EIB makes its move on development restructure

The European Investment Bank is briefing its board of directors Tuesday on plans to reorganize how it invests outside Europe, an attempt to use recent criticism of its work in low-income countries as fuel for reform. A 30-page presentation, seen by Devex, outlines how the lender wants to create a new “dedicated operational setup” for its work beyond the European Union. In 2020, €10.2 billion (approx. $12 billion) — 13% of the Luxembourg-based bank’s total financing — went outside the bloc, including €4.7 billion to Africa. The new setup, which the bank says would require “no additional EIB capital,” is pitched as a “better-tailored business model” for work outside the EU, involving: - “Differentiated strategies. - Dedicated risk appetite within the overall EIBG risk appetite framework. - Local presence to enhance impact, EU policy dialogue, local programming. - Collaboration with MS DFIs and MDBs. - Impact-driven incentives, culture.” It also claims the restructure would allow “more direct policy steer by EU development and external policy priorities by including Member States, European Commission, and [European External Action Service] development expertise in governance.” That’s a sweetener for the commission. The EU executive body has made no secret of its desire to steer a team of European development players, including national development banks, EIB, and the European Bank for Reconstruction and Development. Relations between EIB and the commission have been fractious in recent years, and Brussels will want to see the fine print of the new proposal. EIB was on the verge of moving ahead with a development subsidiary in June 2018 but postponed after France and Germany launched a broader debate to rationalize EU development finance. That generated a 2019 Wise Person’s Report and a feasibility study this year, both of which found EIB does not have enough staff based outside the EU and is ill-suited for the risky investments required in low-income countries. Officials at the bank fought that criticism, but this week’s presentation also cites the feasibility study to justify the latest changes, which it wants to be implemented starting January. Mikaela Gavas from the Center for Global Development told Devex that the proposed changes, including a different risk appetite for non-EU operations, “all point to the need to create a separate entity/subsidiary, although it’s not explicitly mentioned.” “I think that there is a clear strategy here of first positioning the bank to get member states to agree with the approach,” Gavas said. “And once they have agreed, the setting up of a subsidiary will inevitably follow in order to materialise the changes.” EU member states will release their common position on the European Financial Architecture for Development next month, with a draft likely to be circulated this week. After COVID-19 saw off the already remote possibility of creating a new EU development bank, attention has turned to a so-called “status quo plus” scenario. The idea is to boost EU visibility in Africa and get development actors, particularly EIB and EBRD, to coordinate better together. However, as some states pointed out at a meeting last month, if the hope is to show renewed EU ambition, then the moniker “status quo plus” might need work. As for the commission, a spokesperson told Devex Monday: “We stand ready to discuss with the EIB and [member states’] potential ideas to improve the bank’s development impact outside the EU. However, the current Status Quo Plus scenario, which the commission supports, does not involve any major institutional change. As regards possible changes that may be contemplated by the EIB, a key issue for the commission would be to ensure an effective EU policy steer through appropriate governance and shareholding arrangements.”