The variety and evolving nature of the European Investment Bank's operations in promoting the European Union's policies, particularly in the run up to Economic and Monetary Union, was welcomed by EU Finance Ministers in Luxembourg today. The Ministers, as EIB Governors, noted the EIB's strong performance in 1996 with over ECU 23 billion in signed contracts and disbursements of nearly ECU 20.5 billion.
At the EIB's annual meeting, chaired by the Governor for Portugal, António Sousa Franco, the Governors approved the Bank's balance sheet and annual report for its 1996 activities; the balance sheet total came to ECU 135.7 billion. The Governors agreed to set aside an additional ECU 100 million as provisions for general banking and specific loan risk. Outstanding loans at 31 December 1996 came to ECU 127 billion, within the EIB's statutory ceiling of ECU 155 billion.
In his address to the Governors, EIB President and Chairman of the Board of Directors, Sir Brian Unwin pointed out that during the year the Bank had continued to make a significant contribution to EU policies inside and outside the Union.
Looking forward, Sir Brian said: "Many main-line tasks of the Bank will continue, not least in such areas as regional development. But the future holds more, and I believe the EIB now has the opportunity, to make a special contribution to some of the most radical and far reaching changes in the history of the European Union, in particular EMU and enlargement of the Union".
He pointed out that EMU will see the creation of a huge integrated financial and banking market, the biggest government bond market in the world, increased competition, innovation and restructuring in the banking sector, and the progressive development of the capital market itself as a primary source of wholesale funds. As a top-rank borrower, the EIB would be favourably placed to raise funds to finance productive investment. Of greater relevance, however, will be the volume and pattern of EIB lending under EMU, particularly in assisted areas, where persistent regional differences could become an increasingly important policy issue, and to help improve infrastructure, industry and environmental standards of countries in Central and Eastern Europe applying to join the Union.
Nearly 90% of its 1996 lending was within the EU and represented a significant contribution to maintaining the volume and quality of investment at a low point in the economic cycle. In accordance with the Bank's primary goal, over two-thirds was directed at projects in assisted areas, in particular in the least-favoured regions (Objective 1). Lending in the new member states of Austria, Finland and Sweden, in the second full year of activity, doubled to nearly ECU 1.6 billion.
He stressed the high priority the Bank was continuing to give the financing of the Trans-European Networks. All of the 24 priority TENs projects adopted by the Essen European Council had been assessed, and loans approved for 16. During 1996, ECU 6.5 billion went for TENs projects, bringing loan commitments since 1993 to over ECU 31 billion for investment amounting to more than ECU 115 billion. An increasing number of these TENs projects involved private-public sector partnerships in which the EIB was developing special expertise.
On capital markets, the EIB raised ECU 18.6 billion in 22 currencies, mainly those of the EU, but including for the first time Czech Crown, South African Rand, and Hong Kong and New Zealand Dollars. So far this year, the EIB has already borrowed over ECU 11 billion in 13 currencies, and is providing positive support for the Euro. In January 1997, the Bank issued its first Euro bond and launched a series of benchmark "Euro-tributary bonds" in Dutch Guilder, Deutschmark French Franc and Escudo. The fungability of these issues with the Euro will strengthen the market's liquidity from 1999 onwards and enable the Bank to make early on its own benchmarks and yield curve for the Euro.
EIB lending outside the Union, in support of the EU's external co-operation and development policies, amounted to ECU 2.3 billion. This included a record ECU 1.1 billion in Central and Eastern Europe. Under new mandate arrangements approved this year, the EIB will be lending ECU 7.1 billion over the next three years, including ECU 3.5 billion in Central and Eastern Europe and ECU 2.3 billion in the Mediterranean countries. In the Mediterranean the EIB's focus is on promoting the Euro-Mediterranean partnership and meeting the challenges of economic liberalisation that will pave the way for a customs union with the EU.
Under enlargement, Sir Brian underlined that the successful integration of countries in Central and Eastern Europe into the Union will create a framework for economic and social progress throughout the European continent and preserve and strengthen peace through the common pooling of resources. To help bring this about, there will be an even greater need for continuing support from the EIB as a financial intermediary in an enlarged Union. Sir Brian confirmed that the Bank will bring forward later this year proposals for a substantial "pre-accession lending facility" for countries in Central and Eastern Europe and elsewhere negotiating for Union Membership.
The President announced that he had launched a medium-term strategy review with the Board of Directors to determine the EIB's priorities for the crucial period of EMU and enlargement. This review would also cover proposals for the next capital increase which would be necessary by the end of 1998. Sir Brian said that the financial strength of the EIB was such that he saw no reason why the Bank should not fund the paid in part of the next capital increase from its own resources. The Governors approved a proposal that the Bank should now fund outstanding payments amounting to ECU 215 million of the 1990 capital increase.
The EIB, the European Union's financing institution, was set up in 1958 to provide loan finance for capital investment furthering the European Union's balanced development. Owned by the Member States, the EIB raises its funds on capital markets where its bond issues have consistently received an excellent credit rating (AAA). The President of the EIB, Sir Brian Unwin, assumed office in 1993 and is the first British President of the institution.