BEI Operational Plan

Corporate Operational Plan 2009-2011
Important notices:
The Corporate Operational Plan 2009-2011 (COP) was discussed and approved by the Board of Directors at its meeting of 16 December 2008. Attention is drawn to the fact that data provided on 2008 activity are estimates which were drawn up before the year-end. This document also contains other forward-looking statements in the form of projections of financial performance. Such estimates and projections may, by their nature, prove to be inaccurate. Data that are confidential and financially sensitive have been deleted from this publication.
24 February 2009
24 February 2009
European Investment Bank
Corporate Operational Plan 2009 - 2011
BOARD OF DIRECTORS CORPORATE OPERATIONAL PLAN 2009-2011
Table of Contents
1. 2. Board of Directors Decisions ............................................................................... 1 Introduction ........................................................................................................ 2 KPI Table: Main Objectives - Key Performance Indicators (KPIs)........................... 10 Table 1: Main Objectives - Other Significant Performance Indicators .................. 11 Implementing the Strategy: Outlook 2009-2011 3. 4. 5. Overview: Implementation of the EIB Groups Strategy ...................................... 13 Budgetary Planning 2009.................................................................................. 24 Staff matters...................................................................................................... 27
Annexes. .. 29 Glossary of Acronyms ................................................................................................ 32
24 February 2009
24 February 2009
1.
Board of Directors Decisions

101 On the basis of the attached report, the Board of Directors: I. approved the Banks COP for the period 2009-2011 (a COP of reinforced contribution, to do more, faster and better) based on the alternative scenario for operational performance targets, including the Administrative Budget for 2009. Following its decision to grant a global borrowing authorisation on an annual basis: (i) (ii) granted a global borrowing authorisation for 2009 of up to EUR 70bn; authorised associated treasury and derivatives activities in accordance with Article 16a of the Rules of Procedure. The above authorisations will be implemented by the Finance Directorate under the supervision and delegation by the Management Committee.
II.
102 The Board of Directors also: III. approved the principle of making relevant additional staff and other resources available during 2009 for new initiatives and managing signed transactions which may be formalised during 2009 on the basis that the Board will have approved these initiatives and will have been informed of the impact on the 2009 budget and cost recovery accordingly. IV. delegated the in-year decisions regarding staff and administrative expense budgets relating to existing partnership agreements to the Management Committee provided that the budgetary framework of these partnerships approved by the Board is complied with. V. took note of the increases in the 2008 budget for revenue and expenditures related to (i) the new Western Balkans Infrastructure Initiative, (ii) the amended 2008 Contribution Agreement for Joint Assistance to Support Projects in European Regions (JASPERS), and (iii) the new 2008 Contribution Agreement for Joint European Support for Sustainable Investment in City Areas (JESSICA) - and as presented under Chapter 4 Table 2 and 408 and 409 103 The Annexes were provided for information to the Board of Directors.
24 February 2009
CORPORATE OPERATIONAL PLAN 2009 2011
2.
Introduction
EIB Group mission
201. As the Bank of the European Union, the EIB Group uses its special expertise and resources to make a difference to the future of Europe and its partners by supporting sound investments which further EU policy goals. This responsibility is reflected in its strategy of taking more risk, in a controlled manner, for more value-added in support of EU policies, endorsed by the Board of Governors in 2005. 202. The implementation of the strategy is at the same time conducted with a view to ensuring the Groups long-term financial self-sustainability and as a flexible response to the present crisis in the banking industry through a consolidation of its priorities and a reinforced contribution of its operations.
Corporate Operational Plan 2009-2011

203. The Corporate Operational Plan (COP) for 2009-2011 builds on initiatives approved in COP 2008-2010 and in the Framework for the COP 2009-2011 paper which gave an overview of the current strategic challenges and associated planned actions and targets plus the outline budgeting and financial planning implications for 2009. The COP 2009-2011 also encompasses decisions taken by the ECOFIN, European Council, Board of Governors and the Board of Directors during 2008. 204. The performance indicators associated with the Banks activities are given within the KPI Table and Table 1 on pages 9 and 10 respectively. 205. The table in Annex 1 gives an overview of the relationships between lending priorities and other relevant key strategic priorities.
Performance results for 2008

206. Overall, the Bank has achieved solid results towards targets set for each of the seven KPIs. Of particular note, in KPI 4, the expected result for signatures involving the use of special financial instruments (SFF, RSFF, LGTT) in EU and Pre-Accession Countries is that the EUR 3,000m target for 2008 will be exceeded following success in signing projects in EU-15, EU-12 and Turkey a clear illustration of the Banks dedication to this key activity considering signatures were EUR 359m and EUR 1,737m in 2006 and 2007 respectively. Attention is also drawn to KPI 6 and the costcoverage expected result of 140% which offers assurance regarding the continuing responsiveness and efficiency of the systems and working practices in place during the on-going period of intense changes and growth. The expected result for KPI 7 Net Surplus reflects the predicted write-down on venture capital investments managed by the EIF on behalf of the Bank under the Risk Capital Mandate. The on-going market turbulence has also increased the Banks credit risk on own activities. No specific value adjustments have yet been identified which could have a further detrimental effect on the 2008 surplus. 207. Expected performance against other significant indicators is illustrated in Table 1. Of particular note, the immediate response to the financial crisis as for instance reflected in the expected overachievement of the revised EUR 7bn (originally EUR 5.7bn1) target for signatures targeting SMEs (indicator 8a) confirms the Banks focus on empowering growth and jobs in EU Member States since the 2007 result was EUR 5,002m. The 2008 targets are also expected to be met for other SME related activities (EIF Knowledge Economy VC (indicator 5), EIF Guarantee signatures (indicator 8b) and JEREMIE mandates and fund agreements (indicator 14)). See also 328 et seq. In addition, the new signatures in Europe with loan grading C and below (indicator 12) are an important indicator of the wider application of the Banks strategy of taking more risk. The associated target will be exceeded in 2008.
The 2008 SME target set in COP 2008-2010 was 14% of total lending in EU Member States - in absolute terms this target was EUR 5.7bn.
24 February 2009
Operating environment as at end 2008

208. The economic situation in the EU is weakening markedly. The protracted financial crisis and more widespread economic downturn resulting from a liquidity squeeze, capital constraints and declining confidence motivates a step change in EIB Group financing activity during at least the next two years. 209. Provided that capital market conditions allow EIBs possibly larger funding programmes the strengthened support of the EIB Group would be based on (i) a fast-track answer to the impact of the financial crisis on the real economy with increased and/or innovative lending to priority and/or particularly vulnerable sectors and regions, (ii) the development of new financial instruments; and (iii) enhanced cooperation with the European Commission and EU long-term finance investors. The Board of Directors has also proposed to the Board of Governors a capital increase to come into force in 2009 (see 234). 210. Therefore, in line with the orientations provided by the Presidency and the European and ECOFIN Councils on the Banks proposed measures (see 218-228), which also respond to the calls of the Board of Directors to further reinforce its contribution via its operations, the Bank presented its operational activity targets and associated budget implications as a flexible response to the present crisis in the banking industry. They represent an increase in signatures of about 31% (EUR 15.5bn) for 2009, 33% (EUR 16.8bn) for 2010 and of about 26% (EUR 13.3bn) for 2011 as compared to the 2008 expected result. This is in line with the increase endorsed by the ECOFIN Council on 2 December 2008 at which an additional lending of at least EUR 15bn per annum was envisaged for 2009 and 2010. 211. The main tables in the COP 2009-2011 reflect the proposed measures which include: (i) additional support for SMEs; (ii) a comprehensive package on energy and climate change including a specific response for the development of a clean transport facility which will include support to the automotive industry. They also reflect a growing concern that certain new Member States may be particularly hard hit by recent events at a time when they continue to strive for closer integration within the EU. The working group set up by the EIB and the Commission with long-term investors proposes a coordinated response with a specific focus on energy programmes and infrastructures. 212. However, in the current market turmoil, the increase in activity levels may induce an increased risk profile of the Banks lending portfolio, depending of course on the credit quality of the new transactions. The Bank will continue to encourage the necessary credit risk mitigating measures in order to maintain the credit standing of the Bank and as such, the surplus targets do not take into account the potential specific value adjustments which may occur. 213. It should be noted that the additional burden on the Banks staff involved by substantially higher activity volumes entails significant operational risks and therefore additional resources will also be required to deliver the increased output targets. 214. Therefore, central to the proposed approach is the way to tackle the current and hopefully temporary market failure arising from the crisis on the financial markets. The main idea put forward in this context is to offer, on a temporary basis (2 to 3 years) additional, enhanced revisable rate loans or guarantees for projects already appraised and approved by the Bank so that they may be implemented even if the amounts provided by market partners is decreasing, as well as for new approvals. Depending on whether the comparative advantage of the Bank is on the funding side or on the capital side, the preference will go to offering either additional lending or guarantees while maintaining safe and prudent banking principles. Either way, the purpose is to substitute or help the banks to overcome their reluctance to offer credit at the moment. Furthermore, the conditions applicable to existing project loans may be reviewed. 215. The Banks total additional financial support and associated measures will allow quick disbursements and contribute to the economy notably by avoiding the failures of existing projects and companies. 216. It must be highlighted that the total revenues and costs associated with the objectives and targets present an optimistic view. With continuing market volatility, the difficult operating environment means that less favourable results cannot be excluded.
24 February 2009
217. In a sustained effort to ensure that the strategic lending and associated objectives of the Bank are realised, a number of organisational changes are therefore being made to foster the development of sectoral and product specific expertise and specialization. An ambitious change management initiative Building our Future, which aims at supporting the necessary cultural and process transformation has also been launched as well as a review of the value-added methodology. Furthermore, in order to improve the allocation of resources to operational (project appraisal, lending, risk management and financing) activities, the EIB reviews its procedures, processes and internal controls on an on-going basis, evaluating the scope for rationalizing and streamlining existing workflows, increasing simplification, and optimizing the division of work between functional units and Directorates across the EIB.
Proposed Measures - focus for enhanced EIB support

218. A number of temporary measures are proposed for 2009 and 2010, during which the need to continue will be kept under constant review. The measures include: SMEs and Mid-Caps 219. The EIB Group is adopting a series of reforms to simplify its SME finance products as well as offer a substantial development of its loans to its banking partners, both in quantitative and qualitative terms (see 328- 330). Lending to SMEs will be increased by 50% up to EUR 15 bn (+EUR 2.5 bn p.a.) in 2008/2009, a new product line will be developed allowing risk sharing with banks and a EUR 1bn mezzanine mandate conferred on the EIF. 220. A similar and complementary approach is being developed for the so-called mid-caps companies i.e. the ones of a size and development stage between SMEs according to the Community definition of less than 250 employees and larger companies. Simplification, modernisation, risk sharing and transparency are the four aspects of the new EIB product line for SMEs that are being taken forward also for mid-caps. This would be for an additional EUR 1 bn p.a. Energy, Climate Change and Infrastructure 221. Together with the EC, EIB will provide additional support to investment specifically in the fields of (i) energy efficiency and the use of renewable energy sources, in particular at the level of cities and municipalities, (ii) more environmentally-friendly use of fossil fuels, including the development of carbon capture and storage (CCS), (iii) TENs and related infrastructure and (iv) clean transportation. 222. To this end, the EC and EIB are developing a specific energy and climate change strategy with the intention to further strengthen their commitment to energy security and climate change mitigation, create new financial instruments to address issues of capital and debt availability and relax lending limits where appropriate. 223. The volume of EU budget resources to be dedicated to this initiative is not yet confirmed but the EC and EIB agreed that the EU budget contribution would need to be meaningful in relation to the additional lending and guarantees from EIB that could go up to EUR 20 bn (+ EUR 6 bn p.a.) over the next two years. 224. The energy and climate change package includes a clean transport facility for the automotive and other transport industries, their original equipment manufacturers and component suppliers. The facility would target significant CO2 reduction through research, development and innovation expenditure as well as tangible fixed assets in related infrastructure and production plants for cars, buses, trucks, ships, trains and aircraft, in line with the Banks energy efficiency and environmental standards. Lending under this specific facility could double the current level and go up to EUR 8 bn over the next two years (i.e. an additional EUR 2 bn p.a.). 225. Also in this framework, the ECOFIN-launched working group of EIB and the European Commission, in consultation with the EU long-term investors, is proposing the establishment of an energy, climate change and infrastructure fund called Marguerite in order to complement the existing lending capacity with a direct equity instrument of European dimension and status without recourse to the national budgets. This will be the subject of a separate joint Commission-EIB note to the ECOFIN.
24 February 2009
Convergence Lending 226. The financial turmoil is likely to have a disproportionate effect on disadvantaged regions and new Member States. Indeed, difficulties in some New Member States (and Candidate Countries) demonstrate the need as well as the demand for EIB to enhance its presence in these countries. Accordingly the Bank will seek to increase its convergence lending by a further EUR 2.5 bn p.a. with a particular focus on EU-12 and the priority sectors identified above. Operations in emerging and developing countries 227. The volume of EIB lending is fixed in the external mandates and any short term increase in funding will imply some frontloading (see 356). In order to do so, the EIB will look for innovative tools and approaches, doing things differently (e.g. by possibly providing global support to important corporate clients across countries) and by doing different things (e.g. by possibly increasing the proportion of equity investments under the ACP Investment Facility or by supporting trade finance). The Bank will work closely with the European Commission as well as with its multilateral and bilateral financing partners in that regard. Key optional approaches 228. The increases proposed could be achieved by (i) increasing the share of EIB financing; (ii) further development of guarantee business; (iii) development of equity investment business; (iv) increased signatures from existing stock of approved loans and/or new operations and (v) through partnerships. Partnerships 229. The growing importance of partnerships with the European Commission, bilateral financial institutions and other IFIs, including the European Bank for Reconstruction and Development (EBRD), The World Bank and the Council of Europe Development Bank (CEB) has given rise to numerous new, joint initiatives, substantially increasing the Banks contribution to the achievement of overall EU policy objectives. The Bank is also reinforcing its non-financing activities, through the recent creation of the European PPP Expertise Centre (EPEC), providing network facilitation and programme/policy support services to public sector involvement in PPP investments, as well as through the consolidation and managed extension of Technical Assistance in FEMIP, ACP and PreAccession Countries. The Bank is convinced that Technical Assistance to improve project preparation and the sharing of risk and resources through partnerships substantially leverage its contribution to the achievement of overall EU policy objectives.
Resources review
230. Current circumstances on the capital markets make it difficult to forecast the conditions under which the borrowing programme of EIB will develop in the short to medium term, a fortiori with an increase nearly 30% of activity. The de facto competitive pressure of States or State guaranteed borrowers is likely to intensify, leading to both supply and price consequences for the EIB which are difficult to estimate at this moment. 231. Each of the approaches identified to increase lending and related activities would have important resource implications for the operational lending services of the Bank in the mid-term once the existing stock of approved loans has been signed. A period of 6-9 months is identified as necessary to recruit and train new staff to rebuild the stock. Additional expertise is required to develop potential guarantee and equity business lines. 232. Organisational and staff issues therefore certainly need to be reviewed by EIB to handle such a product development and volume increase while maintaining the Banks value added / quality orientation. Attracting and retaining staff with the appropriate technical skill will be essential for the successful implementation of the Banks strategy. The financial incentives and general employment conditions offered to recruits and to existing staff are therefore vitally important and need to be appropriately attractive.
24 February 2009
233. The Bank remains committed to further reorganisation and streamlining of processes although a limited additional budget for other administrative expenses is required of 4.2% or EUR 15.4m (compared to 2008). The increase in budget relates to staff costs for recruitment to be able to deliver the alternative scenario and the 4.3% increase for existing staff salaries.
Capital Review
234. The higher level of lending activity foreseen in the COP 2009-2011 is not compatible with the original expectation of arranging the next capital increase in 2010. The Board of Directors has thus proposed to the Board of Governors to decide a capital increase coming into force on 14 April 2009. Subscribed capital would be raised to EUR 232bn (from EUR 164bn) and the increase in the paid in capital would be funded through the conversion of the Bank's additional reserves.
Implementation of agreed change in EIB Statute

235. The implementation of agreed changes in the EIB Statute as annexed to the Lisbon Treaty would provide for important new ways and means for the EIB Group to act in support of economic growth and jobs including the possibility to take direct equity participations. If Member States wish unanimously and if appropriate legal means could be found, the immediate effectiveness of some of these new statutory provisions could allow a more flexible response by the EIB to the current economic situation2.
Performance targets for 2009-2011

236. The Bank will retain the seven KPIs presented in the COP 2008-2010 which will also facilitate the monitoring of the Bank's performance year on year3. Furthermore, since the achievement of the KPI targets is taken into account by the Management Committee in determining the staffs variable remuneration, a stable measurement platform is essential for staff to contribute effectively. 237. The performance targets established for 2009-2011 predicate further strong activity growth following the very rapid rates experienced over the past years, in line with the expectations of the Banks shareholders. In the light of the EIBs difficult operational environment and in particular the implementation of its value added strategy, they again represent a set of challenging goals see KPI Table and Table 1. The lending targets should not be interpreted as ceilings as the Bank will ensure the financing of exceptionally important European projects in priority areas. EIB lending summary and associated funding assumption 238. The above measures related to operations would entail an overall increase in EIB lending as follows: Increase in compared to: signatures 16.3 15.5 2009 EURbn % 33 31 15.5 16.8 2010 EURbn % 30 33 n/a 13.3 2011 EURbn % n/a 26
Target set in COP 2008-2010* for respective years 2008 expected result
* as revised upwards in July 2008 by the Board of Directors.
Assuming that it would be politically not desirable to separate the new EIB Statute from the Lisbon Treaty, and since the ratification process could be long, alternative options may need to be explored. 3 Targets for KPI 5 - NFR are not given as it is not possible to target in the long-term in the current financial markets
24 February 2009
239. The distribution of the overall increase in EIB lending includes the following as minimum additional amounts to the key priority objectives identified. Item 4 SMEs, Mid-Caps and mezzanine Energy, Climate Change and Infrastructure, including Clean Transport Facility Convergence lending (acceleration of projects in convergence regions and cohesion countries) Flexibility reserve TOTAL Additional annual EIB lending proposed (EUR bn) in both 2009 and 2010 +3.5 +6.0 +2.5 +3.0 +15.0
240. In 2008, the Bank has already responded rapidly to the crisis and expects to disburse EUR 47bn (EUR 8bn more than the target of EUR 38bn). Reflecting this front-loading of disbursements whilst also respecting the need to replenish the pipeline of loans and at the same time anticipating the Banks role to step in if other financial institutions withdraw support for quality projects, the disbursement profile targets present significant increases as follows: Increase in compared to: disbursements 11.3 2009 EURbn % 26 10.1 8.2 2010 EURbn % 22 17 n/a 9.7 2011 EURbn % n/a 20
Target set in COP 2008-2010* for respective years
2008 expected result 6.7 14 * as revised upwards in July 2008 by the Board of Directors.
241. The size of the funding programme has been adjusted to the disbursement forecasts, as done in 2007 and 2008 taking into account the objective of total year-end liquidity ratio5 set within the 25%-40% range. Net Surplus assumptions 242. The 2009 target for Net Surplus also anticipates volatility in venture capital valuations as experienced at end 2008 but does not take into account the potential specific value adjustments which may occur. Diversity in EIB staff recruitment 243. A new Diversity indicator is intended to give a transparent view of the gender profile of the newly recruited professional staff at the EIB group and ultimately, to increase the share of females in managerial positions. This is the key indicator for diversity at present, however, it is part of a range of diversity indicators which reflect the approach to the Banks wider diversity objectives being: (i) Balanced representation of women and men, and nationals of New and Old Member States; (ii) Equal opportunities for all staff regardless of their personal characteristics and life situations irrelevant to their performance. There is no room for biased treatment based on characteristics, such as age, cultural, ethnic and racial background, gender, nationality, physical ability, religion, and sexual orientation;6 and (iii) Excellence in talent management: recognizing, understanding, and valuing differences of people, and encouraging all employees to achieve their full potential, and a good work-life balance.
Projects can contribute to more than one policy objective (i.e. have multiple eligibility). The overall additional lending volume shown in Table 1 is thus less than the sum of those by individual objective. 5 The Banks year-end total liquidity ratio is defined as being the net treasury measured to the projected net cashflows for the following year. 6 As stated in the Banks Code of Conduct (2006) and Dignity at Work Policy (2003).
24 February 2009
2009 Budget
244. The Bank prepares its budget with attention to ensure cost coverage, whilst also enabling the Bank: (i) to pass the benefits of its borrowing advantage (the Net Funding Result (NFR)) to its lending customers and (ii) to generate a financial surplus and a substantially stable Return on Own Funds sufficient for the Bank to be financially self-sustainable (as noted above). The following is noted: a. In 2009, the net surplus target for total EIB increases by EUR 19m (and EUR 19m if compared with the expected result for 2008). However, the goal is for the net surplus target to reach EUR 2,146m by 2011 - an average increase of 14% per annum over the three year COP period. The Bank set operational activity targets in order to reach this goal, which represents an average Return on Own Funds of 5%. As is normal, fluctuations in interest rates may have an effect on the generation of profit. It is therefore important to highlight that important deviations from this target are possible. The total intermediation and administrative revenues for 2009 for EIB Corporate are planned to increase by EUR 40.2m or 8% compared to the 2008 budget. In 2009 for Total EIB (EIB Corporate and ABU-Investment Facility), the goal is to contain current expenditure costs to EUR 454.3m, which in nominal terms is just 4.2% - or EUR 18.4m over the 2008 budget (2008: 9.2%7 - EUR 30.6m). The overall Total EIB cost coverage targets have been planned to increase in absolute terms (from EUR 120.4m in 2009 to EUR 185.9m in 2011) and in percentage terms (from 126% in 2009 to 138% in 2011). With the exception of JASPERS (which is now fully operational), all other recent policy-driven partnerships (JESSICA RSFF and LGTT) are in start-up phases. The Commission is committed to contribute significantly to the cost coverage of these initiatives. The total EIB cost coverage target for 2009 is EUR 120.4m.
b. c.
d.
e.
245. The targets for both net surplus and cost coverage are based on operational activity targets and expected levels of forward interest rates as at end-August 2008. 246. The Bank reports cost-coverage in line with Article 19.1 of the Banks Statute whereby: Interest rates on loans to be granted by the Bank and commission on guarantees shall be adjusted to conditions prevailing on the capital market and shall be calculated in such a way that the income there from shall enable the Bank to meet its obligations, to cover its expenses and to build up a reserve fund as provided for in Article 24. The reported cost-coverage therefore excludes the income from financial operations. 247. The Cost:Income ratio for Total EIB - calculated on the basis of (total net operating expenses +admin expenses = operating expenses)/(sum of net interest income + income from financial operations = net banking income) is planned to be 19% in 2009 decreasing to 15% in 2010 and in 2011.
Conclusion
248. The Bank is implementing the Strategy endorsed by the Board of Governors. By strengthening its products and processes within the framework of the existing six priority objectives and subscribing to the EUs efforts to combat climate change, the Bank can and will substantially increase the valueadded of its activities through systematically targeted interventions, including lending, technical assistance, partnerships, the provision of innovative associated products, greater client orientation and local presence. The strategy for taking more risk for more value-added, combined with the nature of some of the new mandates/partnerships that the EIB is entering into, require more complex operations than the traditional Bank activities. The need to maintain quality in the Banks operations necessarily impacts on the quantity of complex operations which can be performed; Bank experience shows that the more complex operations are more resource intensive yet of a smaller average size and with a higher attrition rate compared to traditional operations. They also require significant monitoring.
The 2008 increase included EUR 17m of special expenses for 2008 associated with the start-up and depreciation of the new (East) building.
24 February 2009
249. The evolving nature of the Banks activities is therefore changing the profile of the Banks operational output. At the same time the Bank is working with new economic actors with higher risk profiles promoting economically and financially viable investment projects. Management has evaluated, and will continue to evaluate the associated risks and will continue to ensure the necessary policies, procedures and resources are in place to manage them effectively and efficiently to meet challenging output targets. 250. In summary - the temporary acceleration of the EIB lending programme is planned with a continued emphasis on maintaining the quality of EIB intervention.
24 February 2009
KPI Table: Main Objectives - Key Performance Indicators (KPIs)

EUR M unless otherwise stated; discrepancies in totals due to rounding 2007 target 2007 achieved 2008 target 2008 expected result 2009 target 2010 orientation 2011 orientation Av. % change in target 2007-2010 (2011)
1. Value added (at approval) - % top 2 of 4 gradings, High and Medium - (Total loans) (1) a) Average EU and Pre-Accession Countries - Pillars 1+2+3 b) Average Neighbourhood and Partnership Countries - Pillars 1+2+3 2. Disbursements a) Total EIB b) Total EU + Pre-Accession Countries(2) (3 - i) c) Total Neighbourhood and Partnership Countries(3 - ii) 3. Achievement of 6 Priority lending objectives in EU and Pre-Accession Countries (%)(4) 4. Signatures in Co-operation with Commission and use of special financial instruments in EU and Pre-Accession Countries - Co-financed with the Commission - SFF/RSFF/LGTT (5) 5. Net Funding Result (EUR M) (6) 6. Cost Coverage (%) - EIB Corporate(7) 7. Net surplus before provisions(8)
>90 >90 36,910 34,782 2,128 100
98 96 43,420 41,349 2,071 100
>90 >90 38,960 36,550 2,410 100
>91 >92 47,310 44,900 2,410 100
>93 >92 53,965 51,150 2,815 100
>93 >92 55,500 52,375 3,125 100
>93 >92 57,000 53,505 3,495 100
17 (14)% 17(13)% 16(16)% -
3,500 1,500 275-400 124 1,568
3,361 1,737 406 141 1,684
3,600 3,000 275-400 129 1,698
3,600 3,700 >500 140 1, 698
3,800 3,500 n/a 134 1,717
3,900 3,600 n/a 139 2,025
4,050 3,750 n/a 142 2,146
4(4)% 47(38)% 9(8)%
(1)
(2)
(3)
(4)
(5) (6) (7) (8)
Calculation rule: KPI 1a: Average percentage of Total approved loans in EU & Pre-Accession Countries, with a rating of High or Medium (which are the top 2 grading categories out of the 4 existing) on Value Added Sheets for Pillar 1 (Consistency to EU priority objectives), Pillar 2 (Quality and soundness of projects) and Pillar 3 (EIB Contribution, including Financial benefits from the use of EIB funds) see Table 1, indicator 1. KPI 1b: Average percentage of Total approved operations in Total Neighbourhood and Partnership Countries, with a rating of High or Medium (which are the top 2 grading categories out of the 4 existing) on Value Added Sheets for Pillar 1 (Contribution to Mandate Objectives & Priorities), Pillar 2 (Quality and Soundness of the Project (Financial and Non-financial Sector operations)) and Pillar 3 (EIB contribution) see Table 1, indicator 2. The average % change 2007-2010 for disbursements in EU and Pre-Accession Countries when compared to the 2007 target (EUR 34,782m) is 17%. The financial market turbulence in 2007 led to higher than expected disbursements. The target for 2008 has been retained at the level set in the COP 2008-2010. It is highlighted that the target was a floor target of the minimum levels to be achieved. For 2009 and 2010, the assumption made is that 10% and 20% (respectively) of additional signatures would stem from guarantees. Disbursement figures reflect the regional split defined in the Council decision 16058/06 of 12 December 2006, approved 19 December 2006 on the new mandate: (i) Pre-Accession Countries include Candidate Countries (Turkey, Croatia, Former Yugoslav Republic of Macedonia,FYROM), and Potential Candidate Countries (Albania, Bosnia and Herzegovina, Montenegro, Serbia and Kosovo (under UNSCR 1244). For the purposes of the Banks reporting, the activities in EFTA countries are also included in this line (ii) Neighbourhood and Partnership countries include: Mediterranean countries (excluding Turkey), Eastern Europe, South Caucasus, Russia, ACP/OCT, RSA and ALA. Calculation rule: The 6 priorities are: Convergence, Knowledge Economy, TENs, Environment, SMEs and Energy. They are each considered to have an intrinsic equal value. The objective is to reach the signature targets for each priority, as detailed in Table 1 (indicators 4-9, for EIB activity in EU and Pre-Accession Countries unless a priority -e.g. Convergence relates to activity in a specific geographical area), whilst allowing a limited degree of flexibility amongst each of the objectives. Activities under the SFF, RSFF and LGTT instruments are grouped because of their similar nature and also reflecting that RSFF and LGTT were only recently launched. Given current market turbulences, a long term perspective of NFR targets is not possible see also 371 Cost coverage is quoted at EIB Corporate level. The net surplus before provisions is required to enable the Bank to be financially self-sustainable. The 2008 target has been reviewed due to the revised budget for administrative expenses (see Table 2 and 408-409). The provisional net surplus target increases by an average of 14% per annum over the three year COP 2009-2011 horizon (and 9% over 2008-2010) however, it should be noted that the on-going market turbulence has increased the Banks credit risk though the surplus targets given do not take into account the potential specific value adjustments which may occur.
24 February 2009
10
Table 1: Main Objectives - Other Significant Performance Indicators

EUR M unless otherwise stated; discrepancies in totals due to rounding New or changed indicators (since COP 2008-2010) are shown in blue n/a indicates no target set for calendar year concerned 2008 expected result
2007 target
2007 achieved
2008 target
2009 target
2010 orientation
2011 orientation
Av. % change target 20072010 (2011)
LENDING AND INSTITUTIONAL OBJECTIVES 1. Value added (at approval) in EU and PreAccession Countries- % top 2 of 4 gradings, High and Medium - (Total loans) (1) Pillar 1: Consistency with EU objectives Pillar 2: Quality and Soundness of projects Pillar 3: EIB contribution 2. Value added (at approval) in Neighbourhood and Partnership Countries - % top 2 of 4 gradings, High and Medium - (Total loans) Pillar 1: Contribution to Mandate Objectives & Priorities Pillar 2: Quality and Soundness of the project Pillar 3: EIB contribution 3. Overall lending and other operations: Signatures(2) Total EIB - Total EU + Pre-Accession Countries - Total Neighbourhood and Partnership Countries 4. Signatures targeting Convergence regions in the EU 27 Countries - Total loans(3) 5. Knowledge Economy in EU and PreAccession Countries(3) - Total loans (EIB) - Total signatures -VC (EIF) 6. TENs signatures (incl. Transport and Energy) in Europe and Pre-Accession Countries 7. Signatures targeting Environmental Protection and Improvement in EU and Pre-Accession Countries (EUR M) (4) 8. Signatures targeting SMEs a. Total Signatures in EU-27. directed to SMEs(4) b. Total Signatures - Guarantees (EIF) 9. Signatures supporting Energy Objective Total Bank (all countries)
>95 >90 >85
100 98 96
>95 >92 >85
>95 >92 >88
>95 >92 >90
>95 >92 >90
>98 >94 >88
>95 >90 >85
96 93 98
>95 >90 >85
>98 >90 >88
>98 >90 >88
>98 >90 >88
>98 >90 >88
45,430 42,314 3,116 15,88017,860
47,820 44,357 3,463
48,120 44,710 3,410
50,910 47,500 3,410
66,442 61,400 5,042
67,727 63,600 4,127
64,210 59,454 4,756
16(10)% 17(10)% 11(13)%
18,083
16,400
17,050
22,000
23,000
23,000
12(9)%
7,230 700/800
10,289 521
7,430 600-710
10,700 572
10,500 840
11,000 900
10,725 730
17(12)% 7(-1)%
8,000
9,336
8,200
8,900
10,100
10,600
10,300
11(7)%
10,60012,720
16,361 5,002 1,397 8,672
10,978 7,000
1,600-2,055
13,500 7,000 1,850 10,100
15,420 8,000 2,400 9,500
16,384 8,000 2350 10,250
15,974 7,000 2,300 10,043
14(9)% 21(11)% 16(11)% 43(31)%
4,870
1450-1750
4,500
6,500
FLEXIBILITY RESERVE
CUSTOMER AND PARTNERSHIP OBJECTIVES 10. Cooperation with the Commission - Total Neighbourhood and Partnership Countries 11. Cofinancing with IFIs for EIB financing operations - Pre-Accession Countries (%) - Neighbourhood,Partnership Countries (%) 12. New signatures with loan grading C and below (EUR M) - Total Europe + Pre-Accession Countries 13. JASPERS (5) - % actions completed (based on yearly action plan) - % of applications approved by the Commission(6) 14. JEREMIE - Cumulative mandates - Cumulative total of fund agreements signed 15. JESSICA (7) - No. of studies commissioned - No. of studies completed - Cumulative no. of JESSICA funds supported
3,000
3,000
100
208
100
100
120
140
160
13(15)%
n/a n/a
29 33
n/a 35
n/a 35
40
40
40
6,600
6,605
7,700
8,700
8,700
8,900
9,100
12(9)%
n/a n/a 5-8 n/a
n/a n/a 1 100
n/a n/a 6 800
n/a n/a 7 700
70% 90% 13 1,050
70% 90% 15 1,150
70% 90% 15 1,150
n/a n/a n/a
18-20 n/a 12-15 n/a 3 n/a FINANCIAL OBJECTIVES 54,725 96.9 55,000 >90.0
18-20 12-15 3
15-20 10-15 8-10
TBD TBD 16-20 65,000/ 70,000 >90.0
TBD TBD 19-21 65,000/ 70,000 >90.0
16. Annual borrowings projections (8) 17. Portfolio quality - % Loan Book with A-C loan gradings
55,000 >90.0
60,000 >95.0
70,000 >90.0
24 February 2009
11
EUR M unless otherwise stated; discrepancies in totals due to rounding New or changed indicators (since COP 2008-2010) are shown in blue n/a indicates no target set for calendar year concerned
2007 target
2007 achieved
2008 target
2008 expected result
2009 target
2010 orientation
2011 orientation
Av. % change target 2007-2010 (2011)
INTERNAL OBJECTIVES 18. Cost coverage (administrative expenses) (EUR M) Total EIB - EIB Corporate - ABU Investment Facility 19. Implementation of Inspectorate General Agreed Action Plans (%) - Total EIB Group 20. Monitoring - Project Completion Reports (PCRs) internal backlog and administrative closure rate (%) - PCRs pending promoter info - Total EIB (%) 21. Bank-wide Survey - Corporate (% of responses satisfactory and above) (9) 22. Bank-wide Survey - HR services (% of responses satisfactory and above) (9) 23. Bank-wide Survey SG Services (% of responses satisfactory and above) (9) 24. Bank-wide Survey SCC Services (% of responses satisfactory and above) (9) 25. Bank-wide Survey - IT services (% of responses satisfactory and above) (9) 26. Diversity (EIB Group) % women hired at function F or above 27. Corporate Social Responsibility(10)
81.3 80.7 0.6
118.1 120.3 -2.2
108.1 105.7 2.4
129.4 133.9 -4.4
120.4 130.4 -10.0
155.9 156.2 -0.3
185.9 174.4 11.5
>60
57
>60
60
>60
>60
>60
n/a n/a
n/a n/a
n/a <20
n/a <20
<5 <18
<5 <17
<5 <16
_ _
LEARNING AND GROWTH OBJECTIVES >80.0 >80.0 >80.0 >80.0 >85.0 n/a n/a 73 75 91 86 84 26% n/a >80.0 >80.0 >80.0 >80.0 >85.0 40% n/a >80.0 >80.0 >80.0 >80.0 >80.0 39% 50% >80.0 >80.0 >80.0 >80.0 >80.0 45% 52% >80.0 >80.0 >80.0 >80.0 >80.0 45% 54% >80.0 >80.0 >80.0 >80.0 >80.0 50% 56% -
General: Projects can contribute to more than one policy objective (ie have multiple eligibility). The overall lending volume is thus less than the sum of those by individual objective. (1) The proposed volume driven actions are expected to have a negative impact on value-added ratings for Pillar I and II, in part compensated by a positive impact of the Banks special contribution on the value-added rating of Pillar III. From 2011 onwards, it is expected that value-added levels would return to the levels originally envisaged (2) Total signature targets for 2007-2010 give an annual average growth of 16% and in EU and Pre-Accession Countries the growth rate is 16%. Signature figures reflect the regional split defined in the Council decision 16058/06 of 12 December 2006, on the new mandate see footnote (3) to KPI Table. Estimations provided from 2008 onwards in the ACPs and OCTs include possible realisations under the second financial protocol of the Cotonou agreement. Estimations provided for Mediterranean Budget resources are based on an allocation of EUR 32m/year under the ENPI, with additional resources expected from reflows of past operations under MEDA, Protocols and mandates (still to be decided in the context of the EU budgetary rules). (3) Following the renewal of the initiative under its new title of Knowledge Economy (i2i), the 2008 expected result is in line with the commitment to maintain the annual level achieved in recent years, under its objective, as an annual average for the next six years, to 2013. (4) Although 2007 and 2008 targets were set as percentages of total loans, in the table they are shown in nominal terms for ease of comparison against the 20092011 objectives (2008 targets for Convergence, Environment and SMEs have been converted into nominal amounts). (5) JASPERS indicators have been redefined for 2009. For 2008, the results on the indicators presented in the COP 2008-2010 are as follows: (i) Number of active JASPERS projects : target 180, expected result 360 and (ii) Number of projects completed: target 90,expected result 80-90. (6) Applications which received assistance from JASPERS and on which JASPERS issued a favourable opinion for their submission by Member States to the Commission. (7) The performance indicators reflect expected results for 2008 and targets for 2009 for studies funded under the Contribution Agreements with the Commission. EIB and the Commission have agreed that a key objective of the joint Action is to trigger commitment from Management Authorities to enter into JESSICA fund structures (both Urban Development Funds and/or Holding Funds), making use of Structural Funds on a revolving basis. (8) Expected funding requirement on the basis of disbursements targets as well as the maturity profile of the Banks debt. The 2009 funding projection of EUR 70bn is assuming a 2009 end-of-year liquidity ratio above the minimum floor of 25%. The methodology of the Central Services Survey is currently under revision and the end 2008 exercise will serve as a pilot case. To this end, the targets already set for 2008 and for the COP 2009 -2011 could be reviewed in light of the 2008 results. (10) The Corporate Social Responsibility (CSR) indicator is based on the results of the CSR review performed by a non-financial rating agency. An annual update of this review will be performed to check performance against targets in future years. (9)
24 February 2009
12
IMPLEMENTING THE STRATEGY: OUTLOOK 2009-2011
As the bank of the European Union, the EIB Group uses its special expertise and resources to make a difference to the future of Europe and its partners by supporting sound investments which further EU policy goals as illustrated in the Strategy Map below Contribute to
EU Policy Goals
INSTITUTIONAL
Priority lending:
Convergence Knowledge Economy TENs Environmental Protection and Improvement SME Energy
VALUE ADDED:
Pillar 1
Contribution to EU priority objectives (inc.
contribution to Mandate objectives and priorities)
Pillar 2
Quality and Soundness of Projects
Pillar 3
EIB contribution
Transparency / Accountability / External Communication
LEARNING AND INTERNAL FINANCIAL CUSTOMER AND GROWTH PARTNERSHIPS
Meet Expectations (Promoter and Borrower)

- Innovate Fields and Products - Provide Attractive Terms
Partnership with the Commission
Partnership with the Financial Institutions
Partnership with the EIF

(part of EIB Group)
Ensure Long Term Financial Sustainability
Manage Risk
Develop Best Practice

(Continuous Improvement of Key processes)
Improve Resources Allocation
Upgrade Systems
-Buildings - IT systems
Attract, Develop and Motivate High Quality Staff
Increase Effectiveness of Internal Communication
Implementing the Strategy: Outlook 2009-2011

3. Overview: Implementation of the EIB Groups Strategy
EIB Priority Lending Objectives
301 The EIBs priority strategic objectives are: (i) For lending in the European Union and Pre-Accession Countries8, the EIBs objectives reflect EU policy objectives in six specific areas: Economic and Social Cohesion and Convergence in the enlarged Union; Implementation of the Knowledge Economy (i2i) (previously known as Innovation 2010 initiative (i2i)); Development of Trans-European Networks (TENs); Support for SMEs in the enlarged Union; Protecting and Improving the Environment and Promoting Sustainable Communities; and Supporting Sustainable, Competitive and Secure Energy. In line with the External Mandate defined in the Council Decision of 12 December 2006, as well as the revised Cotonou Partnership Agreement, the lending objectives for regions outside the EU in which the Bank operates are pre-accession support, private sector development, financial sector development, infrastructure development, security of energy supply, environmental sustainability and support of EU presence.
(ii)
302 Following a period of intense change, involving the deployment of new initiatives in all of its priority lending areas9 (see Chapter 2) and the communication of its Statement on Environmental and Social Principles and Standards, in 2009-2011, the Bank will continue to build on its achievements whilst paying special attention to ensuring a robust control structure. At the same time, the Bank will continue to support the EU and global effort to combat climate change.
Key challenges in lending and associated activities

303 The economic situation both within the EU and outside the EU, is weakening as a consequence of current financial sector turbulences and the protracted financial crisis constitutes a significant element of uncertainty for the implementation of the EIBs strategy to take more risk for more value added in the present circumstances. At the same time, the Bank must contribute to supporting the European economy and together with other IFIs, should explore all options to support emerging and developing countries in which it operates. 304 The growing importance of partnerships with the European Commission and other IFIs is noted in Chapter 2. Going forward, the Bank is committed to seek to streamline arrangements with the Commission and other IFIs to ensure a more consistent and efficient approach to legal, budgetary, administrative and reporting issues. 305 Further efforts are required to reach a more balanced distribution of the economic and social return of the enlargement across the EU-27. Equally, continuous financial support by the EU is also contributing to sustainable political stability in partner countries and neighbouring regions. 306 The following graph illustrates disbursement trends in Europe and outside Europe:
Activities in Pre-Accession Countries support both EU priority lending objectives whilst at the same time benefiting from external mandates. 9 including Technical Assistance (Joint Assistance to Support Projects in European Regions (JASPERS)), Research, development and innovation (RDI) and TENs traffic revenue risk sharing (Risk Sharing Finance Facility (RSFF) and Loan Guarantee Instrument for TENS-Transport (LGTT)), SME microfinance (Joint European resources for Micro to Medium Enterprises (JEREMIE)), climate change (Carbon Credit Instruments) and support of sustainable communities (Joint European Support for Sustainable Investment in City Areas (JESSICA))
8
24 February 2009
13
EU-15 EUR m
40,000 35,000 30,000
Disbursement by Geographical area
Non EU-15 EUR m

5,000 4,500 4,000 3,500
25,000 20,000 15,000 10,000
3,000 2,500 2,000 1,500 1,000
5,000 0
19 88 19 96 19 80 20 00 19 92 19 84 20 04
500 -
EU-15 Pre-Accession States Neighbourhood and Partnership Countries
EU-12 EFTA
EU-12, Pre-Accession States, EFTA, and Neighbourhood and Partnership Countries should be read on the right axis.
Outputs and Inputs : Cumulative Growth

Year EU-15 EU-12 Pre-Accession States EFTA Neighb'hood and P'ship Countries 1980 3,129 3 34 121 1990 11,396 75 60 72 256 2003 30,326 3,271 557 171 987 2004 31,655 3,521 799 184 1,333 2005 32,054 4,142 542 118 1,849 2006 29,299 4,070 1,349 292 1,617 2007 33,844 4,675 2,497 288 1,862
307 The importance of SMEs for economic activity and employment in the EU particularly needs to be more adequately reflected in the quality and availability of financial services provided to SMEs by the banking sector. 308 Volatile energy prices and climate change considerations increasingly determine economic opportunities and choices across all sectors and markets, putting the support of renewable energies and energy efficiency at the centre stage of EU policy decisions. Security of energy supply continues to be a focus. 309 The Bank will continue to shift its support for the Knowledge Economy to higher value-added projects in priority technologies and sectors covered by the Seventh (2007-2013) Framework Programme (FP7)10 from knowledge creation to its application in new products, processes and services 310 The challenge in terms of Trans European Network (TENs) lies in achieving a balanced distribution of projects across the different geographical areas and transport modes, while applying the Banks transport policy with its emphasis on climate change impacts. 311 The December 2006 Council Decision granting the EIB the Community Guarantee for external lending in the period 2007-2013 not only underlined the need for a stronger dialogue, strategic planning and coherence between the Commission and the EIB, but also called on EIB for a reinforced cooperation with other IFIs in the regions concerned. The implementation of these requirements as well as the preparatory work for the mid-term review of EIBs external lending (also requested by the above Council Decision and to be finalised by June 2010) will gain momentum throughout 2009 and mobilise resources from across the Bank. 312 The adjusted Value Added methodology and the rolling-out of the Economic and Social Impact Assessment Framework (ESIAF) Indicators which became effective in 2008 have improved the Banks ability to measure and report on its value-added. A follow-up review of the Value Added methodology is planned for 2009 to secure further improvements. The Bank services will work on ensuring that its qualitative assessments are done in a transparent and systematic way. This is particularly relevant for the 2007-2013 external mandate referred to above as proof of such value-added assessments having taken place will be an essential input to the planned 2010 mid-term review. 313 As noted in Chapter 2, the increasingly complex operational environment of the EIB, the need to diversify its product range and to adapt its approach to diverse market and stakeholder expectations constitutes a major challenge for the EIBs organizational structure and resources. The Bank therefore continues to allocate its staff resources to operational activities as illustrated in below:
10
The Seventh Framework Programme for research and technological development (FP7) is the European Union's chief instrument for funding research over the period 2007 to 2013. It bundles all research-related EU initiatives together under a common roof playing a crucial role in reaching the goals of growth, competitiveness and employment.
24 February 2009
14
Staff/year Operational services Support services Total EIB staff
2004 751 501 1252
% 60% 40% 100%
2005 826 498 1324
2006 879 490 1369
2007 927 527 1454
2008 1055 544 1599
% 66% 34% 100%
EIB response to lending activity challenges

Implementing the Banks strategy in the current economic and financial environment 314 The EIBs strategic orientations involve a controlled increase in its acceptance of risk, while maintaining the principles of sound and prudent banking, including the management of signed transactions. The EIB remains committed to this value-oriented strategy, and the refinement of the credit risk policy and the review of its loan grading and pricing system have improved the Banks capacity to take risk, while at the same time its ability to understand and select risks has been systematically strengthened in the context of the current market environment. Funding requirements to meet lending objectives and borrowing redemptions for 2009 should be higher than in 2008. In order for the Bank to achieve such a volume, normal conditions of access to the capital markets are assumed. 315 The EIB's activities are generally not subject to strong cyclical patterns. The crisis has had only a limited direct effect for the EIB, impacting its refinancing cost and relative attractiveness. At the same time, the current liquidity problems on the financial markets represent a significant challenge. In the light of the economic downturn in the EU, the EIB will nevertheless maintain its strong support to the European growth and employment agenda, supporting productive and innovative investments and stimulating a balanced economic expansion of activities. 316 The Bank is pursuing an active risk-sharing approach and has entered into a number of partnerships and co-operation agreements with other EU institutions, IFIs and with the commercial banking sector. The future could see a widening of joint initiatives with the Commission, notably in areas of key importance to the EU, such as energy, environment and SMEs. The EIB Group could also play an important leveraging role in the framework of the currently ongoing EU budget reform exercise. 317 The EIB already closely cooperates with IFIs and European bilateral institutions, both within and outside the EU, where the scope for cooperation is relatively larger. This cooperation is guided by several regional-specific Memoranda of Understanding or Letters of Intent, signed between the EIB, the Commission and various IFIs and European bilateral institutions covering EU Member States, PreAccession Countries, Southern and Eastern Neighbourhood countries, Russia, ACP and ALA countries. EIB financing operations outside the EU, particularly those within the scope of the external mandate for 2007-2013, will increasingly be carried out in cooperation and/or by means of co-financing with other IFIs, with European bilateral institutions and with key national lenders, in order to maximise synergies, cooperation and efficiency and to ensure reasonable sharing of risks and coherent project and sector conditionality. A key challenge for the near future, in this area, will be to broaden and deepen the cooperation with Agence Franaise de Dveloppement (AFD) and Kreditanstalt fr Wiederaufbau (KfW), by establishing a common approach of the Banks services towards harmonisation of procedures and partial or full delegation of project appraisal and monitoring. A similar approach could be sought with the EBRD as the present work sharing is further developed. This will be applied in all countries outside the EU in which the EIB operates, with a more immediate focus on countries covered by a MoU (notably the Eastern region) where work sharing is already relatively structured and formalised and where the potential for co-operation funds involving delegation is already being discussed. 318 A sustainable partnership with banks and the private sector, based on subsidiarity and complementarity remains key to the implementation of the Strategy. Strong working relationships with the banking and the private sectors are also important for successful product development which responds to the market needs. The Bank continues to work with intermediaries in order to facilitate the assumption by EIB of credit risk on smaller companies and a number of initiatives are being undertaken both to develop further risk-sharing structures with banks and corporates and to enhance the Banks product offering particularly in favour of SMEs alongside banking partners including very small loans in the range of micro-credit financing.
319 Intra-Group cooperation has strengthened notably in recent years. EIB and EIF complement one another by, typically, the former investing in the senior tranche of a transaction and the latter guaranteeing the mezzanine tranche. In some cases, EIF guarantees may be combined with EIB global
24 February 2009
15
loans and, in the context of JEREMIE (Joint European Resources for Micro to Medium Enterprises), it is possible that EIB will contribute to the holding funds managed by, or in receipt of Technical Assistance from, EIF through loans including regional global loans. 320 The Bank is continuing to develop its risk-taking activities under the Structured Finance Facility (SFF). The following graph illustrates the recent development of SFF activities compared to global loans and individual loans:
Total Bank - Disbursement by Operation types
EUR m
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
19 84 19 88 19 92 19 96 20 00 20 04 19 80
Individual Loan
(1) Includes Mid-Cap loans
Global Loan (1)
SFF / RSFF / LGTT
321
By building a sustainable SFF programme, the Bank is seeking to transform these operations into a mainstream element of its financing activities in priority sectors. Over and above the development of SFF activity, the achievement of the challenging targets set for the Risk Sharing Finance Facility (RSFF) and the recently launched Loan Guarantee Instrument for TENs-Transport (LGTT) will deserve particular attention in the context of the mid-term review of the Seventh Framework Programme to take place in 2010. On that occasion, the Community will evaluate the scope for maintaining the co-operation under the joint instruments RSFF and LGTT in the light of the then-achieved results.
322 In the EU and Pre-Accession Countries, the update of the value added methodology will enable the Bank to stay abreast of, or respond to, market and EU policy developments, and will strengthen the EIBs project selection process to further improve transparency and consistency in its approach to evaluating projects and loan types at the time of approving financing for projects. 323 For operations outside the European Union and outside Pre-Accession Countries, the Economic and Social Impact Assessment Framework (ESIAF) has been adopted for all operations, whether investment loans or financial sector operations, whether under an external mandate or at EIB own risk. The ESIAF indicators will be an important reporting tool in the framework of the mid-term review of the external mandate planned for 2010 as well as in the context of enhancing the impact assessment of EIB operations in ACP countries. 324 In addition to the external value added, a new internal risk/return indicator (IRRI) has been successfully implemented on an experimental basis to measure also the internal value added of the EIBs lending activities. Apart from the traditional cost coverage, the new indicator considers also the costs and revenues related to the (credit) risk of the EIBs operations. The IRRI measurement tool aids internal decision-making by providing indications of the ex-ante NPV or risk/return balance on individual operations as part of the overall cost management process. Contributing to a more balanced development across the EU through Economic and Social Cohesion and Convergence 325 The Bank is committed to support European regions qualifying for convergence assistance under the 2007-2013 Cohesion Policy. While the main challenge remains the EU-12 capacity to absorb the substantial grant amounts, the EIB is concentrating its efforts on increasing Member States abilities to absorb and make best use of the EU structural grant funds, through lending in support of the public (especially through structural lending programme in co-financing with the Commission) and private sectors, but also Technical Assistance. To underpin the importance of this priority lending objective, the convergence target represents a significant share of total EU-27 financing over the 2009-2011 period.
24 February 2009
16
326 Framework loan procedures have been streamlined to facilitate the co-financing of EU cohesion and structural funds. Moreover, Technical Assistance is being enforced in the upstream phase of project preparation, in view of accelerating the implementation of the Structural Funds. The Joint Assistance to Support Projects in European Regions (JASPERS) initiative has become a key instrument in this domain, by assisting Member States to present viable projects and therefore to access more rapidly and efficiently the substantial support from the European Regional Development Fund (ERDF) and the Cohesion Fund which will be available over the next few years. 327 The EIB Group cooperation with EU Structural Funds is pursued through the Joint European Resources for Micro to Medium Enterprises (JEREMIE) initiative managed by EIF see below and through the Joint European Support for Sustainable Investment in City Areas (JESSICA) initiative managed by the EIB, which targets sustainable investments in urban projects. JESSICA will also strengthen the provision of the Banks advisory and financial engineering support through the establishment and management of Holding Fund operations to invest in urban development funds. Strengthening the support to SMEs 328 The EIB Group is reinforcing its focus and strengthening its support to SMEs. In this context, it has reviewed its SME product offering in an extensive consultation with SME representatives and partners for SME financing in the EU. Based on these findings, the EIB Group will strive at increasing the value added brought to SMEs through its activity, to expand its SME support geographically, whilst at the same time cooperating with, and monitoring the activities of, those intermediaries who are able to deliver both transparency and a transfer of benefit to the final beneficiaries. This reinforcement can also be evidenced by the revised 2008 target which represents an increase of 44% against the 2007 target11. The average annual volume for 2008-2011 is EUR 7,500 giving an average growth of 54% compared to the 2007 target (see below). Evolution of the SME target
2007 Target 4,870 2007 Actual 5,002 2008 original target 5,731 2008 mid-year review of target 6,500 2008 final review of target 7,000 2008 target 7,000 2009 target 8,000 2010 target 8,000 2011 target 7,000
EUR M Total Signatures in EU27 directed to SMEs
329 In order to improve SME access to EIB financing, the new initiative involves the streamlining of the intermediation process at partner bank level to allow intermediating banks to reduce their costs and pass more of EIBs financial value-added to SMEs and the simplification of the SME Loan product. At the same time, the EIB is broadening the scope of eligible investments and introducing mezzanine financing solutions (jointly with the EIF) and longer duration financing, thereby extending the coverage of SME financing needs. The range of products offered within the EIB Group now reaches from equity to senior loans and EIB and EIF will ensure that a joint approach in client relationships becomes more systematic than before. 330 As set out at the informal ECOFIN (12-13th September 2008) notwithstanding the level of current targets, the EIB seeks to strengthen its support to SMEs, providing at least EUR 15bn in actual lending via banks during the period 2008-2009 and EUR 30bn over the 4 year period 2008-2011. Potential for increasing the volume of SME activities is already anticipated from (i) the Banks new SME Loan product which is intended to support unsecured lending for SMEs investing in intangible assets, such as R&D activities, expansion or company transmission, (ii) risk-sharing schemes whereby under specific circumstances, the EIB could be prepared to share the risk incurred by the commercial banking partners in such unsecured lending operations including mezzanine operations; (iii) increased co-operation with banking partners and shareholders to complement national initiatives to ensure European competitiveness of SMEs and (iv) EIF's portfolio approach through investments in venture capital funds and credit enhancements of SME securitisations, based on established types of intervention complemented by the development of new products notably relating to mezzanine finance . In respect of the latter, the Bank intends to establish a mandate for mezzanine products in support of SMEs to be implemented by EIF. It is envisaged that such a facility would amount to EUR 1bn over a three year period to be potentially made available in tranches, subject to performance review.
11
Equivalent nominal target
24 February 2009
17
331 For EIF SME guarantee signatures, the Commission mandated Competitiveness and Innovation Framework Programme (CIP) programme is now fully operational and provides a comprehensive suite of interventions for European SMEs. The CIP has a budget of over EUR 1.1bn dedicated to both venture capital and guarantee financial instruments and covers the period to 2013. A significant pipeline of operations exists for EIF guarantee signatures, which are subject to the specific requirements of the CIP mandate. 332 EIF is reinforcing its contribution to balanced regional development across the Union by targeting SMEs in regions in receipt of structural funds through the JEREMIE initiative. Intra-Group cooperation has been further extended through JASMINE (Joint Action to Support Micro-finance Institutions in Europe), an initiative which emphasises the synergies between various European institutions (European Commission, European Parliament), the Eurofi network, banks and the European Microfinance Network (see Annex 2a). Protecting and Improving the Environment and Promoting Sustainable Communities 333 While environmental sustainability is required for all projects supported by the Bank under all its lending objectives, the Bank focuses on investments in the areas of water, wastewater and solid waste management and in general on projects promoting cleaner production and sustainable natural resource management in support of EU policy. 334 The Bank is currently reviewing its lending policy in the solid waste sector. Action in the sector is driven by the need to comply with the pressing landfill targets and stringent technical requirements of the 1999 Landfill Directive. 335 The EIB also prioritizes projects improving the Urban Environment and promoting Sustainable Communities, in line with the Leipzig Charter adopted by the EU in 2007, which aims to address economic, social, environmental, and health considerations in an integrated manner. Supporting sustainable, competitive and secure energy 336 In addition to integrating climate change into its policies, the Bank has substantially stepped up its energy lending. It has made this one of its priority lending objectives, and has widened the range of financial instruments available. To continue this process, the Bank is to further increase its energy targets in 2009-2011. As part of this exercise, the Bank will propose setting a minimum floor that at least 20% of energy projects in the EU should cover renewable sectors. In addition, and, regardless of this target, the Bank will seek to maximise the proportion of its projects associated with low carbon technologies. In addition, the Bank will step up its support to renewable energy and energy efficiency outside the EU As more specific actions, the Bank will be active in promoting the energy efficiency of buildings across projects, including those involving social housing, hospitals, schools, and other public buildings. 337 In order to support the development of low-carbon technologies, as proposed in the European Strategic Energy Technology Plan, the Bank will mobilise the resources available from the Risk-Sharing Finance Facility (RSFF) as well as other risk-sharing instruments. This will include actions to support Carbon Capture and Storage, as well as other innovate technologies such as photovoltaics, off-shore wind, concentrated solar power and 2nd generation biofuels. 338 The Bank is committed to developing the carbon markets to help companies and Member States meet their carbon obligations related to the Kyoto Protocol, to support the EU Emissions Trading Scheme and to promote cleaner technologies. In this respect the Bank has established three carbon funds with the EBRD, the World Bank and KfW, and a 2nd generation fund (the Post 2012 Carbon Credit Fund) in order to promote the long-term carbon market also post-2012. 339 In general, the Bank will continue to integrate climate change considerations across all its activities. The Bank will establish appropriate measures of project effectiveness in this domain and design systems to report performance on attaining climate change goals both to the EIBs governing bodies and to civil society. 340 Energy efficiency is the most cost-effective and evident way of reducing emissions and improving the security of energy supply. The Bank will always require the use of the most efficient solutions, and will establish targets at the project level (as already endorsed by Governors for coal and lignite power stations). The Bank will continue to mainstream energy efficiency considerations in all projects. Projects will be screened to identify energy efficiency opportunities, and promoters encouraged and assisted to bring forward such investments.
24 February 2009
18
341 In addition to this, the Bank together with the Commission has proposed the establishment of a European Energy and Climate Change Initiative, covering: An EU Sustainable Energy Financing Initiative This initiative would target energy efficiency and renewable energy projects within the EU, with a main focus on municipalities and SMEs, and including: a) provision of Technical Assistance and advisory services; b) access to flexible financing lines; and c) measures to increase leverage between Cohesion Policy Funds and EIB/EBRD financing. Possible financing measures to support the implementation of the European Strategic Energy Technology plan (SET-Plan): In order to accelerate the development and deployment of costeffective low carbon technologies, the Commission, supported by EIB, is preparing a Communication on financing low carbon technologies which will analyse the deficiencies, identify gaps in the current range of instruments and propose new measures to overcome them. A working group on coordinated support on energy and infrastructure As requested by the ECOFIN Council, at the September informal meeting, the Bank and the Commission have set up a working group, also with European institutional investors, with the task of proposing further coordinated action with a specific focus on energy and infrastructure investments, including in the form of equity funds. This should be also seen against the new priorities set on energy infrastructures by the Second Strategic Energy Review, the Green Paper on Trans-European Energy Networks as well as the conclusions of the European Council of 16 October 2008, with a view to support the internal energy market, the integration of renewables and the enhancement of internal security of supply. Clean Transport Facility: the facility would target CO2 reduction, through for example enhancing R&D and Innovation lending to the automotive and transport industries.
342 The primary focus of these actions is on the EU 27 Member States, Candidate Countries and potential Candidate Countries. However, a subsequent extension to other regions could be foreseen, in particular focusing on Neighbourhood Countries. 343 In another approach to cooperation, EIF is working with the European Commission (Environment and AIDCO) on the Global Energy Efficiency and Renewable Energy Fund (GEEREF), launched earlier this year. Promoting a competitive Knowledge Economy 344 EIB support for the Knowledge Economy (i2i), covering the Banks support to (i) education and training, (ii) research and development; and (iii) innovation, focuses on maintaining the competitive edge where the EU excels and catching up in the other areas. The Bank finances tangible and intangible assets, which may also cover recurrent (salary) costs for R&D and certain recurrent costs of exceptional relevance to enhancing quality in education. 345 The EIB is shifting its focus towards more private sector lending (one third public to two thirds private) for R&D projects with special emphasis on SMEs and mid-caps. A balanced support will be maintained for larger enterprises and corporates which are critically important for their significant investment in R&D and Innovation. Activities will rely on systematic use of innovative financing solutions and combining, where appropriate, the EIBs conventional financing products with other instruments that entail a higher level of risk, including the RSFF. 346 Through the EIF, a range of innovative structured solutions, including guarantees for early stage financings, Venture Capital and Technology Transfer Acceleration are aimed at increasing the valueadded of the EIB Groups support of the knowledge economy. As part of an initiative by the European Parliament, the Commission has allocated EUR 2m to fund a technology transfer pilot project to be implemented by EIF and for which the contract is expected to be signed in late 2008. Developing Trans-European Networks 347 The Banks commitment to the development of the Trans-European Transport Network (TEN-T) will be maintained for all modes of transport, while project selection will reflect the Banks new transport lending policy. 2009 will be the first full year of operations for the Loan Guarantee Instrument (LGTT) for TEN-T Projects. As a mezzanine product, it will provide coverage of traffic volume-related revenue risks during the critical early project operation phase.
24 February 2009
19
348 The EIB will maintain its support of project preparation and provide advisory services to the public sector promoters of selected priority TEN-T projects and continue to work closely with the EU coordinators. In addition, and jointly with the European Commission, EU Member States, and certain other states and organisations, the EIB established the European PPP Expertise Centre (EPEC) in 2008. 349 EIB support to TEN-Energy projects will be intensified in line with the increased priority given to energy issues in particular diversification of supply and increased interconnection across the Union. The EIB is also working actively with EU energy coordinators. Support to Pre-Accession Countries 350 The EIB supports the economic development process and the potential transition to EU membership of Candidate Countries (Croatia, Turkey, FYROM) and Potential Candidate Countries (the remaining Western Balkan Regions). Operations in these countries take place under the Pre-Accession Facility and the Pre-Accession mandate, (both renewed in 2007), in close cooperation with the European Commission and the IFIs operating in the respective countries. Of particular note, the EIB continues to collaborate closely with the Commission and other IFIs in the Western Balkans, in particular on the Western Balkans Infrastructure Initiative being developed together with the Commission, EBRD and CEB with the objective of rationalising interventions in the region. In pursuing support to the Pre-Accession Countries, a range of products has been developed, including disbursement in local currencies, municipality-lending without state-guarantee, corporate-sector finance and SME-financing with banking partners as well as Technical Assistance. Support to EFTA countries 351 EIB has been active in EFTA since 1994, when it started to finance investment projects in these countries (Iceland, Liechtenstein, Norway, Switzerland) in the framework of the EFTA Lending Facility. The Facility is intended to strengthen the already close economic ties between the EU and the EFTA countries and enables the EIB to participate in the financing of selected projects with a direct EU interest, notably in the sectors of energy, particularly renewables, access to Trans-European Networks (TENs) and Research, Development and Innovation (RDI). The lending envelope for the Facility has been increased on a number of occasions, the most recent being in 2005, when an additional EUR 800m brought the total cumulative lending envelope to EUR 2 500m for the period up to 31 December 2009, which is nevertheless expected to be fully utilised already during the first half of 2009. Implementation of the external mandate 352 The December 2006 Council Decision regarding EIBs external mandate 2007-2013 underlined the need for a stronger dialogue, strategic planning and coherence between the Commission and the EIB, and specifically requested early mutual consultation with respect to policy matters, preparation of papers of mutual significance and project pipelines outside the EU. To provide the necessary framework for such enhanced cooperation, a specific MoU was signed between the Commission and the EIB on 26 May 2008. The EIB has already submitted for consideration by the Steering Committee under the above MoU, its proposals for the strategic objectives for lending in the European Neighbourhood and Partnership Countries (ENPCs), Asia and Latin America (ALA) and South Africa as well as internal guidelines for EIB coordination with the Commission. 353 The above Council Decision of December 2006 also requested the Commission and the EIB to prepare a substantive mid-term review of EIBs external lending by June 2010. This mid-term review will have be fully informed by an independent external evaluation, to be supervised and managed by a committee comprising wise persons appointed by the EIB Board of governors, alongside an EIB and a Commission representative. A first meeting of this committee took place in October 2008. 354 In its financing operations outside the EU, the EIB will endeavour to further enhance coordination and cooperation with IFIs and with European bilateral institutions where relevant, including projects cofinancing (see also 317). 355 Priority will continue to be given to projects that have a good potential to generate significant value added, with the objective that more than 90% of projects are ranked in the top two Economic and Social Impact Assessment Framework (ESIAF) grades. 356 The volume of EIB lending is fixed in the external mandates and any short-term increase in funding will imply some frontloading. In order to do so, the Bank will look for innovative approaches, doing things differently (e.g. by possibly providing global support to important corporate clients across countries) and by doing different things (e.g. by possibly increasing the proportion of equity investments under the ACP
24 February 2009
20
Investment Facility or by supporting trade finance). The Bank will work closely with the European Commission as well as with its multilateral and bilateral financing partners in that regard. Key aspects of priority lending objectives for Neighbourhood and Partnership Countries in which the Bank operates 357 Mediterranean countries: In the context of the reinforcement of the Facility for Euro-Mediterranean Investment and Partnership (FEMIP), with its focus on the private sector and creating an investmentfriendly environment, the Bank activities will aim at stabilizing the 50%-target of its activities in support of the private sector; increasing its support for microfinance institutions and for the tourism sector, thus fostering the development of the private sector and of local SMEs, as well as increasing its capital risk activities. Technical Assistance will continue to play a significant role in improving the quality of the FEMIP portfolio. 358 Deployment of new financial instruments will be pursued, notably the provision of guarantees to local private groups and public companies, to improve their access to local capital markets; and the raising of funds in local bond markets to extend financing in local currencies. 359 In line with the 2006 Council Conclusions reviewing FEMIP, risk-taking will be increased though a more active use of the Special FEMIP Envelope. FEMIP will also support the key initiatives of the Barcelona Process: Union for the Mediterranean listed in the Joint Declaration of the Paris Summit in July 2008 and thus strengthen partnerships with the Mediterranean partner countries. 360 Eastern Europe, Southern Caucasus and Russia: In 2009, the Bank will give increased focus on the Eastern neighbours (Ukraine, Moldova, Georgia, Armenia and Azerbaijan). EIB financing operations in these countries will continue to be carried out in close cooperation with the EBRD according to the December 2006 tripartite MoU with the Commission and EBRD. 361 Emphasis will be put on projects of significant interest to the EU in energy, environmental infrastructure, telecommunications and transport, both within public sector entities (including municipalities) and private sector promoters (including PPPs and project finance). The possibility for EIB to lend in Roubles is also being considered. 362 Priority will be given to projects on extended major Trans-European Network axes, projects with crossborder implications for one or more Member States and major projects favouring regional integration through increased connectivity. In the environmental sector, the EIB will give particular priority to projects in Russia which are within the framework of the Northern Dimension Environmental Partnership. In the energy sector, strategic energy supply and energy transport projects are of particular importance. 363 African, Caribbean and Pacific States/Overseas countries and Territories (ACP/OCT): Following entry in force of the revised Cotonou Agreement and related financial protocol on 1st July 2008, an additional EUR 1.1bn capital endowment is available under the IF while the Bank is authorised to lend up to EUR 2bn from its own resources over the period 2008-2013. A strong focus will be maintained on projects with a high developmental impact, notably in the financial sector, major energy and transport infrastructure, environmental initiatives (access to water and sanitation) and private business. Deployment of new financial instruments under the IF, like guarantee instruments and local currency financings, will continue to be pursued. Own resources lending will focus on projects supporting the development of key infrastructure as well as private sector operations, in accordance with the new modalities approved by the Bank in June 2007 in terms of risk taking, notably in the weaker ACP countries. In addition, following the approval by the Board of Directors in June 2008 of guidelines for the use of SFF in ACP-OCT countries, the Bank has now additional flexibility in financing own resource projects under the risk-sharing mechanism, provided that a minimum internal rating and eligibility criteria is attained. The focus will be on delivering on specific initiatives or more qualitative COP objectives, such as the EU-Africa Infrastructure Trust Fund or climate change. 364 The availability of resources for Technical Assistance (TA) provided for under the revised Cotonou Agreement adds significant value to the Banks activities in the ACP regions by enabling the Bank to take a more proactive role in the preparation of projects, either in the financial sector (such as microfinance) or for larger industrial or infrastructure projects. 365 Overall, the challenge for the Bank will be to strike an adequate balance between lending volume and the emphasis put on the developmental quality of the projects, in line with the recently approved Guiding Principles with regard to Portfolio Management, Value Added and Transparency.
24 February 2009
21
366 Republic of South Africa (RSA): In line with the Council Decision objectives for the 2007-2013 mandate, EIB activity in South Africa is to focus on infrastructure projects of public interest (including municipal infrastructure, power and water supply) and the promotion of private sector growth. 367 With the European Commission, the Bank is currently appraising the feasibility of a new joint Facility (Growth and Employment Facility for South Africa or GEFSA). The Banks costs in managing GEFSA would be met on a full cost recovery basis. 368 Asia and Latin America (ALA) countries: Project identification so far has resulted in a sound pipeline in the two sectors in which the Bank is now entitled to intervene: support of EU presence in ALA countries through financing FDI and transfer of technology and know how; projects that contribute to environmental sustainability (including climate change mitigation) and energy security. Roughly 30% of total commitments are expected in support of environment sustainability, notwithstanding additional operations, outside the mandate, to be structured under the EUR3 bn Facility for Energy Sustainability and Security of Supply (ESF). 369 An ECOFIN Council decision on eligibility of five Central Asian countries (Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan) was taken on 4 November 2008. Delivery of services in this area will have some resource implications for the Bank. The decision foresees a Community guarantee for the EIB in case of losses resulting on loans or guarantees to projects in this area.
Financial Planning
370 The following graph illustrates the growth in net surplus compared to loan signature and outstanding loan volumes. The growth in surplus is remarkable considering that the introduction of the euro was, at the time, expected to produce the reverse effect on the Banks results:
Growth index
EIB Inputs and Outputs trends
2,550 2,200 1,850 1,500 1,150 800 450 100

80 19 85 19
Loan Signatures
90 19
95 19
00 20
05 20
Net Surplus (after provisions)
Loans Outstanding
Actuals EUR m 2007 47,820 324,719 1,633
Outputs and Inputs : Cumulative Growth

Year Loan Signatures Loans Outstanding Net Surplus (after provisions) 1980 100 100 100 1990 416 462 428 2003 1316 1656 682 2004 1343 1778 658 2005 1473 1968 666 2006 1422 2080 762 2007 1486 2172 783
371 The long-term perspective of ensuring the Groups financial self-sustainability therefore applies to the on-going monitoring of the Net Funding Result (NFR) generated by the Bank's borrowings and the NFR allocated to loans as well as to the Asset-and-Liability Management (ALM) and financial equilibrium of the Bank. The Bank is already in line with generally accepted best practice concerning the measurement of the impact of changes in the main market factors on accrual earnings and economic value. A further strengthening of this process, relying upon an integrated system with enhanced simulation capabilities, will be pursued as part of the ALM strategy. 372 Funding requirements to meet lending objectives and borrowing redemptions for 2009 should be higher than in 2008. In order for the Bank to achieve such a volume, normal conditions of access to the capital markets is assumed. Currently, the market predicts an overwhelming supply of debt in the high grade sovereign, supranational, agency/US government backed sector, which is leading to a severe repricing of paper across all major currencies in fragile and illiquid markets. It is therefore difficult to estimate both supply and price consequences for the Bank.
24 February 2009
22
373 Furthermore, in 2009 the Bank will, within the framework of current financial risk guidelines, aim to achieve its Treasury contribution targets in a prudent and sustainable manner, by adjusting the treasury management according to market conditions and constraints.
External Communication
374 The Communication Department is redynamising the Banks external communication and working closely with the EIF to convey an integrated message that the EIB Group is at the service of shareholders and citizens to meet the challenges posed by the evolving financial climate. At a time when European citizens are questioning the solidity of the financial system itself, the emphasis is on stability, on the human benefits reaped from EIB Group funding and on the concrete actions it is taking (such as improved and reinforced support for SMEs) in response to the credit crunch.
24 February 2009
23
4.
Budgetary Planning 2009

Planning Policy
401 The planning policy used for the 2009-2011 cycle presents the budget information from a cost coverage perspective12 and plans the actions to support the strategic objectives, factoring in the implications on the three main parameters (intermediation, administrative and cost coverage revenues and expenses) and that contribute to the cost coverage targets.
Financial drivers
402 The nature and mission of the Bank means that a significant part of the benefits produced by the Bank derives from its contribution as a policy-driven institution. The two main financial surplus drivers are: the return on the investment of Own Funds and the surplus of the cost-coverage generated by loans. Own Funds investment: As a public institution, and in line with the Banks Asset and Liability Management (ALM) policy, the EIB does not aim to take speculative exposures to financial risks and sets its financial risk tolerance at a level to ensure the long-term financial sustainability of the Bank. The goal for Return on Own Funds is 5%. The projected trend of the Return on Own Funds is explained by two main factors: (i) the maturing of fixed rate investments initiated in the previous years and which carry higher nominal rates than current investments, despite the recent increase in interest rates, (ii) the increase of Own Funds due to accumulated profits and to the periodical contributions of paid-in share capital from the new Member States, both of which have been invested at rates lower than the historical average. Cost coverage surplus: In line with Article 19.1 of the Banks Statute, cost coverage surplus represents the excess of revenues generated mainly by the lending activity (intermediation revenue and administrative revenues) over the Banks cost (Staff, administrative, depreciation). A surplus evidences an appropriate level of margin (mark-up plus modulation) applied to the loan portfolio and an adequate management of the expenses.
Cost coverage considerations

EIB Total Bank (EIB Corporate and Autonomous Business Unit Investment Facility): 403 Although the above aspects reduce the range of measures available to actively improve the return on Own Funds, the Bank is prudently managing its resources and delivering cash-releasing efficiencies. The Bank remains vigilant to monitoring and improving the cost coverage ratio which is now planned to exceed 125% in each year covered by the COP 2009-2011, as indicated in the KPI Table and Table 2 below. 404 The planned cost coverage is exceptional considering the anticipation of the value-added benefits of the Banks participation in more complex activities requires specific products and resources and also brings more credit default, financial and operational risk. Measures of the Banks productivity must take such factors into consideration. Nevertheless, to achieve the planned cost coverage in 2009-2011, the Bank commits to continue to seek administrative efficiencies by making arrangements to secure continuous improvement in the way in which its functions are exercised and contribute to overall objectives, having regard to Bank policy, quality of process delivery, economy, efficiency and effectiveness. 405 The Cost:Income ratio for Total Bank is shown in Table 3b.
2009 Budget
406 When compared to the 2008 budget, the 2009 budget for EIB Total Bank shows a nominal +4.2% increase in expenses (or 0.6% in real terms if the spring 2008 forecast for the Harmonised Index of Consumer Prices (Europe) (HICP) inflation rate of 3.6%13 for EU-27 in 2008, is maintained in 2009 or 1.8% if the spring 2008 forecast for the HICP inflation rate of 2.4% for EU-27 in 2009 is realised).
12
Presenting the current expenses against the intermediation and administrative revenues
13 Luxembourg HICP for 2008: 4.2%
24 February 2009
24
407 The proposed budget for EIB Total Bank for 2009-2011 is shown in Table 2 below.
Table 2:
Figures in EUR M
2009-2011 budget for EIB Total Bank

Orientations 2008 Budget (a) 2009 Scenario (d) 574.6 -454.3 120.4 126% 134% 85% Avg. % Change 2008-2011 (i) 7.4% 3.8% 19.8%
% Growth (e) = (d)/(a) 5.6% 4.2% 11.4%
2010 (f) 624.0 -468.1 155.9 133% 139% 100%
2011 (g) 673.9 -488.0 185.9 138% 142% 117%
Intermediation and Administrative Revenues Depreciation and Administrative Costs Cost Coverage Total EIB Cost Coverage Total EIB (%) Cost Coverage - EIB Corporate (%) Cost Coverage - ABU-IF (%)
544.0 435.9 108.1 125% 129% 104%
Cost budget 408 Since the COP 2008-2010, the 2008 Contribution Agreements for JESSICA has been signed and the one for JASPERS has been amended with additional budgetary implications for both 2008 and 2009. For both JESSICA and JASPERS, the increase in the costs associated with the 2008 Contribution Agreements should be at least covered by the increase in revenues from the EC contribution payments to be made to the Bank. 409 At the Board of Directors meeting in May 2008, the decision was made to separately allocate EUR 10m funds to the 2008 budget for the Western Balkans Infrastructure Initiative. As a practical solution to budgeting for the likely consumption profile, EUR 5m has now been added to the other administrative budget for both 2008 and 2009. Staff cost budget: 410 As reported in the COP 2008-2010, in recent years, the Bank has primarily allocated, and will continue to allocate, staff resources to operational activities in a sustained and well-controlled effort to ensure that the strategic lending objectives of the Bank are realised both in terms of quality and quantity. At the same time, given market conditions, particular attention will be paid to the control functions of the Bank. 411 As in 2008, when other new initiatives are formalised, the Management Committee will inform the Board of the associated impact on the 2009 budget and cost recovery accordingly and will request the Boards approval for the associated budget adjustments (if needed). 412 The total EIB staff cost budget in 2009 shows a growth of +7.1% (EUR 19.3m) compared to the 2008 budget which includes EUR 7.0m for the recruitment of new staff and EUR 12.3m for existing positions of which EUR 5.7m includes the 4.3% Basic salary increase. Other administrative expenses 413 Other administrative expenses decrease by 1.4% (2008: increase of 1.1%) due to cost savings efforts planned in all Directorates. Depreciation costs 414 The increase in depreciation in 2009 is mainly due to the first full-year depreciation charge impact associated with the new (East) building (EUR 7.5m). 415 The original (West) building in Kirchberg will be fully depreciated in 2010 and associated depreciation expenses will fall by EUR 1.6m as of 2011.
24 February 2009
25
EIB Capital budget

416 The EIB capital budget covers annual capital expenses and multi-annual investment projects. Non-staff expenses during the implementation phase are capitalised and amortised over a pre-specified period according to the type of expenditure. The budget for capital expenses for 2009 amounts to EUR 37.2 m and the corresponding multi annual figure is EUR 90.1 m. New capital requests amount to EUR 18.3 m. 417 The New Building was delivered within the foreseen scope of works. Delivery of the building is currently in hand, and occupation will be completed in early 2009.
The Prospective Profit and Loss (P&L) Account for the EIB
418 The targets set for intermediation and administrative revenues (which rely on the Bank meeting the operational activity levels identified as targets in the KPI Table and Table 1), together with the Banks Own Funds Remuneration and contributions from other activities such as Venture Capital and Treasury (which includes a current market interest rate profile prediction for the coming years and which therefore is subject to potentially high volatility), result in a positive trend in the Net surplus target and Cost:Income ratio. The year-on-year increase in Net Surplus of 9% over the 2007-2011 timeframe and the average 5% Return on Own Funds also supports the anticipated self-sustainability requirements (see Table 3a: Net Surplus before provisions and Table 3b: Cost:Income ratio).
Table 3a: Net Surplus (before provisions) for EIB Total Bank
(EUR M) 2007 Target 2007 achieved 2008 Target 2009 Orientation 2010 Orientation 2011 Orientation
Av. % change target 20072010 (2011)
Intermediate margin & other income Administrative costs Net surplus before provisions)
1,932
1,933
2,044
2,224
2,381
2,515
8(8)%
-364
1,568
-251
1,684
-346
1,698
-507
1,717
-354
2,025
-367
2,146 10(9)%
Note: the above takes the forward interest rates as at 31 August 2008 as interest rates move, this could impact the above figures.
Table 3b: Cost: Income ratio for EIB (Corporate & Investment Facility)
(%) Cost:Income ratio (total net operating expenses +admin expenses divided by the sum of net interest income + investment income) 2007 Target 18% 2007 achieved 16% 2008 Target 18% 2009 Orientation 19% 2010 Orientation 15% 2011 Orientation 15%
Long-term (capital) implications of the strategic orientation

419 EIB: The Banks capital situation was recently reviewed by the Board. This review indicates that the current subscribed capital base is sufficient to cover prospective lending disbursements until the end of 2010. By that time, the Bank would need a capital increase and should have enough financial means to fully fund the next capital increase from internally generated reserves (and not require contributions from Member States). Should the Treaty of Lisbon be ratified in the future, the timing of the next capital increase would be delayed by at least two years. 420 EIF: With a view to reinforcing the capital structure of the EIF, the authorised share capital was increased by 50% to EUR 3bn in 2007. The majority of proceeds of the capital increase was received by EIF in the same year. As foreseen, in the second of the four annual subscription periods (7 May-30 June 2008), the European Commission employed over EUR 33m to increase its shareholding by an additional 95 shares.
24 February 2009
26
5.
Staff matters
501 The Bank is faced with significant changes in both operational and human resources terms. Consequently, in 2007 the Human Resources (HR) strategy was reformulated and its priorities were redefined. The new strategy is based on the pillars (i) Excellence in staffing, (ii) Motivation and individual development and (iii) Health and well-being at work.
Excellence in staffing
502 Excellence in staffing, aims to attract the right talent to the right jobs at the right time and to deploy staff optimally across the organisation according to business needs. The EIB must ensure its attractiveness. 503 HR will focus its efforts in initiatives oriented, inter alia, to a better anticipation of needs through a three-year resource planning linked to the business planning cycle, promotion of diversity in recruitment and internal mobility, diversification of sources and pools of candidates, developing alternative channels such as Graduate programmes and considering local recruitment in external offices, streamlining of recruitment processes, improvement of assessment tools and support to managers in their selection of staff. 504 By 1 October 2008, the Bank had recruited 166 new staff members, (105 in net terms, taking into account departures), including 104 at managerial or executive level (of which 41 were women) and 62 support staff, thus bringing the total staff complement to 1558. The 2007 full-year equivalent figures were 153 new staff members, of which 113 management or executive staff - including 31 women, and 40 new support staff.
Motivation and individual development

505 The new HR strategy seeks to align better the organizational and individual performance, improve the effectiveness of staff contributions, and ensure the engagement of qualified and motivated staff. 506 e-performance, the Banks new on-line performance management tool was successfully introduced in early 2008, leading to a ongoing and more effective appraisal process with more active involvement through self-assessment and proposing own objectives. 507 HR will also focus its efforts regarding (i) intensified cooperation with Directorates by way of direct contribution to change and the development of an HR Business partner model (ii) training to managers on modern people management issues, including awareness raising on diversity, and (iii) individual development plans and talent development including focused training.
Health and well-being at work

508 The Bank is continuing to improve the working environment by examining such diverse subjects as ergonomics, stress management training, defining a substance misuse policy and integrating an occupational psychologist. Important developments in the near future will encompass further enhancements to the work/life balance policy and finalisation of the Occupational Health Policy.
Remuneration and Pensions

509 In December 2006, the Board approved a review of the remunerations system. This review would allow for the Board to approve the annual staff cost budget without actually changing the structure of the remuneration system. 510 Annual increases in basic salaries are based on a reference figure constructed from the average increases of our nearest comparators (commercial banks, IFIs, EC). The bonus envelopes increase is based on the performance of the Bank as defined by the KPIs.
24 February 2009
27
Reform of the Pension Scheme 511 Work carried out in recent years within the Pensions Committee has raised the question of the long-term equilibrium of the Staff Pension Scheme. Following the recommendations of two independent actuaries, the Board of Directors accepted a proposal on the pension scheme in September 2008. The creation of an investment portfolio dedicated to the financing of the debt as regards pensions in the form of a ring fencing arrangement within the financial statements, would first require the agreement of the Board of Governors. Reform of the Staff Regulations 512 Certain of the Staff Regulations must be amended to take account of recent experience and/or Community Law, particularly those aimed at repeated or prolonged absences, disciplinary actions or the individual conciliation procedure.
Internal Communications
513 HR/Incom has made significant progress in bringing the messages and information, both corporate and of social nature to the members of staff. It has achieved this through radical and innovative changes to existing communication channels, the modernisation of other established, traditional channels and by adding new ones where necessary. HR/Incom has also increased the supply of face-to-face communication by organising a number of internal conferences. 514 HR/Incom provides expert advice to other areas within the Bank, assisting and facilitating in communication projects advising on design, content and use of communication channels. HR/Incom is also responsible for the induction and integration of new staff members. 515 These trends will be continued, expanded and honed. HR/Incom will facilitate better communication within, and between, the Directorates with the objective of sharing information and easing access to corporate experience and Knowledge Management. This should be a key area of study and activity during the period and in so doing facilitate corporate cohesion thereby encouraging the Banks staff to feel valued and fully participated in the life and mission of the Bank.
24 February 2009
28
Annexes
24 February 2009
24 February 2009
Annex 1: COP overview matrix: relationship between lending priorities and other relevant key strategic priorities
Lending Priorities/ Strategic Priorities Convergence New focus. Co-funding with EU Structural Funds Value added Knowledge economy Lisbon agenda Growth Initiative TENs TEN Project lists Growth Initiative EPEC SMEs SME access to finance Dedication & transparency of Global Loans Risk Delegation schemes Taking more risk with banks RSFF Risk taking Other SFF Corporate risk taking Structural Programme Loans (SPL) New Financial Instruments RSFF Other SFF LGTT/Other SFF Support to PPP LGTT Other SFF EIF Risk-sharing Global Loans EIF Revised SME-Global Loans Risk-Sharing Global Loans SFF JESSICA EC-EIB new joint initiative on Energy and Climate Change. Carbon Credit Instruments (also for post 2012 period) Environment SustainableDevelopment JESSICA (Urban Env.) Climate Change Energy New EU energy policy Climate change Renewables and Energy Efficiency EPEC SFF JESSICA EC-EIB new joint initiative on Energy and Climate Change. SFF RSFF in green RDI Energy-efficient SMEs
EIB Group cooperation
JEREMIE in convergence regions
Technology Transfer Accelerator (SMEs) Risk Capital Mandate
Risk Capital Mandate JEREMIE
Co-programming Co-operation with the Commission Co-financing JASPERS, JESSICA, JEREMIE JASPERS, JESSICA, JEREMIE Technical Assistance (TA) Other TA instruments for specific countries (Romania, Bulgaria, Turkey, W Balkans)
Cooperation. EIB-FP71
Cooperation EIB-DG-TREN
CIP SME Facility JEREMIE
Cooperation EIB-DG-ENV and FP-7 JEREMIE JESSICA
Cooperation EIB-FP-7
RSFF JASPERS Other TA instruments for specific countries (Romania, Bulgaria, Turkey, W Balkans)
JEREMIE
JASPERS JESSICA Other TA instruments for specific countries (Romania, Bulgaria, Turkey, W Balkans)
JASPERS Other TA instruments for specific countries (Romania, Bulgaria, Turkey, W Balkans)
Seventh Framework Programme Note : EIB/EIF initiatives are highlighted only in the matrix cells where they can play a significant role.
24 February 2009
29
Annex 2a: New EU institutional initiatives (2008)

Inside the EU
Initiative i. LGTT (loan Guarantee Instrument for TENs Transport)
Priority objectives TENs (Value-added, EC co-operation, new financial instruments) The LGTT Cooperation agreement with the Commission was signed on 11 January 2008. It is a facility managed by the Bank and supported by a EUR 500m allocation under the new TEN-T Financial Regulation for the period 2007-2013 and designed to provide coverage of traffic volume-related revenue risks during the ramp-up and early operations periods of TEN-T projects. Initiative ii. EPEC (European PPP Expertise Centre)
Priority objectives Convergence (Technical Assistance) EPEC was established on 1 July 2008 and will be formally launched on 15/16 September 2008. It has a wholly public sector mission and is designed to support the delivery of more and, from the perspective of the public sector, better PPP deals. EPEC's principal tasks are to (i) synthesise and disseminate information and best practice for the benefit of Europe's public PPP taskforces and (ii) provide policy and programme support in PPP procurement and management to its public sector membership. Initiative iii. JASMINE (Joint Action to Support Micro-finance Institutions in Europe)
Priority objectives SMEs Emphasising synergies between various European institutions (European Commission, European Parliament), the Eurofi network, banks and the European Microfinance Network., JASMINE will promote the emergence of a sustainable microfinance sector in Europe, through financial support to essentially non-bank Microfinance Institutions (MFIs) and dissemination of best market practices. JASMINE will primarily focus on MFIs in development phase. A dedicated EIF team will provide two kinds of support to MFIs: one will be the provision of additional capital through a co-financing facility to double the quasi equity participation/loans granted by banks to promising MFIs; the other will be Technical Assistance. The initial resources for JASMINE could reach some EUR 50m and the first operations will be starting early 2009.
Outside the EU
Initiative i. Western Balkans Investment Framework (WBIF)Facility
Priority objectives Support to Pre-Accession Countries An initiative of the European Commission, together with EIB, EBRD and CEB to enhance harmonisation and cooperation in investments for socio-economic development in the Western Balkans. This initiative was welcomed by the June 2008 European Council, which called for its establishment by 2010. As a first step towards this WBIF, by the end of 2008, EC together with EIB, EBRD and CEB are to establish a Western Balkans Infrastructure Initiative including two components: i) A Joint Grant Facility including: The infrastructure Project Facility (IPF) aims to support project preparation via Technical Assistance in environmental, energy, transport and social sectors, with particular focus on potential Candidate Countries, using EC budget funds. A complementary mechanism to pool grant resources, possibly through a joint trust fund, to help to better link and mobilize existing grant resources for both TA and grant blending to support priority infrastructure projects from the partner IFIs, the Member States and other EU multilateral donors. ii) A Joint Lending Facility jointly coordinated by the partner IFIs. This should provide financing for projects prepared using Joint Grant Facility.
24 February 2009
30
Annex 2b: Horizontal initiative with other IFIs in 2008

The Bank has entered into the following horizontal collaboration with other IFIs during 2008 as summarised below.
Initiative i. Post-2012 Carbon Credit Fund
Priority objectives Environment The Post-2012 Carbon Fund was signed on 20th March 2008 in partnership with Instituto de Credito Oficial (ICO), KfW Bankengruppe, Nordic Investment Bank and Caisse de Dpts et Consignations. The fund is designed to underpin the market value of carbon emission reduction units produced after the expiry of the current Kyoto Protocol in 2012. The Fund will support the development of environmentally beneficial projects including renewable energy, energy efficiency, forestry and methane capture, via the acquisition of carbon credits generated by the mitigation, prevention, reduction and/or sequestration of GHG emissions in the period 2013-22 (i.e. after the second phase of the ETS and the Kyoto Protocol commitment period and for a sufficiently long period to have a material impact on the financial viability of underlying projects). The day-to-day activities of the Post 2012 Carbon Fund will be undertaken, by an independent fund management team.
24 February 2009
31
Glossary of Acronyms
AFD ABU ACP ALA ALM CEB CIP EBRD EFTA ENPI EPEC ERDF ESIAF ESF ETS FEMIP FTF FYROM GEEREF GEFSA IF IFI IT JASMINE JASPERS JEREMIE JESSICA KfW KPI LGTT MoU NFR NIB NPV OCT OR P&L PCRs PPP RDI RSA RSFF SFF SMEs TA TEN TTA VC Agence Franaise de Dveloppement Autonomous Business Unit African, Caribbean and Pacific States Asia and Latin America Asset/Liability Management Council of Europe Development Bank Competitiveness and Innovation Framework Programme European Bank for Reconstruction and Development European Free Trade Association European Neighbourhood and Partnership Instrument European PPP Expertise Centre European Regional Development Fund Economic and Social Impact Assessment Framework Facility for Energy Sustainability and Security of Supply Emissions Trading Scheme Facility for Euro-Mediterranean Investment and Partnership FEMIP Trust Fund Former Yugoslav Republic of Macedonia Global Energy Efficiency and Renewable Energy Fund Growth and Employment Facility for South Africa Investment Facility International Finance Institutions Information Technology Joint Action to Support Micro-finance Institutions in Europe Joint Assistance to Support Projects in European Regions Joint European Resources fir Micro to Medium Enterprises Joint European Support for Sustainable Investment in City Areas Kreditanstalt fr Wiederaufbau Key Performance Indicator Loan Guarantee for TEN Transport Memorandum of Understanding Net Funding Result Nordic Investment Bank Net Present Value Overseas Countries and Territories Own Resources Profit and Loss (Account) Project Completion Reports Public Private Partnership Research, Development and Innovation Republic of South Africa Risk Sharing Finance Facility Structured Finance Facility Small and Medium-sized Enterprises Technical Assistance Trans-European Networks Technology Transfer Accelerator (EIF) Venture Capital
24 February 2009
32

BEI Operational Plan

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

BEI Operational Plan

Uploaded by

Copyright:

Available Formats

Corporate Operational Plan 2009-2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

BOARD OF DIRECTORS CORPORATE OPERATIONAL PLAN 2009-2011

Annexes. .. 29 Glossary of Acronyms ................................................................................................ 32

European Investment Bank

Corporate Operational Plan 2009 - 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

Board of Directors Decisions

European Investment Bank

Corporate Operational Plan 2009 - 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

CORPORATE OPERATIONAL PLAN 2009 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

Corporate Operational Plan 2009-2011

Performance results for 2008

European Investment Bank

Corporate Operational Plan 2009 - 2011

Operating environment as at end 2008

European Investment Bank

Corporate Operational Plan 2009 - 2011

Proposed Measures - focus for enhanced EIB support

European Investment Bank

Corporate Operational Plan 2009 - 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

Implementation of agreed change in EIB Statute

Performance targets for 2009-2011

* as revised upwards in July 2008 by the Board of Directors.

European Investment Bank

Corporate Operational Plan 2009 - 2011

Target set in COP 2008-2010* for respective years

European Investment Bank

Corporate Operational Plan 2009 - 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

European Investment Bank

Corporate Operational Plan 2009 - 2011

KPI Table: Main Objectives - Key Performance Indicators (KPIs)

>90 >90 36,910 34,782 2,128 100

98 96 43,420 41,349 2,071 100

>90 >90 38,960 36,550 2,410 100

>91 >92 47,310 44,900 2,410 100

>93 >92 53,965 51,150 2,815 100

>93 >92 55,500 52,375 3,125 100

>93 >92 57,000 53,505 3,495 100

17 (14)% 17(13)% 16(16)% -

3,500 1,500 275-400 124 1,568

3,361 1,737 406 141 1,684

3,600 3,000 275-400 129 1,698

3,600 3,700 >500 140 1, 698

3,800 3,500 n/a 134 1,717

3,900 3,600 n/a 139 2,025

4,050 3,750 n/a 142 2,146

4(4)% 47(38)% 9(8)%

(5) (6) (7) (8)

European Investment Bank

Corporate Operational Plan 2009 - 2011