the 
framework of EU financial instruments5, the EBRD and the EIB Group could still enhance the 
cooperation  at  operational  level.  The  two  IFIs  should  further  build  on  existing  synergies 
between their mandates, business models and the resulting comparative advantages in order to 
foster  their  cooperation,  in  particular  when  using  EU  resources  in  the  blending  frameworks. 
When cooperating, the IFIs should consider using a more standardised or systematic approach 
and minimise the creation of ad-hoc instruments. In those cases when they decide to cooperate 
with the EC and/or Managing Authorities of various Member States (including possible use of 
European  Structural  and  Investment  Funds  2014-2020  (ESI  Funds)6),  they  should  preferably 
use  the  existing  structure  of  EU  financial  instruments  and/or  financial  instruments  under  ESI 
Funds, including the so-called off-the-shelf instruments7 where appropriate.  

In  order  to  further  enhance  policy  impact  and  leverage,  the  EC  should  continue  to  play  an 
important  role  in  the  funding,  setting-up  and  oversight  of  joint  facilities/funds  without 
necessarily being directly involved in investment decisions or their management. In particular, 
through blending with EU grants, the involvement of the EC in setting up joint facilities/funds 
could  be  further  promoted,  especially  to  provide  further  value-added  and  to  incentivise  the 
cooperation of the two IFIs, although the EIB Group and the EBRD also cooperate without the 
involvement of EU funds. 

Additionally, when using EU funds (including ESI Funds), the two IFIs should to the maximum 
extent possible build on the already existing reporting obligations at project level, including by 
the  Financial  and  Administrative  Framework  Agreement  concluded  between  the  EC  and  EIB 
Group  and  the  Framework  Administrative  Agreement  between  the  EC  and  EBRD,  when 
meeting the relevant reporting requirements for the EU and/ or ESI Funds. In this context, the 
administrative burden of any new reporting requirements should not become a disincentive for 
the participation of the private sector in the financing operations of IFIs.  

At the same time, some economic effects are not covered by the IFIs' current reporting systems, 
as  is  the  case  for  the  EBRD  regarding  employment  effects.  This  could  be  an  area  for  further 
alignment of reporting approaches between the EC and the two IFIs, especially when they are 
using EU resources. Furthermore, both IFIs should improve and streamline how they report on 
the  leverage  effects  as  the  analysis  identified  diverging  methodologies  for  the  calculation  of 
leverage figures. 

Recommendation 2 

The analysis showed that there are many examples of mutual reliance, such as the exchange of 
information during appraisal procedures, sharing due diligence on jointly financed projects, an 
agreed  protocol  for  procurement  on  co-financed  projects  and  a  multi-IFI  understanding  on 
reporting  on  Climate  Finance.  However,  there  may  still  be  potential  for  enhanced  mutual 
reliance especially in terms of joint contract negotiations, coordination and sharing of market 

5  As  defined  in  Regulation  (EU,  Euratom)  No  966/2012  of  the  European  Parliament  and  of  the  Council  of  25 
October 2012 on the financial rules applicable to the general budget of the Union. 
6  Regulation  (EU)  No  1303/2013  of  the  European  Parliament  and  of  the  Council  of  17  December  2013  (the 
Common Provisions Regulation - CPR). 
7  See  Article  38(3)(a)  CPR.  So  far,  the  following  off-the-shelf  instruments  have  been  adopted  by  implementing 
act:  No  964/2014  of  11  September  2014:  Risk-sharing  loan  and  capped  portfolio  guarantee  for  SMEs  and 
renovation loan for individual households. 

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assessments  and  (as  stated  above)  further  alignment  of  reporting  requirements,  in  particular 
with  EU  objectives  when  EU  resources  are  used.  Nevertheless,  due  consideration  has  to  be 
given  to  the  differences  in  their  mandates  and  policy  standards  that  may  limit  the  extent  to 
which each institution can rely on the due diligence and appraisal performed by the other.  

Furthermore,  risk  management  considerations  may  also  come  into  play  and  which  might 
necessitate that, even when co-financing the same project, the two institutions perform separate 
diligence  procedures,  following  their  own  appraisal  processes  in  order  to  get  their  respective 
Boards'  approval.  As  such,  complete  mutual  reliance,  especially  recognition  of  procedures  or 
standards does not appear to be the objective per se.  

Recommendation 3 

In light of the institutions' ongoing effort to ensure the additionality - in the case of EIB – or 
transition impact - in the case of EBRD,  quality and soundness of their operations, both IFIs 
should further develop their financial and non-financial incentives as well as Key Performance 
Indicators,  which  would  continue  to  strengthen  the  motivation  of  their  staff  towards  the 
achievement of those objectives. 

In that context, the EBRD's and the EIB Group’s lending objectives in terms of volume should 
be  accompanied  by  ambitious  targets  for  the  additionality/transition  impact,  quality  and 
soundness of operations. One important additional consideration in this regard is that the EBRD 
and  the  EIB  Group  should  each  strengthen  their  emphasis  on  the  crowding-in  of  private 
financing.  

The analysis showed that risk-sharing structures (such as junior/subordinated debt, mezzanine 
products, guarantees, equity, senior debt with higher risk profile) can be used to achieve a high 
level  of  private  sector  participation  and  should  continue  to  be  part  of  both  IFIs'  strategies  to 
attract  private  financing.  In  appropriate  circumstances  (such  as  market  failures  or  market 
makers), EU blending facilities could provide support in order to pave the way for more private 
sector financing. 

Furthermore,  there  seems  to  be  scope  to  also  strengthen  the  motivation  staff  in  both  IFIs  to 
maintain  policy  dialogue  between  themselves  and  with  the  EC,  especially  on  EU  policy 
priorities  such  as  local  economic  governance,  capital  markets  development,  development  of 
sustainable infrastructure etc – see also recommendation 6.  

Recommendation 4 

The cooperation between the two IFIs could be further increased through EBRD's involvement 
in  the  Investment  Plan  for  Europe,  a  flagship  EU  initiative.  EBRD  could  get  engaged,  in 
particular,  via  Investment  Platforms  which  are  foreseen  by  the  European  Fund  for  Strategic 
Investments  (EFSI)  Regulation8.  The  EBRD’s  expertise  and  past  knowledge  in  identifying 
viable  projects,  developing  and  bundling  projects  and  attracting  potential  investors  would  be 
valuable for setting up Investment Platforms involving the EU-11 Region.   

8  Regulation  (EU)  2015/1017  of  the  European  Parliament  and  of  the  Council  of  25  June  2015  on  the  European 
Fund  for  Strategic  Investments,  the  European  Investment  Advisory  Hub  and  the  European  Investment  Project 
Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013 — the European Fund for Strategic 
Investments.  

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Investment  Platforms  aim  to  further  leverage  EU  funds  and  to  involve  public  financial 
institutions,  including  national  promotional  banks  and  institutions,  and  institutional  investors 
and commercial financiers in the delivery of the EFSI. They can be designed in various forms 
so as to enable the provision of direct and indirect equity injections as well as guarantees for 
high-quality securitisation of loans and other products that are granted in pursuit of the aims of 
the EFSI.  

Recommendation 5 

The two IFIs should increase their efforts to pro-actively involve institutional investors such as 
pension funds and Sovereign Wealth Funds9 (SWFs) in co-financing projects in infrastructure 
in their common countries of operation. SWFs, public pension funds and insurers have ample 
liquidity  available  for  investments  and  are  the  most  natural  type  of  investors  for  long-term 
financing  projects  in  areas  such  as  infrastructure  financing  due  to  their  requirement  to  match 
long-term liabilities.  

This  enhanced  cooperation  may  in  many  instances  require  so-called  "stratification  of 
investors", which means that different classes of shares with different risk-return profiles and 
degrees of influence are issued within a single investment facility. 

For example, the increased interest and expertise of European-based insurance companies and 
pension  funds  can  be  capitalized  on.  In  this  context,  the  EBRD  and  EIB  Group  could  be 
encouraged to jointly develop projects with such entities. On the other hand, SWFs should only 
be engaged when they meet acceptable standards of governance and ensure alignment with the 
EU policies and legislation.  

Recommendation 6 

The EC should encourage the two banks to be instrumental, in particular, in the development of 
capital-based  products  and  in  policy  dialogue.  The  EBRD  could  step  up  its  engagement  with 
the  EC  and  countries  of  operation  to  deliver  on  mutually-beneficial  policy  initiatives.  Within 
the  EU-11  for  example,  both  IFIs  could  assist  national  governments  in  developing  policies 
which  would  help  them  move  towards  a  common  capital  market  in  Europe,  as  promoted  by 
recently-announced  flagship  initiative  on  a  Capital  Markets  Union  (CMU).  This  legislative 
initiative  is  in  line  with  the  EBRD  and  the  EIB  Group’s  mandates  to  finance  SMEs  and 
infrastructure  projects,  to  help  attract  private  sector  investments  and  develop  an  open,  stable 
financial system facilitating access to finance for the private sector.  

Finally, there is scope for both IFIs to further work with the EC on policy dialogue to define 
appropriate joint policy responses to regional and country-specific challenges through regular, 
structured exchange of policy analysis and discussion on strategies to promote common goals 
and priorities. 

*** 

9 Subject to compliance with the state aid rules.  

10