COMMISSION STAFF WORKING DOCUMENT Accompanying the document 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  SWD(2016) 22 final   COMMISSION STAFF WORKING DOCUMENT Accompanying the document 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 {COM(2016) 46 final}  
 
 
1. INTRODUCTION 

In recital 8 to Decision No 1219/2011/EU of the European Parliament and the Council of 16 
November 2011 concerning the subscription by the European Union (EU) to additional shares 
in  the  capital  of  the  European  Bank  for  Reconstruction  and  Development  (EBRD),  the 
Commission (EC) is invited 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  (the 
"Report").  

In  line  with  the  Decision,  this  Staff  Working  Document  (SWD)  aims  to  complement  the 
above  mentioned  Report  by  providing  an  analysis  of  the  instruments  used  by  EBRD, 
European Investment Bank Group - which includes the European Investment Bank (EIB) and 
the European Investment Fund (EIF) - and to a lesser extent their peer institutions operating in 
Europe and its Neighbourhood. The SWD covers the period 2010-2014 and focuses on those 
EU  countries  where  EBRD  is  active  and  on  the  European  Neighbourhood  ("the  Region"): 
Eastern  and  Central  European  EU  Member  States  (EU-11);  Southern  and  Eastern 
Mediterranean;  South  Eastern  Europe;  Eastern  Europe  and  Caucasus;  Central  Asia;  Russia 
and Turkey1. 

2. OVERVIEW OF PEER INSTITUTIONS 

  WORLD BANK 

the  International  Development  Association, 

Established in 1944, it was created to fight extreme poverty. Today, the World Bank Group 
comprises  five  different  institutions2  (the  International  Bank  for  Reconstruction  and 
the  International  Finance 
Development, 
Corporation, the Multilateral Investment Guarantee Agency and the International Centre for 
Settlement  of  Investment  Disputes).  It  strives  to  improve  lives  of  people  living  in  extreme 
poverty.  It provides  low interest loans,  zero to low interest  credits and grants  to developing 
countries. It also  offers support  to  developing countries through policy advice, research and 
analysis as well as technical assistance. 

The  main  sectors  of  investment  of  the  World  Bank  are:  health  and  education,  public 
administration, infrastructure, agribusiness,  environmental and natural resource management 
and the private sector. Its main geographical focus is on developing countries. 

  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 

(IBRD) 

IBRD was created in 1944 to help Europe rebuild after World War II. Today IBRD provides 
loans  and  other  assistance  primarily  to  middle  income  countries.  It  is  owned  by  its  188 
member countries. The institution provides a combination of financial resources, knowledge 
sharing,  technical  services,  and  strategic  advice  to  developing  countries,  including  middle 
income and credit-worthy lower income countries. 

1 Detailed description of the countries of each region is provided in the Glossary of this document.  
2 Only the International Development Association and the International Finance Corporation from the World 
Bank Group were considered as peer institutions for the Report.  

2 

 
 
 
 
 
 
 
 
 
 
                                                            
The main sectors of investment of IBRD are: public administration, law and justice, transport, 
energy  and  natural  resources,  financial  sector,  health  and  education,  municipal  and 
environmental  infrastructure  and  industry.  Its  main  geographical  focus  is  on:  Brazil,  India, 
China, Ukraine, Romania, Philippines, Morocco, Indonesia, Colombia and Tunisia.  

  INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA)  

Established in 1960, IDA is the World Bank’s fund for the poorest countries. It aims to reduce 
poverty  by  providing  loans  (called  credits)  and  grants  for  programs  that  boost  economic 
growth,  reduce  inequalities,  and  improve  people’s  living  conditions.  IDA  complements  the 
World Bank’s original lending arm, the IBRD. 

IDA's main sectors of focus are: education, healthcare, water and sanitation, climate and the 
environment,  business  climate  improvements,  infrastructure  and  institutional  reforms.  Its 
main geographical focus is on the 77 least developed countries - 39 of them in Africa.  

  INTERNATIONAL FINANCE CORPORATION (IFC) 

Established in 1956 and owned by 184 member countries, the IFC was created to end extreme 
poverty and boost shared prosperity.  Focused  on  the  private  sector,  IFC  works  closely  with 
businesses in developing countries to help them succeed in ways that promote prosperity for 
all. It provides investment, advice, and asset management. 

Its  main  sectors  of  coverage  are:  financial  markets,  infrastructure,  consumer  and  social 
services,  industry,  agribusiness  and  information  and  communications  technology  (ICT).  Its 
main  geographical  focus  is  on  Latin  America  and  the  Caribbean,  Europe  and  Central  Asia, 
East Asia and the Pacific, Sub-Saharan Africa and South Asia.   

  BLACK SEA TRADE DEVELOPMENT BANK (BSTDB) 

BSTDB was founded by the 11 founding countries of the Black Sea Economic Cooperation. 
Its  purpose  is  to  accelerate  development  and  promote  co-operation  among  its  shareholder 
countries.  It  supports  regional  trade  and  investment,  providing  financing  for  commercial 
transactions  and  projects  in  order  to  help  its  Member  States  establish  stronger  economic 
linkages.  It  has  a  dual  mandate:  i)  promote  regional  cooperation  among  and  ii)  economic 
development    in  its  Member  States  principally  by  financing  operations  in  the  private  and 
public sectors. 

Its  main  sectors  of  coverage  are:  infrastructure,  energy  and  natural  resources,  transport, 
industry,  ICT  and  the  financial  sector.  Its  main  georgraphical  focus  is  on  its  founding 
members which include: Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, 
Romania, Russia, Turkey, Ukraine.  

  KREDITANSTALT FÜR WIEDERAUFBAU (KfW) 

The  KfW  Development  Bank,  a  part  of  the  KfW  Banking  group,  focuses  on  improving  the 
economic  and  social  conditions  of  people  in  developing  countries.  It  finances  investments 
reform  programs  focused  on  local  needs  in  multiple  sectors.  It  also  promotes  and  supports 
programmes on behalf of governments. 

3 

 
 
 
 
 
 
 
 
 
 
 
 
The  main  sectors  where  KfW  invests  are:  energy  generation/distribution,  finance,  water 
supply  and  sanitation,  health  and  education.  In  terms  of  geographical  focus  KfW  mainly 
targets  the  following  areas:  Sub-Saharan  Africa,  Asia  and  Oceania,  North  Africa,  Latin 
America and South-Eastern Europe.  

  AGENCE FRANCAISE DE DÉVELOPPEMENT (AFD) 

Established in 1941, the main priorities of the AFD are to fight against poverty and inequality 
and  to  support  economic  growth  and  to  preserve  global  public  goods.  AFD  finances 
sustainable  development  projects  carried  out  by  governments,  local  authorities,  public 
companies,  and  the  private  sector  on  five  continents  -  with  priority  given  to  Africa,  which 
receives  two-thirds  of  AFD  commitments,  the  Mediterranean  countries  and  the  French 
Overseas Territories. 

AFD  is  investing  mainly  in  the  following  sectors:  health  and  education,  potable  water  and 
sanitation,  the  fight  against  climate  disruption  and  support  to  the  private  sector.  Its  main 
geographical  focus  is  on:  Sub-Saharan  Africa,  French  Overseas  Territories,  Latin  America 
and the Caribbean and the Mediterranean countries.  

  COUNCIL OF EUROPE DEVELOPMENT BANK (CEB)  

Created in 1956, its original aim was to help refugees and other displaced people after WWII. 
Its scope of action has progressively widened to other sectors of action directly contributing to 
strengthening  social  cohesion  in  Europe.  It  acts  as  a  development  bank,  granting  loans  to 
member states of the bank. 

The  main  sectors  of  investment  of  CEB  are:  social  integration,  environmental  protection, 
health  and  education  and  Small  and  Medium-sized  Enterprises  (SMEs).  Its  main 
georgraphical focus is on its 41 member states.    

  BANK GOSPODARSTWA KRAJOWEGO (BGK) 

BGK  was  established  during  Poland’s  monetary  reforms  of  1924.  The  primary  objective  of 
BGK is to provide banking services for the public sector, in particular through the support of 
the government's economic programs, as well as local governments and regional development 
programs  implemented  with  the  use  of  public  funds,  including  those  of  the  EU.  It  provides 
funding for infrastructure investments and supports Polish exporters by taking on part of the 
risk related to their trading activities. In collaboration with other financial institutions, BGK 
improves access to funding for businesses. 

BGK  mainly  covers  the  following  sectors:  infrastructure,  energy  efficiency  and  public 
utilities. In terms of georgraphocal focus, BGK mainly targets Poland.  

4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
3. DESCRIPTIVE ANALYSIS OF EBRD, EIB GROUP AND PEER INSTITUTIONS3 

3.1 COUNTRIES AND SECTORS OF OPERATION OF EBRD AND EIB GROUP 

The  data  analysis,  which  was  carried  out  over  project  data  of  operations  in  the  reference 
period 2010-2014 in the Region, demonstrated that there are differences in the volume of the 
EIB Group and EBRD’s commitments across the different regions and sectors. 

The analysis showed that the EIB Group has higher volumes of commitments than the EBRD 
in  the  EU-11,  the  Southern  and  Eastern  Mediterranean  and  Turkey.  On  the  other  hand,  the 
EBRD  has  higher  volumes  in  Eastern  Europe  and  Caucasus,  Central  Asia  and  Russia.  In 
South Eastern Europe the volumes  of commitments between the two International Financial 
Institutions (IFIs) are similar. 

Table 1: EBRD and EIB Group commitments 2010-2014 in bn EUR 

EU-11 

South 
Eastern 
Europe 

Eastern 
Europe 
and 
Caucasus 

Central 
Asia 

Southern and 
Eastern 
Mediterranean 

Russia 

Turkey 

Regional* 

EIB 
Group 

    EIB 

    EIF 

EBRD 

49.4bn 

4.5bn 

3.9bn 

0.3bn 

5.8bn 

1.4bn 

11.1bn 

47.8bn 

1.6bn 

9.6bn 

4.4bn 

0.1bn 

3.7bn 

3.9bn 

0.3bn 

5.8bn 

1.4bn 

10.5bn 

- 

- 

- 

- 

0.6bn 

8.0bn 

3.4bn 

1.5bn 

9.3bn 

4.6bn 

3.6bn 

- 

- 

- 

Source: PWC 
* Regional: Data from the EBRD included a number of operations that were classified as “regional” as they cover 

several countries and it has not always been possible to attribute the commitments to a single country.  

The  analysis  also  demonstrated  that  the  EBRD  committed  financing  to  operations  in  33 
countries, while the EIB signed contracts in 30 countries and the EIF supported operations in 
16  countries.  With  regards  to  the  financing  volume  by  geographical  breakdown,  the  EBRD 
committed EUR 9.6bn in EU-11, EUR 9.3bn in Russia, EUR 8bn in Eastern Europe and the 
Caucasus,  4.6bn  in  Turkey,  EUR  3.7bn  in  South  Eastern  Europe  and  EUR  3.4bn  in  Central 
Asia.  This  is  in  line  with  EBRD’s  mandate  foreseeing  that  the  bank  will  support  former 
members of the Soviet Bloc in their transition towards market economies. Due to a relatively 
recent  expansion  of  the  EBRD  to  Southern  and  Eastern  Mediterranean  countries,  its 
commitments to the regions are lower, around EUR1.5bn.  

On  the  other  hand,  the  EIB  as  the  bank  of  the  EU  is  the  leading  IFI  in  the  EU-11  (EUR 
47.8bn). In South Eastern Europe, the two IFIs have similar commitments (EUR 3.7bn for the 
EBRD and 4.4bn for the EIB). The EIF closed financial deals in EU-11 (EUR 1.6bn), Turkey 
(EUR  558m)  and  South  Eastern  Europe  (EUR  65m).  The  fact  that  the  EIB’s  volume  of 
operations in the EU-11 is 5 times larger than the EBRD’s in those countries is a natural trend 
given that these countries are EU Member States and are also reaching a stage of development 
that  is  more  aligned  with  the  social  and  economic  cohesion  objective  of  the  EU  and 
progressively perceived less as economies in transition. 

3 EIB and EBRD are by far the most active IFIs throughout the Region and therefore the analysis is mainly 
concentrated on them.  

5 

 
 
 
 
 
 
 
                                                            
As for the peer istitutions, based on the publicly available data, the most active institution in 
Eastern Europe and Caucasus, in Central Asia, in Southern Eastern Mediterranean, in Turkey 
and in the EU-11 was the IBRD, in Russia was BSTDB, KfW and IBRD whereas in  South 
Eastern Europe were the IBRD and the KfW. 

Table 2: Commitments of the peer institutions 2010-2014 in bn  EUR. 

Central Asia 

Eastern 
Europe and 
Caucasus 

EU -11 

Russia 

South 
Eastern 
Europe 

Southern and 
Eastern 
Mediterranean 

Turkey 

BSTD 

IBRD 

IFC 

- 

5.9bn 

0.01bn 

KfW 

0.3bn 

Source: PWC 

0.5bn 

5.1bn 

0.1bn 

0.8bn 

0.2bn 

0.4bn 

0.07bn 

- 

0.2bn 

13.2bn 

0.2bn 

0.2bn 

0.1bn 

- 

0.3bn 

2.2bn 

0.1bn 

1.5bn 

11.0bn 

8.7bn 

0.2bn 

1.9bn 

- 

0.7bn 

Regarding the breakdown by economic sector, both the EIB Group and the EBRD provide a 
large  share  of  their  total  commitments  to  the  financial,  transport  and  energy  sectors. 
Furthermore, each institution has its own sectors of expertise. EIB has an in-depth expertise in 
supporting  the  development  of  municipal  and  environmental  infrastructure,  service  sector 
projects as well as SME financing through on-lending, equity and risk-sharing. EBRD has a 
strong  know-how  when  it  comes  to  financing  industrial,  agribusiness  projects  and  SMEs. 
Even if the EIB lending to the municipal sector is larger in terms of volume, the EBRD also 
has a long history of engaging with the municipal sector on a sub-sovereign basis. 

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

3.2 COUNTRIES AND SECTORS ATTRACTING INVESTMENTS FROM BOTH 

EBRD AND EIB GROUP 

There are a number of countries and sectors in which both the EIB Group and EBRD invest 
across the Region, particularly in the EU-11, Eastern Europe and the Caucasus and Turkey, as 
shown below: 

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure  1:  Comparing  the  number  of  sectors  which  are  covered  by  both  EBRD  and  EIB  in  the  EU-11,  in 
Eastern Europe and Caucasus and in Turkey in 2010 and 2014 (commitments). 

                           EU-11                                                                                  Eastern Europe and Caucasus 

Turkey 

Source: PWC 

In EU-11 countries, Poland was a key focus of the EIB Group’s and the EBRD’s operations 
both  in  2010  and  in  2014.  Bulgaria  and  Romania  appear  to  have  become  relatively  more 
important markets for the IFIs and by 2014 they demonstrated increased potential for overlap. 
In  terms  of  sector  coverage,  the  financial  sector  is  the  most  common  sector  of  potential 
operational overlap between the EIB Group and EBRD in the EU-11 both in 2010 and 2014.  

As regards the operations of the peer institutions in the EU-11, the analysis showed that for 
Bulgaria,  Croatia  and  Romania  there  were  also  at  least  two  other  peer  institutions  (BSTDB 
and IFC) operating in the financial sector in addition to the EIB Group and EBRD. Moreover, 
each of the energy and natural resources sectors in Bulgaria, Croatia and Romania are covered 
by at least three IFIs. 

In  Eastern  Europe  and  Caucasus  region,  whereas  in  2010  a  potential  overlap  was  only 
identifiable  in  Georgia  and  Moldova,  in  2014  potential  overlap  occurs  in  four  countries 
(Armenia, Azerbaijan, Moldova and Ukraine). The increase in potential overlap in countries 
and  sectors  observable  between  2010  and  2014  is  largely  a  result  of  the  EIB’s  heightened 
activity in the region, as the EBRD already had a strong presence in all countries in 2010. The 
most common sectors of potential overlap between the EIB and EBRD in this region are in 
the financial sector and the municipal and environmental infrastructure sector.  

When  the  commitments  of  the  peer  institutions  in  Eastern  Europe  and  Caucasus  region  are 
also  taken  into  account,  there  were  at  least  two  other  peer  institutions  (BSTDB  and  IFC) 
operating in the region in addition to the EIB Group and EBRD. Potential overlaps involving 
at least three of these financing institutions occur mostly in the financial sector in Armenia, 
Azerbaijan,  Georgia  and  Ukraine.  Moldova  and  Armenia  have  a  particularly  high 
concentration of IFIs' operations, with at least three financing institutions involved in several 

7 

 
 
 
 
   
 
 
 
economic  sectors.    For  instance,  in  Armenia  these  sectors  are  agriculture,  energy,  financial 
and services, while in Moldova these are agriculture, financial and industry.    

Finally,  in  Turkey,  IBRD  and  the  EIB  Group  are  the  IFIs  with  the  highest  commitments. 
However, the EBRD and KfW also play a significant role. The key trend emerging for Turkey 
when  comparing  commitments  from  2010  and  2014  is  that  Turkey  appears  to  be  a  country 
with  a  high  concentration  of  both  EIB  and  EBRD  operations,  with  five  sectors  displaying 
potential  for  overlap.  Potential  overlaps  between  the  EIB  and  the  EBRD  were  found  in  the 
sectors  of  agriculture,  energy,  financial,  ICT,  industry,  municipal  and  environmental 
infrastructure,  and  transport.  Once  the  commitments  of  the  peer  institutions  are  considered, 
potential  sectorial  overlaps  between  them  and  the  EBRD  and  EIB  Group  also  arise  in  the 
financial and the industry sectors.  

3.3 FINANCIAL PRODUCTS USED BY THE EBRD AND BY EIB  

The  following  financial  products  are  delivered  by  EBRD  and  the  EIB  Group  (the  below 
figures show commitments over the 2010-2014 period in the analysed Region): 

  Debt (EIB Group: EUR 72.7bn; EBRD 36.7bn);  
  Guarantees (EIB Group: EUR 1.6bn; EBRD 2.1bn); 
  Equity (EIB Group: EUR 1.3bn; EBRD 5.7bn); 
  Microfinance (EIF). 

As can be seen in Figure 2, the vast majority of the EBRD, EIB Group and peer institutions’ 
commitments  are  provided  as  debt  products.  It  is  to  be  highlighted  that  EIB  provides 
subordinated  or  mezzanine  finance  on  a  limited  scale  while  the  EBRD  makes  use  of  these 
financial products more regularly with the biggest share as subordinated debt. 

Figure 2: Comparing financial products over time (EBRD and EIB Group's aggregated commitments for 
2010 - 2014) 

Source: PWC 

Breaking down the financial products by region for the years 2010 to 2014, in three out of the 
seven  areas  under  review,  the  relative  size  of  equity  and  guarantee  commitments  increased 
compared  to  debt.  The  provision  of  financial  instruments  measured  as  share  of  total 

8 

91.7%89.6%91.1%89.9%93.0%5.7%7.2%5.7%6.2%4.2%2.6%3.0%3.1%3.9%2.7%0.02%0.20%0.07%0.08%0.07%70%75%80%85%90%95%100%20102011201220132014Microfinanceguaranteesequitydebt 
 
 
 
 
 
 
commitments was expanded in Eastern Europe and Caucasus, Central Asia, the Southern and 
Eastern Mediterranean as well as in Turkey. 

On the other hand, in the EU-11, South Eastern Europe, and Russia, the relative but also the 
absolute  commitments  in  equity  and  guarantee  instruments  declined  when  comparing  the 
years 2010 to 2014. 

Comparing the EIB Group's and EBRD’s financial products, it is apparent that the EBRD uses 
relatively  fewer  debt  instruments  and  more  guarantees  and  equity  than  the  EIB.  Within  the 
EIB  Group  there  is  a  clear  division  of  labour  to  exploit  comparative  advantages:  the  EIB 
finances virtually all investments through debt while the EIF provides nearly two-thirds of its 
volume  of  total  commitments  through  guarantees  and  nearly  a  third  through  equity 
instruments. 

Figure 3 underlines this observation: out of the operations included in the database, the EIB 
Group  is  providing  the  highest  proportion  of  debt  products  to  the  countries  covered  by  this 
document in absolute terms (EUR 72.79bn over the period 2010 – 2014), and such products 
make up 96.2% of its portfolio. Over the same period, the EBRD committed EUR 36.6bn of 
debt products, representing 82.6% of the institution’s overall commitments during the period 
of 2010  – 2014. The EIF, as  the main provider of equity  and guarantee products within the 
EIB Group, has only signed EUR 104m of debt products (5% of EIF’s total portfolio); mainly 
for microfinance operations. 

In absolute terms, the EBRD provided EUR 2.1bn of guarantees (5%), which compares to the 
EIB Group having committed EUR 1.57bn (2.1% of the EIB Group’s commitments). Broken 
down  by  entity  this  makes  EUR  100m  (less  than  1%)  for  the  EIB  and  1.47bn  for  the  EIF 
(65%). 

The EBRD is also the leading equity investor with EUR 5.7bn (13%), which compares to the 
EIB  Group’s  EUR  1.33bn  (1.8%  of  EIB  Group’s  commitments).  For  the  EIB  this  means  it 
made available EUR 648m (1% of its commitments) and the EIF committed EUR 687m (30% 
of its activities). 

Figure 3: Comparing the EIB, EIF and EBRD's provision of debt, equity and guarantees over the 2010 – 
2014 period (commitments in million EUR) 

Source: PWC 
Note:  This  breakdown  includes  EBRD  operations  classified  as  “regional”  both  for  equity  worth  EUR  2.14bn 
and debt worth EUR 1.41bn. 

9 

EBRDEIBEIF - 20,000 40,000 60,000 80,000DebtEquityGuarantees 
 
 
 
 
 
 
 
 
 
 
 
4. COOPERATION OF THE EIB GROUP AND EBRD WITH THE EC 

The  EBRD's  and  the  EIB's  cooperation  with  the  EC  takes  on  different  forms  (e.g.  the 
Memorandum of Understanding signed between the EBRD, the EIB and the EC, involvement 
on  the  boards  of  joint  facilities,  regular  inter-institutional  meetings)  and  occur  at  different 
levels  throughout  the  organisations  (from  Director  General/Vice-President-level  to  loan  and 
desk officer-level in the field). 

The  scope  and  modalities  of  cooperation  and  the  policy  frameworks  under  which  the 
cooperation occurs  vary substantially between the operations in  the EU-11 and those taking 
place outside the EU.  

In  the  EU-11,  the  EIB  Group  has  supported,  and  will  continue  to  support,  the  EC  in  the 
design, setup and implementation of financial instruments under the European Structural and 
Investment Funds (ESI Funds). This is done through the provision of horizontal and bilateral 
technical assistance to FI stakeholders across the EU Member States, implementing blending 
activities with ESI Funds and direct fund management activities. The Project Bond Initiative4 
is one of the most visible examples of financial cooperation.  

In  addition,  the  EU  has  given  the  EIB  a  number  of  mandates  to  perform  certain  lending 
operations supported by the EU budget. Particularly relevant is the recent Investment Plan for 
Europe,  within  which  the  EC  and  the  EIB  Group  have  forged  a  strategic  partnership  to 
address  market  gaps  and  help  shoulder  risk  inherent  in  projects  to  encourage  higher  risk 
private  and  public  investment.  The  European  Fund  for  Strategic  Investments  (EFSI)  is 
established within and managed by the EIB in order to maximise synergies and benefit from 
EIB expertise and experience.  

Moreover,  EIF  has  been  mandated  by  the  EC  to  implement  various  EU  programmes 
supporting SMEs via guarantees and equity. Besides this, the EIF has implemented a number 
of local mandates funded by structural funds. 

in 

As regards the EBRD, until now it has played a different role with respect to EU Cohesion 
Policy.  EBRD  has  invested  in  a  number  of  operations  that  were  co-financed  through 
the  municipal  and  environmental 
Structural  Fund/ESI  Funds  resources,  mostly 
infrastructure, energy efficiency and SME sectors. In many of those transactions, the EBRD 
played  a  key  role  in  structuring  the  products  in  close  cooperation  with  the  EC  and  the 
beneficiary  country.  Although  EBRD  has  invested  in  operations  that  were  co-financed 
through Structural Fund/ESI Funds resources, it has not been involved in the management of 
ESI Funds-funded instruments on behalf of national and regional Managing Authorities due to 
the  limited  appetite  of  EBRD  to  pursue  such  mandates  as  well  as  some  administrative  and 
procedural  hurdles.  However,  the  emphasis  on  financial  instruments  in  the  new  2014-2020 
Multiannual Financial Framework, has brought some major new opportunities for the EBRD, 
the EIB and EC to cooperate more extensively in the region.  

Outside  the  EU,  the  EC,  the  EIB  and  the  EBRD  have  a  long  established  cooperation  to 
enhance  coordination  and  synergies  of  their  activities.  On  1  March  2011,  a  tripartite 

4 The Project Bond initiative is a joint initiative of the EC and the EIB. Its objective is to stimulate capital market 
financing  for  large-scale  infrastructure  projects  in  the  sectors  of  transport  (TEN-T),  energy  (TEN-E)  and 
information and communication technology.  

10 

 
 
 
 
 
 
 
 
 
                                                            
Memorandum  of  Understanding  (MoU)  was  signed  to  maximise  synergies  between  the 
activities  of  the  three  partners.  This  MoU  sets  out  a  framework  of  cooperation  and 
coordination of the activities of the three institutions outside the EU. 

The role of the EIB Group is to finance investment projects in support of EU external policy 
objectives,  complementing  the  EU's  corresponding  external  assistance  policies,  programmes 
and  instruments  in  the  different  regions,  and  adapting  its  activities  to  developments  in  EU 
policies. As such, the EIB is granted an External Lending Mandate (ELM), providing an EU 
guarantee against losses under loans and loan guarantees for projects outside the EU.  

The combination of resources also occurs between the EIB Group and/or EBRD on the one 
hand,  and  EU  budget  external  financial  instruments  on  the  other  hand,  notably  in  the 
Instrument for Pre- Accession Assistance (IPA) countries, the European Neighbourhood and 
Partnership Instrument (ENPI) and the Development Cooperation Instrument (DCI).  

Furthermore,  the  EC  is  increasingly  focusing  on  the  efficiency  of  the  use  of  EU  financial 
resources and on the use of financial instruments in particular. The combination of EU grants 
with  the  financial  instruments  occurs  in  the  Region  particular  through  three  EU  blending 
facilities5,  i.e.  the  Western  Balkans  Investment  Facility  (WBIF)  which  covers  pre-accession 
countries, the Neighbourhood Investment Facility (NIF), covering both the Southern and the 
Eastern Neighbourhood, and the Investment Facility for Central Asia (IFCA). 

In addition to co-investment, the cooperation between the EC, the EIB Group and the EBRD 
also  takes  the  form  of  the  provision  of  joint  technical  assistance,  in  particular  through  the 
JASPERS  (Joint  Assistant  to  Support  Projects  in  European  Regions)  Programme.  The 
JASPERS Programme was established in 2006 and is co-sponsored by the EC and the EBRD 
and managed by the EIB, which provides the technical staff. Its mission is to provide free-of-
charge advice to the 13 countries that joined the European Union in 2004, 2007 and 2013 as 
well  as  to  Greece,  the  Former  Yugoslav  Republic  of  Macedonia,  Montenegro  and  Serbia 
during project preparation, to help improve the quality of the major projects to be submitted 
for grant financing under the Structural and Cohesion Funds. 

As  the  figure  below  shows,  741  projects  financed  by  either  the  EBRD  or  the  EIB  were 
realised  with  EU  support,  most  of  them  with  direct  co-financing  from  the  EU  budget.  This 
compares to a total number of projects of 3,391 for the 2010 – 2014 period.  

The  EBRD  realised  209  projects  co-financed  by  the  EU  budget  (also  including  Technical 
Assistance  funds).  In  addition,  the  EIB  promoted  532  projects  with  an  EU  financing 
component  or  under  the  ELM.  EIB  projects  profiting  from  EU  co-financing  mainly  drew 
funds  from  structural  funds  (226),  regional  blending  facilities  (48)  and  other  co-financing 
under the ELM (44). 

5 Blending facilities combine EU grants with financing from the EIB Group, EBRD and peer institutions.  

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
Figure 4: Breakdown on the number of operations co-financed by the EU budget or realised within EIB’s 
External Lending Mandate during 2010 and 2014 

Source: PWC 

5. ASSESMENT OF THE EFFECTIVENESS OF THE EBRD AND EIB GROUP 

This SWD further develops the information presented in the Report regarding the analysis of 
the assessment of the effectiveness of the existing system of IFIs in promoting investments in 
the Region.  

As explained in the Report, the analysis of effectiveness of the IFIs system has focused on the 
following  areas:  effectiveness  in  meeting  market  needs,  assessment  of  other  effects, 
leveraging of private financing, cooperation between the two IFIs as well as in the analysis of 
their complementarities and comparative advantages.  

5.1 EFFECTIVENESS IN MEETING THE MARKET NEEDS 

A wide range of market needs are covered by EIB Group and EBRD’s broad offer of different 
financial instruments and technical assistance: 

 

Insufficient  development  of  capital  markets,  which  hinders  the  diversification  of 
funding sources for a wide range of public and private actors. 

  Lack  of  equity  investment  in  renewable  energy  and  the  energy  efficiency  market. 
Several countries in the Region are confronted with a growing energy demand while 
investments in the sector remain insufficient. 

  Lack  of  access  to  finance  for  SMEs  due  to  local  financial  institutions'  inability  to 
estimate underlying risk correctly and offer reasonable pricing of financing products. 

12 

ELM, 144 Structural Funds 226 RSFF 3 Other EU Grants/Funds  24 JESSICA  19 EBRD-EU co-financing209 ELM -Regional Blending Facilities48 ELM -FEMIP RC9 ELM -ISPA/EAR12 ELM -other EU co-financing44 ELM -IPA3 741 projects realised with EUEIBEBRD 
 
 
 
 

Insufficient financing for public infrastructure especially for larger scale projects with 
a long-term investment horizon. 

However, a number of factors limit the effectiveness of their operations, such as: 

 

Insufficient  development  of  the  regulatory  framework  and  the  limited  capacity  of 
market actors both on the demand and supply side; 

  Joint financial instruments, which did not manage to provide equity investments due to 
the additional complexity when compared to intermediated loans. This is linked to the 
difficulty of identifying a pipeline of bankable projects in the target countries and the 
longer due diligence and appraisal time needed;  

  Greater than expected availability of EU structural funds, which has resulted in some 
cases in a readjustment of the financial contribution of EIB and EBRD, delaying the 
project implementation.  

5.2 OTHER EFFECTS  

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

In  the  financial  sphere,  there  is  clear  evidence  of  strong  demonstration  effects  for  both  the 
EIB  Group  and  the  EBRD’s  financial transactions,  in  particular in  terms  of  structuring  new 
products  and  new  types  of  beneficiaries.  Moreover,  EBRD  actively  supports  local  capital 
markets  in  its  countries  of  operations  in  various  ways.  More  specifically,  through  its  Local 
Currency  and  Capital  Markets  Initiative,  the  EBRD  has  provided  loans  in  several  local 
currencies in its countries of operation and has contributed to the development of local bond 
markets so that they ultimately can  be sustainable without public sector involvement. Aside 
from these elements, the two banks promote international financial and risk-related standards 
through their operations.  

Economic  effects  (such  as  the  boost  to  employment,  the  impact  on  the  real economy,  skills 
upgrading  or  promotion  of  international  technical  standards)  are  more  difficult  to  assess. 
However,  they  can  be  best  understood  by  differentiating  for  direct  and  indirect  economic 
effects.  On  the  one  hand,  the  EIB  and  EBRD  financial  instruments  directly  targeting  SMEs 
aim at generating economic growth and job creation and thus can have a positive economic 
impact  on  the  real  economy.  On  the  other  hand,  financial  transactions  targeting  capital 
markets  developments  and  public  infrastructure  projects  have  also  had  a  positive  indirect 
impact  on  the  workforce’s  skills  upgrading  and  employment  levels,  which  in  turn  has  a 
positive effect on the real economy. In this context, it should be noted that EBRD considers 
including transition impact, looking at youth unemployment, gender inequalities and regional 
exclusions in its assessment, while job creation is not part of the EBRD's mandate.   

Social, environmental and governance effects are also recognized. Sectoral reforms and policy 
dialogue,  including  changes  to  legal  and  regulatory  frameworks,  are  key  aspects  for  the 
transition  impact  pursued  by  the  EBRD.  EBRD  supports  projects  in  countries  of  operation 
which  are  committed  to  multiparty  democracy,  pluralism  and  market  economies.  With  a 
similar effect, the EIB Group is bound by the EU Treaties and policies.  

Another important contribution of the two institutions in this area of effects is their significant 
exposure to  financing  of  operations targeting  climate  change  and  the  environmental  impact. 

13 

 
 
 
 
For  example,  the  EIB  has  adopted  rules  and  guidance  concerning  the  management  of  the 
impacts  of  its  operations  on  climate  change  which  are  spread  across  the  bank's  sectoral 
policies (in sectors such as energy and transport), its greenhouse gas accounting methodology 
and  project  feasibility  assessments.  The  Climate  Action  Programme  of  the  EIB  currently 
targets  at  least  25%  of  all  EIB  lending.  Both  the  EBRD  and  the  EIB  can  hence  be  seen  as 
providers  of  leadership  which  propose  solutions  addressing  climate  concerns.  Finally,  both 
IFIs  contribute  to  setting  appropriate  corporate  governance  standards  by  tackling  illegal 
capital flows and potential tax evasion and avoidance. 

5.3 LEVERAGE OF PRIVATE FINANCING 

Another  aspect  which  needs  to  be  analysed  when  assessing  the  effectiveness  of  IFIs 
interventions  is  how  successfully  they  manage  to  leverage  private  financing  in  their 
operations. 

The analysis of the data made through this exercise showed that both the EIB Group and the 
EBRD  manage  to  leverage  private  sector  financing.  However,  their  respective  success  in 
leveraging private funding varies across sectors, countries and the types of financial products 
and instruments provided. For example, EBRD published results which show that funding to 
Eastern partnership countries as well as Southern and Eastern Mediterranean region achieved 
a  leverage  of  36  times  the  initial  grant  contribution  within  the  context  of  the  NIF.  The 
leverage under the Western Balkan Investment Framework financing projects in the transport, 
energy  and  environmental  sectors  in  the  region  has  achieved  different  leverage  targets 
depending on the specific projects, with a loan multiplier ranging from 1 to 50 times the initial 
grant.  EIB’s  latest  figures  highlight  that  projects  outside  of  the  EU  approved  by  the  EIB  in 
2014  leveraged  2.7  times  its  initial  contribution.  Looking  at  the  EIF  on  its  own,  it  has 
achieved a leverage of 7.5 times on its initial commitments.  

The level of achievable leverage is linked to a number of external factors, such as: 

  Risk  mitigation  products:  Risk-sharing  programs  in  partnership  with  private  sector 
companies can help to enhance aid effectiveness by harnessing private sector capital 
and developing capital markets. 

  Local  Capital  Markets  Enhancement:  There  is  a  perceived  need  for  new  financial 
instruments  and  an  expansion  of  current  instruments,  such  as  the  EBRD’s  local 
currency  and  capital  markets  programme,  specifically  aimed  at  developing  local 
capital markets and expanding local sources of available credit in direct collaboration 
with private sector and national government experts. 

  Regulatory  and  Foreign  Exchange  Risk:  The  EIB  and  EBRD  need  to  collaborate 
with  private  sector  experts  in  designing  new  financial  structures  that  correspond  to 
market  needs  in  two  specific  areas  blocking  mobilisation  of  capital  -  government 
regulatory risk and foreign exchange risk. 

  Assistance  for  project  feasibility  studies:  The  EIB  and  EBRD  need  to  pool  project 
feasibility  funds  and  make  them  easy  to  access,  utilising  appropriate  experts  from 
across  the  public  and  private  sectors  to  identify  quality  projects  and  develop 
acceptable risk-mitigating financial structures. As the stakeholder interviews revealed, 
there  is  still  some  room  for  improvement  regarding  the  coordination  and  sharing  of 
technical  and  financial  feasibility  studies.  Therefore,  pooling  feasibility  funds  would 
facilitate access to these studies and avoid overlaps in tendering them. 

14 

 
 
Furthermore,  it  has  to  be  highlighted  that  the  leverage  is  higher  in  projects  related  to 
infrastructure,  e.g.  the  Project  Bond  Initiative6,  which  aims  to  stimulate  capital  market 
financing  for  large-scale  infrastructure  projects  and  enabling  eligible  infrastructure  projects 
promoters,  usually  public  private  partnerships,  to  attract  additional  private  finance  from 
traditional  institutional  investors  such  as  insurance  companies  and  pension  funds.  Also, 
overall  non-concessional  finance  is  estimated  to  leverage  fewer  private  funds  than 
concessional finance. Equity and guarantees financed via grants are estimated to have a higher 
leverage than debt underpinned by grants. 

5.4  EBRD-EIB  GROUP  COOPERATION,  COMPLEMENTARITIES  AND 

COMPARATIVE ADVANTAGES 

5.4.1 COOPERATION 

As mentioned earlier (section 4), a tripartite MoU was signed between the EC, the EIB Group 
and EBRD to maximise synergies between the activities of the three partners outside the EU. 
The  analysis  has  recognized  three  distinct  scenarios  of  cooperation  between  the  EIB  Group 
and the EBRD that may occur when their operations target the same countries and sectors:  

  Ad-hoc cooperation: Both the EIB Group and the EBRD are undertaking investment 
activities  in  the  same  country/region  and  are  offering  products  to  the  same  sectors 
without necessarily co-financing any specific project. 

  Co-financing  on  a  project-by-project  basis:  The  EIB  Group  and  the  EBRD  finance 

separate project components of the same investment. 

  Co-financing  under  joint  facilities/funds:  The  EIB  Group  and  the  EBRD  undertake 
investments  in  a  more  formalised  governance  framework  of  cooperation  and 
coordination.  

One  should  be  aware  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 the two institutions at all levels, from the technical staff to the top 
level of management, also reflecting that the EIB was a founding member of the EBRD, and 
is thus fully represented in the EBRD Board of Directors and Board of Governors. 

The  analysis  also  showed  that  there  are  a  number  of  formal  and  informal  mutual  reliance 
mechanisms  already  in  place  helping  to  coordinate  the  actions  between  the  EBRD  and  EIB 
Group,  especially  with  regards  to  the  exchange  of  information  on  projects  and  clients,  joint 
monitoring and reporting. However, there are limits to potential deepening of existing forms 
of  mutual  reliance  during  the  project  appraisal.  This  is  mainly  due  to  the  fundamental 
differences in two institutions' mandates and shareholding structures and to risk management 
considerations, which limit the extent to which each institution can rely on the due diligence 
and appraisal performed by the other. 

The  two  institutions  co-finance  on  a  project-by-project  basis  and  through  joint  facilities.  In 
particular,  this  includes  large  projects  (e.g.  energy,  transports  or  municipal  infrastructure), 
where  the  investment  costs  and  risks  are  high  and  each  institution  can  leverage  its  own 
comparative  advantages  as  well  as  those  operations  where  the  two  institutions’  policy 
objectives and interests are well aligned. 

6 Please refer to footnote 4. 

15 

 
 
 
 
 
 
 
                                                            
The analysis also showed that the two institutions co-finance on a project-by-project basis and 
through  joint  facilities  or  funds.  This  includes,  in  particular,  operations  with  the  following 
characteristics: 

  Large  projects  (e.g.  energy,  transport  or  municipal  infrastructure)  where  the 
investment costs and risks are high and each institution can leverage its comparative 
advantages.  In  these  instances  the  EIB  Group  brings  in  its  strong  technical  and 
engineering skills in project assessment and appraisal while the EBRD can contribute 
with its strong local presence and knowledge of the market actors, as well as its strong 
financial structuring capabilities.  

  Operations  where  the  two  institutions’  policy  objectives  and  interests  are  very  well 
aligned (especially in energy, transport and municipal infrastructure projects; projects 
that have a positive climate change impact; and operations that support the growth of 
SMEs). 

Nonetheless, the analysis has identified a number of potential barriers to co-financing or co-
investing, in particular in terms of: 

  Small scale projects where contribution from more than one IFI is impractical due to 

the disproportion between the transaction costs and the size of the investment. 

  Areas in which the requirements of the two IFIs are diverging due to the differences 
in  their  shareholder  structure  and  mandates.  As  an  example  of  this,  there  can  be 
situations  in  which  the  EBRD  needs  to  request  sectoral  reforms  as  a  condition  to 
ensure the transition impact of its financial support, while this is not a priority of the 
EIB. In  such cases,  EIB relies  on the dialogue of the EC  and the European  External 
Action  Service  (EEAS)  with  the  partner  country  and  does  not  engage  in  a  parallel 
dialogue to avoid duplications. On the other hand, there might be cases in which the 
EIB  considers  that  a  project’s  technical  or  financial  characteristics  need  to  be 
improved or modified in order to be better aligned with EU policy objectives and the 
promotion of the implementation of EU legislation. 

  Operations in which one of the institutions is not able to provide the most appropriate 
financial products due to a lack of previous experience with the product itself, lack of 
sufficient  knowledge  of  the  market,  or  the  presence  of  financial  intermediaries  and 
borrowers,  resulting  in  an  unsuitable  risk  profile  of  the  operation.  For  instance,  this 
may be the case in markets in which the EIB has just recently started operations and in 
which  the  EIF  does  not  invest,  even  though  the  most  needed  financial  products  are 
small-scale equity investments (e.g. in commercial banks or corporates). In these cases 
the EBRD can provide financing, since these investments require a much more hands-
on  approach,  a  significant  market  knowledge  and  local  presence  to  properly  manage 
the  associated  risks.    The  EIB  is  in  a  strong  position  for  operations  involving  high 
volume and long-tenure lending to public sector entities where substantial value added 
is provided. 

  Moreover,  there  is  a  significant  difference  in  the  two  banks'  pricing  approach:  the 
EBRD  employs  a  market-based  pricing  policy  and  the  EIB  follows  a  risk-based 
pricing policy. As such, the EIB has a clear comparative advantage since it is able to 
pass its favourable borrowing conditions on to its clients.  

  Co-financing  and  joint  investments  appear  to  be  particularly  complex  in  the  area  of 
support to the development of capital markets due to the risk of crowding out private 
investors.  The  solution  is  to  provide  risk-absorbing  products  in  order  to  foster  the 
mobilisation of liquidity that is not willing to take certain types of risks. The balance 

16 

 
 
 
in  absorbing  risk  to  attract  others  and  at  the  same  time  not  to  deprive  them  from 
assuming  risk  is  sought,  every  time,  along  with  continuous  interaction  with  market 
players.  The  very  purpose  of  such  instruments  (e.g.  subordinated  debt  for  credit 
enhancement,  the  purchase  of  corporate  bonds,  the  purchase  of  equity  stakes,  the 
provision of risk-sharing instruments or guarantees) is to provide just enough support 
to  enable the  clients to access the capital markets and to  raise  additional funding. In 
such  cases,  the  joint  participation  of  two  IFIs  in  the  same  operation  may  create 
unnecessary  distortions  in  the  financial  structure  of  these  operations  and  lead  to  too 
large  a  contribution  of  public  grant  resources  and  possibly  to  undesirable  capital 
inefficiencies. 

5.4.2 COMPLEMENTARITIES AND COMPARATIVE ADVANTAGES 

The analysis has  identified  that the two institutions have  a high  degree of complementarity, 
but also fundamental differences resulting in a number of comparative advantages, which are 
described in the following paragraphs. 

Mandates, shareholders, business models  

As  mentioned  in  the  Report,  EIB  Group  and  EBRD  have  different  shareholders,  distinct 
mandates  and  particular  business  models.  These  differences  bring  the  two  IFIs  their  own 
specific comparative advantages enabling them to maximize the effectiveness and efficiency 
of their respective public financing, thus also benefitting the economies in the Region.  

The EIB is owned by and representing the interests of the EU Member States with a mandate 
is to support the achievement of EU policy objectives and, although not a shareholder, with 
the EC represented in the EIB Board. The EBRD's shareholding is wider – see table 3 - and its 
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 region. The following table gives an 
overview of the EBRD's structure and eligible countries of operation. 

Table 3: EBRD’s structure 

Examples 
For  instance,  China  has  recently  become  a 
shareholder  in  the  EBRD.  The  Governors  of 
EBRD voted on a resolution that China shall 
become EBRD's shareholder. 

Background  
Article 3 of the EBRD Basic Documents foresees 
joining 
the  possibility  of  new  shareholders 
EBRD.  
1. Membership in the EBRD shall be open: 
to  (1)  European  countries  and  (2)  non-European 
countries which are members of the International 
Monetary  Fund;  and  to  the  European  Economic 
Community and the European Investment Bank. 
2. Countries eligible for membership as specified 
above  may  be  admitted,  under  the  terms  and 
conditions  determined  by 
to 
membership  in  the  EBRD  upon  the  affirmative 
vote of not less than two-thirds of the Governors, 
representing  not  less  than  three-fourths  of  the 
total voting power of the members. 

the  EBRD, 

According  to  the  Article  1  of  the  EBRD  Basic 
Documents the "purpose of the  EBRD shall be to 
foster the transition towards open market-oriented 
economies 
and 
the  Central  and 
entrepreneurial 
Eastern  European  countries  committed  to  and 
applying the  principles  of  multiparty  democracy, 
pluralism and market economics". 

to  promote  private 

initiative 

and 

in 

For example, the EBRD Board recently voted 
in  favour  of  Egypt  becoming  an  eligible 
country  of  operation..  Now  the  EBRD  can 
carry  out  its  purpose  and  functions  in  Egypt 
as set out in Article 1 and 2 of the Agreement, 
namely  "to  foster  transition  towards  open 
market-oriented  economies  and  to  promote 
private and entrepreneurial initiative". 

Shareholders 

Eligible of 
countries of 
operation 

17 

 
 
 
Graduation 

and 

Graduation  reflects  the  successful  transition  to  a 
well-functioning 
sustainable  market 
economy.  The  main  instrument  for  decision 
making  on  graduation  is  the  respective  country 
strategies,  jointly  agreed  by  the  EBRD  and 
country authorities. 

For  instance,  the  Czech  Republic  expressed, 
"the  desire  that  EBRD  operations  in  the 
Czech  Republic  be  considered 
to  have 
'graduated'  in  2007.    As  a  consequence,  the 
EBRD  have  had  no  longer  considered  or 
approved new operations in the country since 
2008. 

Geographical and sectoral focus 

The detailed information regarding the complementarities/comparative advantages of the two 
IFIs in terms of their geographical and sectorial focus is provided in section 3.1 of this SWD. 

Public/private nature of beneficiaries 

In  terms  of  breakdown  by  final  beneficiaries,  the  analysis  showed  that  both  ERBD  and  the 
EIB Group mainly finance private entities. Specifically, 78% of EBRD's commitments (EUR 
40.5bn)  are  dedicated  to  private  beneficiaries  and  22%  of  its  commitments  are  focused  on 
(EUR  11.7)  public  beneficiaries.  The  EIB  Group,  62%  commitments  (EUR  57.8bn)  are 
concentrated  on  private  beneficiaries  while  38%  of  its  commitments  (EUR  35.5bn)  are 
focused on public beneficiaries.  

Financial products provided 

Even though the EBRD and EIB offer similar financial products, they target different risks in 
line with their own strengths and comparative advantages, thereby providing complementary 
products.  

For  example,  in  the  equity  transactions,  EIB  makes  selective  investments  in  equity  funds 
whose  investment  strategy  addresses  EU  priority  objectives,  and  it  has  longstanding 
experience in supporting sustainable urban development through equity investment. EIF, as a 
specialist  provider  of  risk  finance,  is  the  main  provider  of  equity  products  and  it  takes 
minority  stakes  in  a  wide  range  of  equity  funds.  By  contrast,  EBRD  directly  invests  in 
corporates,  SMEs  and  commercial  banks.  It  also  provides  equity  indirectly  by  investing  in 
private equity funds, as well as donor supported equity funds.  

In  terms  of  debt  transactions,  the  EIB  mainly  uses  standard  project  loans  but  also  offers 
subordinated debt and mezzanine financing for projects addressing EU priority objectives. It 
also finances using capital markets instruments (covered bonds and asset backed securities as 
a  means  to  provide  finance  for  eligible  projects)  and  a  wider  range  of  non-loan  financing 
products. EBRD provides tailor-made debt products for both public and private sector clients, 
including  subordinated  and  mezzanine  structures  for  SMEs,  recapitalization  of  commercial 
banks  and  corporate  acquisitions  –  including  in  local  currency.  This  requires  a  much  more 
hands-on  approach  and,  as  such,  a  close  cooperation  between  the  EBRD  and  its  clients. 
Besides, EBRD  mobilises other sources  of financing to the transactions it supports, through 
loan syndications also known as A/B loans. 

The guarantees and risk-sharing instruments are provided by the EIB Group mainly through 
the EIF in the form of guarantee products on junior, mezzanine and senior tranches of SME 
and mid-caps loan portfolios of a wide range of financial intermediaries. A significant share 

18 

 
 
 
 
  
 
of  these  guarantee  products  are  deployed  by  the  EIF  under  EU  programmes  (COSME7, 
Horizon 20208), as well as with EU Member States. The EBRD’s guarantee activities mainly 
consist of two types of products: the Trade Finance Programme (TFP) guarantees, which is by 
far  the  largest  proportion  of  EBRD’s  guarantee  activity  and  the  funded  and  unfunded  risk-
sharing products.  

Looking also at the comparative advantages of non-financial products, the EBRD has a strong 
business and legal advisory component in its programmes, while the EIB often contributes its 
technical know-how to the projects it finances.  

6. CONCLUSIONS  

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 (as described in sections 
5.2 and 5.3).   

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 (as 
described in section 3 of the Report and also in section 5.4.2). 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 (as described in section 5.4.1).  

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) (as described in section 5.4.1).   

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.  

7. RECOMMENDATIONS 

As mentioned in the Report, the EC makes the following recommendations in order to further 
enhance the effectiveness of the IFIs' interventions. 

7 COSME is the EU programme for the Competitiveness of Enterprises and Small and Medium-sized 
Enterprises.  
8 Horizon 2020 is the EU's Research and Innovation programme.  

19 

 
 
 
 
                                                            
Recommendation 1  

Although  there  is  already  an  existing  and  close  high-level  inter-institutional  dialogue  in  the 
framework of EU  financial instruments  9(as described in  section  4),  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)10),  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 instruments11 where appropriate.  

During the preparation of the Report, several case studies have been analysed. Some of those 
case studies have  demonstrated that 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 

As  described  in  section  5.4.1,  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 

9  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. 
10  Regulation  (EU)  No  1303/2013  of  the  European  Parliament  and  of  the  Council  of  17  December  2013  (the 
Common Provisions Regulation - CPR). 
11 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. 

20 

 
 
                                                            
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  assessments  and  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  (as  described  in  section  3  of  the  Report).  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 (as described in section 5.4.1). 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)  Regulation12.  The  EBRD’s  expertise  and  past  knowledge  in 

12 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.  

21 

 
 
                                                            
 
identifying viable projects, developing and bundling projects and attracting potential investors 
would be valuable for setting up Investment Platforms involving the EU-11 Region.   

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  Funds13  (SWFs)  in  co-financing  projects  in 
infrastructure  in  their  common  countries  of  operation.  As  the  case  study  analysis  showed, 
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 

EBRD  and  EIB  Group’s  mandates  is  to  finance  SMEs  and  infrastructure  projects,  help  to 
attract  private  sector  investments  and  develop  an  open,  stable  financial  system  facilitating 
access to finance for the private sector. Against this backdrop, 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. 

13 Subject to compliance with the state aid rules.  

*** 

22 

 
 
                                                            
AFD: Agence Française de Développement 

GLOSSARY 

BGK: Bank Gospodarstwa Krajowego, the Polish National Promotional Bank 

BSTDB: Black Sea Trade and Development Bank 

CEB: Council of Europe Development Bank 

Central Asia: Kazakhstan,  Kyrgyz  Republic,  Mongolia,  Tajikistan,  Turkmenistan, 
Uzbekistan as defined for this assignment.  

DCI: Development Cooperation Instrument 

Eastern Europe and Caucasus: Armenia, Azerbaĳan, Belarus, Georgia, Moldova, Ukraine 
as defined for this assignment. 

EBRD: European Bank for Reconstruction and Development  

EBRD's additionality: in terms of whether the bank provides financing that could not be 
mobilised  on  the  same  terms  by  markets  and/or  whether  the  Bank  can  influence  the 
design and functioning of a project to secure transition impact.  

EC: Commission 

EEAS: European External Action Service 

EFSI: European Fund for Strategic Investments  

EIB Group: The European Investment Bank and the European Investment Fund 

EIB: European Investment Bank  

EIB's  additionality: is ensured through EIB's value  added  which is  based on the three 
pillar methodology described in the EIB's business model in the Report. 

EIF: European Investment Fund 

ELM: External Lending Mandate  

ENPI: European Neighbourhood and Partnership Instrument  

ESI Funds: European Structural and Investment Funds 

EU: European Union 

EU-11:  Post  2003  accession  countries,  i.e.  Bulgaria,  Croatia,  Cyprus,  Estonia,  Hungary, 
Latvia,  Lithuania,  Poland,  Slovak  Republic,  Slovenia  and  Romania.  Malta  is  not  included 
since it is not an EBRD recipient country. The Czech Republic is not included as it graduated 
from the EBRD investment activities in 2008, although it was originally a recipient country.   

FEMIP: Facility for Euro-Mediterranean Investment and Partnership 

IBRD: International Bank for Reconstruction and Development  

ICT: Information and communications technology  

23 

 
 
IDA: International Development Association  

IFC: International Finance Corporation 

IFCA: Investment Facility for Central Asia  

IFIs: International Financial Institutions  

IPA: Instrument for Pre-Accession Assistance  

ISPA/EAR:  Instrument  for  Structural  Policies  for  Pre-Accession/  European  Agency  for 
Reconstruction 

JASPERS: Joint Assistance to Support Projects in European Regions 

JESSICA: Joint European Support for Sustainable Investment in City Areas 

KfW:  Kreditanstalt  für  Wiederaufbau,  for  this  assignment  specifically  its  development 
branch, KfW Entwicklungsbank 

MoU: Memorandum of Understanding 

NIF: Neighbourhood Investment Facility 

PWC: PricewaterhouseCoopers 

Region: EU countries where EBRD is active and the European Neighbourhood 

Report:  The  report  assessing  the  effectiveness  of  the  existing  system  of  European  public 
financing institutions in promoting investment in Europe and its Neighbourhood. 

RSFF: Risk-Sharing Finance Facility 

SMEs: Small and Medium-sized Enterprises 

South  Eastern  Europe:  Albania,  Bosnia  and  Herzegovina,  FYR  Macedonia,  Kosovo, 
Montenegro, Serbia as defined for this assignment. 

Southern and Eastern Mediterranean: Egypt, Jordan, Morocco, Tunisia as defined for this 
assignment.  As  far  as  the  EBRD  is  concerned,  its  operations  in  Egypt  are  carried  out  using 
Special  Fund  resources  as  the  country  has  not  yet  received  the  status  of  Full  Country  of 
Operations.  For  the  purposes  of  this  assignment,  Egypt  is  included  as  if  it  were  a  Full 
Recipient Country.  

SWD: Staff Working Document  

TEN-E: Trans-European energy networks 

TEN-T: Trans-European transport network  

TFP: Trade Finance Programme 

WBIF: Western Balkans Investment Facility 

24