Professional Documents
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EIB does not manage private customers’ accounts or take deposits. EIB
operates like a development bank, raising its resources on the financial and
capital markets, mainly through bond issues or other specialized capital
market operations. EIB makes long-term loans for investment projects.
EIB’s clients are public and private sector bodies and enterprises. As a rule,
the Bank normally only lends up to half of the capital required for a project.
The Bank usually finances larger scale projects directly. It supports small
investments, e.g. between EUR 40 000 to EUR 25 million, and the activities
of small and medium-size enterprises indirectly through its global loans. A
global Loan is a structure under which a domestic partner bank receives a
credit line together with a mandate to apply the credits to EIB eligible
projects.
Broadly, a project must further a European Union policy objective, assist the
preparation of candidate countries for EU membership or contribute to the
EU’s external partnership and development assistance policies.
Within the EU, projects must contribute to: development in the assisted
regions, transport and telecommunications improvements; help secure
energy supplies, protect and improve the natural and urban environment;
health and education schemes, the international competitiveness and
integration of European industry; the development of the information
society, research and development and innovation; and further the activities
of small and medium sized enterprises. The EIB Group also promotes
European venture capital finance through the European Investment Fund.
Currently, about 85% of the EIB lending goes to projects located within the
European Union. Outside the EU, the main focus of the Bank lending is the
accession countries and the partner countries in the Mediterranean region
and the Balkan, in the context of the post-war reconstruction and
development. It also operates in Africa and South Africa, the Caribbean and
the Pacific regions and the Latin America and Asia.
Through the usual limit of 50% of the total gross qualifying cost of an EIB
facility, EIB financing has a catalytic effect, mobilizing the participation of
other banking and financial partners in the project.
9
EIB Group, Annual Report 2000
Generally, EIB supports:
- investment by thousands of small and medium sized enterprises each year-
important for job creation;
- construction and upgrading of transport infrastructure (rail, air, road
connections and bridges);
- energy-production, transfer and distribution (power gas heat etc), as well
as schemes for more efficient energy use and alternative energy supplies
(wind power, etc);
- telecommunications infrastructure;
- natural and urban environment schemes (water, waste, urban transport);
- investment in human capital (schools, universities, laboratories, research
centers, hospitals etc);
- industrial projects in manufacturing (motor vehicles, pharmaceuticals,
aviation equipment, chemicals etc.).
The new kind of relationship between the EIB and the EIF encourages a
productive sharing of expertise between the Bank and the Fund in support of
finance for SME;
Inaugurated in 1991, less than two years after the fall of Berlin Wall, the
EBRD was created to support the development of market economies in the
region following the widespread collapse of communism regimes. Based in
London, EBRD is an international institution with 62 shareholders,
comprising 60 nation states, the EU and the EIB. The mandate of the bank is
to foster transition towards open market economies and to promote private
and entrepreneurial initiative in all the 27 countries of operation. From an
initial EUR 10 billion, EBRD’s capital base was doubled in 1997 to Eur 20
billion, allowing it to continue to meet the growing demand for its services
in Central and Eastern Europe.
The decision bodies
All the powers of the EBRD are vested in the Board of Governors,
representing the bank’s 62 shareholders. With the exception of certain
reserved powers, the Board of Governors delegated the exercise of its
powers to the Board of Directors, while retaining overall authority.
In fact, there are basically three principles that govern EBRD’s activity.
Their importance has been demonstrated by its own experience through ten
years of transition. The first is sound-banking. Sound market-oriented
development cannot be promoted by investments that are commercially
unsound. Working in collaboration with donor governments, the Bank also
uses technical assistance to promote the development of sound business
practice and skills.
10
EBRD, Annual Report 2000
in the region from its own sources EBRD has successfully attracted an
additional two from external sources. Co-financing with official partners in
2001 amounted to Eur 844 million for 36 projects. International financial
institutions provided the largest share, totaling Euro 489 million (57.9%) for
18 projects. The European Commission provided Eur 193 million (22.9%)
for seven projects.
In 2001, the Bank produces its greatest volume of new business ever-Euro
3.6 billion-as well as achieving its highest net income and doubling the leve l
of annual disbursements. Once again, the Bank was the biggest single
investor in the region, not only using the traditional tools of loan and equity
investments but also introducing products adapted to local needs, such as
trade facilitation products, leasing and local currency lending. The EBRD
also initiated new programs to funnel money to small business.
The Black Sea Trade and Development bank (BSTDB) was established by
the eleven member states11 of the Black Sea Economic Cooperation12 in
1998 as a regional multilateral development financial institution. The Bank
is headquartered in Thessaloniki, Greece and commences operations on June
1st , 1999.
The bank is managed by the Board of Governors, the Board of Directors, the
President, two Vice-Presidents and the Secretary General. Each Member
State is represented on the Board of Governors.
11
These are Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania,
Russian Federation, Turkey, and Ukraine.
12
Black Sea Economic Cooperation was founded in June 1992 with the status of an
international regional economic organization.
construction of new productive capacities or upgrading and modernization
of existing facilities. An eligible project may also involve the restructuring
of an enterprise or privatization.
Financial instruments
Loans-the Bank provides a variety of loan types and tailors each loan to
meet an individual operation’s requirements. Acting as a financial
intermediary on the basis of sound banking principles, its contribution is
normally up to 35% of the total project cost. Loan maturity and the
possibility of a grace period depend on the type of project involved and its
useful life. The overall loan maturity generally ranges between 5 and 10
years depending on the individual operation’s requirements. The availability
term normally does not exceed two years, although it may be extended to
three years for large capital intensive projects.
Trade finance- the Bank’s Trade Facilitation Program is divided into two
categories: Short-Term Products (such as Guarantee Program and Pre-
Export Financing Program) and Medium- Long Term Products (such as
Single Buyer Credits, Multiple Buyer Credits, Single/Multiple Supplier
Refinancing).
The are other three major regional development banks in the world: the
African Development Bank, the Asian Development Bank, and the Inter-
American Development Bank. Their function is to lend money in less
developed countries to built infrastructure, support agriculture and industry
and create jobs. The sources of their funds are several. All get contributions
from their member-countries, all get money from developed countries that
are permitted to be members even though they are not located in the
geographical areas. They are also raising money in the international capital
markets.
Summary
§ The setting up
I. EIB Group=EIB (1958)+ EIF (2000)
Shareholders=from 6 to 15 EU members
§ Objectives
I. EIB - to support EU cohesion policy (15 EU member states)
- to support EU enlargement policy (12 accession countries)
- to support EU external policy: development assistance policy
(partner countries from Africa, Asia, Latin America, etc.)
§ Operations
I. EIB - telecommunications, transport, energy, SME
- small investments up to 25 mil Euro
- usually larger scale projects in public and private sector
- facilities- maturity 4-20 years, 50% of the cost
11. Who are the members of the Board of Governors of the EBRD?
14. What types of facilities are offered to its customers by the BSTDB?
References
3. Beth &Robert Yearbrough, The word econo my: trade and finance,
Dryden Press, 1996