In 1996, the European Investment Bank strongly supported the European Union's preparation for Economic and Monetary Union, in particular by directing a large share of its financing to regional development and to trans-European infrastructure networks (TENs). Providing ECU 23.2 billion in loans, and raising ECU 18.6 billion on capital markets (of which ECU 17.6 billion was signed), the EIB reaffirmed its position as the world's largest multilateral lender and borrower. Lending in the EU amounted to ECU 20.9 billion, up 13% on 1995, and financing outside the EU totalled ECU 2.3 billion.
EIB President and Chairman of the Board, Sir Brian Unwin said: "These results once again demonstrate the EIB's strong practical commitment to furthering European economic integration, laying the basis for long term growth and employment. By doing so it helps create the conditions for a successful Economic and Monetary Union. Our 1996 success also reflects enhanced cooperation with the banking sector, both in lending and borrowing activities, and our efforts to transform the funds we raise on capital markets throughout the world into loans promoting capital investment furthering EU policies. The projects we have supported - especially in regional development areas and for developing the trans-European infrastructure networks - are a major contribution to European integration in the run up to EMU. Outside the European Union we have continued to support the Communities' external cooperation policies by lending in more than fifty countries. We are now ready to give particular support to the candidate countries in Central and Eastern Europe and to the partner countries in the Mediterranean".
Main lending highlights of the year:
- 70% of EIB financing in the EU went to projects in assisted areas, the Bank's prime mission;
- loans for TENs totalled ECU 6.3 billion, of which nearly ECU 2 billion for the high priority transport and energy projects;
- continuing expansion of lending for the improvement of living conditions in urban areas and the environment;
- increased financing of energy investment, in particular of pan-European natural gas lines;
- more than doubling of lending to ECU 1.6 billion in the EU's new Member States, Austria, Finland, and Sweden;
- lending outside the EU: a temporary tapering off of overall financing with expiry of mandates - a higher level of lending in Central and Eastern Europe; lower totals in the Mediterranean region, the African, Caribbean and Pacific (ACP) countries, South Africa, and Asia and Latin America;
- ECU 20.3 billion in loan disbursements; a substantial increase (+22%) and a solid financial basis for the years to come, with a stock of ECU 30 billion approvals (of which 27.3 billion for projects in the EU) and outstanding commitments, including undisbursed loans, standing at ECU 126.7 billion on 31 December 1996.
Partnership with the banking sector:
- enhanced cooperation with the banking sector, both in direct and indirect financing of large and small scale projects, reinforcing the EU's principle of subsidiarity. In 1996, commercial banks were an intermediary or guarantor for 50% of EIB loans; in France, Germany, Italy, and Spain some 90% of loans to the private sector were arranged with both private and public sector banks;
- special emphasis on private sector investment, including support for public-private partnerships and non-recourse funding for infrastructure, in particular TENs.
Capital market borrowing:
- borrowing, up 40% on 1995; in 22 currencies of which over 90% from EU countries;
- first formal commitment, in March 1996, to convert ECU issues into Euro on a 1:1 basis;
- first issues in Czech crown, South African rand, Hong Kong dollar, and New Zealand dollar;
- launch of "Bonos Europeos" peseta issues for the Spanish retail market, a retail-targeted
- dual-currency issue in the domestic Japanese "Samurai" market, and an inaugural US dollar Global Bond.
Lending within the European Union (1)
Regional development: half of the ECU 13.8 billion for loans in the EU's less-favoured regions went to infrastructure, energy, environmental and industrial projects in areas facing severe structural development problems, the Objective 1 regions, including over ECU 1.6 billion in the eastern Länder of Germany. In the four EU countries with the lowest per capita income, and eligible for the Cohesion Fund, a total of ECU 4.6 billion EIB loans contributed to the creation of 10% of new capital investment in Greece, 9% in Spain, 5% in Ireland, and 16% in Portugal. The average for the EU was 5%. The Bank completed its interest rate subsidy scheme for SMEs under the Peace Initiative for Northern Ireland and the six border counties of the Republic of Ireland, advancing ECU 203 million for 350 new SME ventures, expected to create over 7 500 jobs. To achieve an optimum combination of EIB loans and EU grant aid, the EIB worked in close co-operation with the European Commission, which manages the Structural Funds and Cohesion Fund.
Communications infrastructure and TENs: ECU 6.5 billion in loans went to transport and telecommunications infrastructure and ECU 4 billion supported energy production and transfer infrastructure. A special emphasis continued to be given to transport and energy schemes with a European dimension, in particular to the high priority transport and energy TENs, identified by the Essen European Council (December 1994), and investment extending these networks into neighbouring countries in Central and Eastern Europe and the Mediterranean. ECU 1.2 billion went to high priority transport TENs, including the Patras-Athens-Thessaloniki and Corinth-Tripoli motorways in Greece, the Brenner Axis (Verona-München), the Øresund link between Denmark and Sweden, the "Nordic Triangle" in Norway, Sweden, and Finland, as well as high-speed rail links. Some ECU 700 million were advanced for high priority energy TENs, including pipelines bringing Russian natural gas to Greece and Germany, and from Algeria to Italy and Portugal, as well as the gas Interconnector between the UK and Belgium. Since 1993, the EIB has supported high priority TENs investment costing ECU 104.6 billion with ECU 30.7 billion in loan commitments, and has ECU 3 billion in its pipeline of loan approvals for TENs. The Bank has either financed or is appraising all 14 transport and 10 energy "Essen" schemes. A special TENs Window has been set up to tailor financing conditions for the needs of these large infrastructure schemes of which many have a high private sector involvement. A number of EIB financed projects are receiving guarantees from the European Investment Fund (2).
Environment and quality of life: ECU 5.9 billion for environmental protection projects and schemes improving the quality of life focused on water conservation and management, air pollution and the urban environment. Loans for improving the quality of urban conditions, affecting two out of every three European citizens, included a wide variety of public transport schemes, various public infrastructure projects, and major urban renewal programmes, in particular in Rome, Venice, and eleven towns throughout Portugal. Reflecting its deep involvement in environmental protection, the EIB issued an Environmental Policy Statement, underscoring its response to the Treaty on European Union's requirements for greater public transparency.
Industrial objectives: out of a total ECU 3.8 billion for industry, ECU 1.2 billion went as individual loans for investment to promote European competitiveness and ECU 2.6 billion supported SME projects. Some 12 000 SMEs benefited from EIB funds channelled through global loans arranged with over 130 national and regional banks.
Breakdown according to EU policy objectives (3)
||Global loan allocations
Environment and other infrastructure
Industry, agriculture, services
|European communications infrastructure
Roads and motorways
Air transport and shipping
Posts and telecommunications
|Environment and quality of life
Water conservation and management
Waste management and other
Measures to combat atmospheric pollution
Rational use and management of energy
International competitiveness and European integration of large firms
Investment by small and medium-sized enterprises
Lending outside the European Union
EIB loans outside the EU totalled ECU 2.3 billion, virtually completing commitments under the expiring lending mandates for Central and Eastern Europe (CEEC), the Mediterranean region, South Africa, and Asia and Latin America (ALA). The EIB is now preparing for renewed mandates from the Council of Ministers in these areas, and under the Lomé IV Second Financial Protocol, and expects to devote particular priority to the applicant countries in Central and Eastern Europe and the partner countries in the Mediterranean region.
Central and Eastern Europe: ECU 1 116 million in loans, an all time EIB annual high, of which ECU 688 million went to transport schemes along the trans-European road and rail corridors defined by the Pan-European Transport Conference (Crete, March 1994), including the Warsaw-Ostrava-Vienna rail corridor, the Ljubljana-Celje and Budapest-Ukraine road corridors, and trans-European natural gas lines. Focus was also on projects furthering basic economic infrastructure, such as telecommunications networks, environmental protection schemes, energy saving projects, and investment by SMEs, supporting the applicant countries' preparation for EU membership. This year's loans complete the full amount of ECU 3 billion foreseen under the 1994-1996 lending mandate.
Mediterranean region: EIB loans supporting sustainable economic development and trans-regional projects totalled ECU 681 million, of which ECU 562 million was made available outside the separate national financial protocol arrangements, under the EU's "horizontal financial cooperation" aimed at regional and environmental protection schemes. Loans included communications infrastructure schemes, measures to combat pollution, and trans-regional electricity and natural gas links. The Bank, alongside the World Bank and the European Commission, launched the third phase (1996-2000) of the Mediterranean Environmental Technical Assistance Programme (METAP), under which, since its launch in 1990, over 120 technical assistance activities in 21 Mediterranean countries have been funded with over ECU 25 million. The EIB has also helped to set up the new regional METAP Office in Cairo to assist in project preparation. The Bank's commitment to the region's development was highlighted in its EIB Forum 1996 in Madrid on "The Mediterranean: Working in Partnership".
ACP countries: EIB lending under the Lomé IV arrangements totalled ECU 396 million, including some ECU 100 million in risk capital, for investment projects supporting economic development, in particular infrastructure, environmental protection schemes, and industrial and SME ventures.
South Africa: the EIB advanced ECU 56 million to help modernise parts of the country's electricity transmission system.
Asia and Latin America (ALA): ECU 45 million for upgrading road infrastructure in Argentina brought total EIB lending in the ALA countries since 1993 to ECU 652 million.
Being innovative in its extensive access to capital markets world-wide, the EIB launched in 123 operations ECU 18.6 billion (of which ECU 17.6 billion were signed in 1996) in 22 currencies. It transformed these funds to meet the financing needs of new investment being put into place in the run up to EMU. The 1996 total of signed operations, ECU 17.6 billion, compares to ECU 12.4 billion borrowing in 1995, and reaffirms the Bank's position as the world's largest multilateral borrower. As the EU's financing institution, the EIB launched an ECU 500 million bond issue in March that formally committed the Bank to convert the ECU into the Euro on a one to one basis, supporting the Madrid European Council's decision two months earlier on the creation of the Euro as the new single currency for EMU.
Of the 22 currencies (compared to the 17 currencies in 1995), those of the EU (including the ECU) accounted for over 90%. The Bank strengthened its position as a leading borrower in European Union markets through large benchmarks issues. After swaps, the EIB collected ECU 10.2 billion in fixed rate borrowings (58%) - mirroring its role as a large fixed rate lender -, and ECU 7.4 billion in floating rate ones (42%), to tailor its funding for the requirements of its project promoters.
The EIB offered a large range of issuing products to accommodate investors' changing preference, emphasising its role as a financial intermediary. It launched large issues with positioning on the yield curve to complement Government bonds for the main EU and non-EU currencies. The Bank arranged very successful retail-targeted "Bonos Europeos" peseta issues in the Spanish market, and a dual-currency issue in the domestic Japanese ("Samurai") market. Innovative borrowing strategies and techniques included the use of the price discovery system, borrowings linked to stock exchange indexes, and structured borrowing instruments. The EIB continued to make use of currency and interest-rate swaps to adjust the currency and rate structures to disbursement requirements, and to protect itself against long-term interest rate fluctuations.
As the European Union's "house bank" committed to fostering the development of Member States' domestic capital markets, the EIB currently also promotes the development of domestic capital markets within the Union's candidate countries in Central and Eastern Europe. In 1996, it made its first Czech crown issue.
The Bank charted new ground in concluding its first Hong Kong dollar and South African rand Eurobond issues, non-OECD currencies, and it also launched an inaugural US dollar Global Bond.
Breakdown of currencies borrowed (after swaps)
Breakdown of currencies borrowed
Organisation, Management and Public Relations
New 1996 appointments at the EIB included Francis Carpenter, formerly Head of the Credit Risk Department in the Directorates for Lending Operations in the EU, being appointed as Secretary General. He took over from Thomas Oursin who has been nominated Chairman of the Financial Committee of the European Investment Fund. Andreas Verykios is the new Director of the EIB's Representative Office in Brussels replacing Joachim Müller-Borle who has retired.
Ernst&Young has been appointed as the EIB's new External Auditors, taking over on 1 January 1997 from Price Waterhouse. Michael J. Somers (National Treasury Management Agency, Dublin) has replaced Juan Carlos Pérez Lozano (Ministerio de Asuntos exteriores, Madrid) as Chairman of the EIB Audit Committee, approved by the Board of Governors .
In keeping with its policy for greater transparency, the Bank diversified its communications activities, to include new public information instruments such as an information server "EIB on-line" on Internet, and refurbishing its "Cahiers BEI/EIB Papers" series, the first issue which came out in late 1996 addressing the vital topic of EMU. The Bank also published its "Environmental Policy Statement". In October, it held its second "EIB Forum" which discussed "The Mediterranean: Working in Partnership" in Madrid. The next Forum will be in Stockholm in October 1997 and will examine integration in the Nordic/Baltic region. The Bank also launched in October 1996 a new formula for the EIB Prize (biennial) for which articles must be submitted before 1 March 1997.
(1) This section is based on a breakdown by EU policy objective. Projects financed by the EIB may simultaneously serve several policy objectives and, therefore, the figures given here cannot meaningfully be added together.
(2) The European Investment Fund (EIF), a public-private partnership established in June 1994 and owned by the EIB (40%), the European Commission (30%), and the banking sector (30%), issues long-term guarantees for major infrastructure (TENs) financing and SMEs. Since mid-November 1996, it also undertakes equity participations. Signed guarantees since its inception total ECU 1 505 million, 78% going to TENs, including 33% transport, 33% energy, and 12% telecommunications schemes, and 22% to SMEs. On 1 October, Thomas Oursin, former EIB Secretary General, was appointed Chairman of the EIF's Financial Committee, succeeding Georges Ugeux who became Group Executive Vice President, International, at the New York Stock Exchange.
(3) Projects financed by the EIB may contribute to the achievement of one or more EU policy objective. The totals tabulated above serve to highlight these various contributions and cannot meaningfully be added together.