European Investment Bank [print sheet]
Last updated: 14/08/08

'The European Investment Bank (EIB) was set up in 1957 to provide long-term financing for projects which would further the policy objectives set by the European Community. The Bank provides funding to projects which contribute towards EU integration, economic development and social cohesion of the EU member states, but also to projects in other countries linked to the EU through various agreements (such as potential member countries and the Western Balkans. The EIB is the world's biggest international public lending institution, raising over €48 billion in a range of currencies (principally Euros, Pounds Sterling and US Dollars) and having signed loans of €55.9 billion in 2006. The Bank raises money through issuing bonds, and enjoys the highest possible credit rating as its borrowing is effectively guaranteed by the member states. In this way it can borrow at the lowest possible rates and pass these low rates on to its customers.

The European Investment Bank operates like a development bank, such as the World Bank, providing long-term loans to projects that contribute to economic policy goals set by the European Union. It does not make grants, which are instead provided by the European Commission. The EIB is a not-for-profit institution, so does not charge fees and can offer very low rates to its customers. Its loans are for a period of four to twenty years, although can be offered over a longer period. The bank only contributes up to 50% of the cost of a project; the rest has to be raised through other sources.

The EIB structures its lending priorities around six main areas:

• Improving economic and social cohesion in the European Union by financing projects in poorer regions to help bring them to the same standards of living as richer regions.
• Financing projects that contribute to the EU meeting the objectives set by the Lisbon Strategy in 2000, which set the goal of establishing the most competitive knowledge-based economy in the world by 2010.
• Supporting the development of Trans-European networks, which are large networks in the transport, telecommunications and energy sectors across the whole of the European Union.
• Support of EU development and cooperation policies in partner countries.
• Support for projects which contribute to evironmental protection and improvement, including climate change and renewable energy.
• Support for small and medium-sized businesses.

• In the past five years, the EIB has made loans worth over €209 billion. Over 90% of this is spent on projects within the EU (€189.5 billion).
• Projects in the UK that have received loans from the EIB include the redevelopment of the East London tube line in time for the 2012 Olympic Games, which received a £450 million loan from the EIB in 2005.

For

• Projects can borrow money from the EIB at far lower rates than would be possible commercially, which can substantially lower the cost of a project.
• The EIB contributes to closer European integration by focusing its lending on EU policy objectives such as research and design, and greater cohesion among the different regions of the EU.

Against

• The EIB has often been criticised for its lack of transparency, accountability and the way it addresses environmental issues in its work.
• EU member states have a very advanced banking and lending sector. If the EIB were wound up, then the private banking sector could easily replace its activities.

‘'As the European Union's long-term financing institution, the EIB supports the Union's policies by financing projects deemed economically and financially viable.' - Philippe Maystadt, President, EIB, 2005

'The EIB has drawn up various codes of conduct but fails to comply with good corporate governance rules which it is required to observe in its capacity as a public bank and the largest supranational lending institution in the world.' - Mónica Ridruejo MEP, 2004.