The European Investment Bank (EIB) was created at the same time that the European Union was founded, as a result of the Treaty of Rome, signed on March 25, 1957. Headquartered in Brussels, Belgium, it was later relocated to Luxembourg City, Luxembourg, in 1968, where it has remained ever since.
Initially, the EIB was only authorized to provide financing for projects inside the European Union, however, it’s mission scope was later widened to provide financing for prospective EU members, and in the end – for countries anywhere around the world. Today, most of the EIB’s investments continue to be for projects in the European Union, but it has conducted operations in 160 countries around the world.
Since it began operations in 1958, the EIB has invested over one trillion euros in projects in Europe, Africa, and Central Asia, primarily in the field of “green energy” innovations, job growth, and urban transportation projects.
What Is the EIB?
The European Investment Bank is one of the largest supranational investment agencies in the world. Wholly owned by the members of the European Union, the EIB functions as the lending arm of the EU, using loans and financial guarantees to support SMEs, the reduction of carbon, and to provide debt instruments in accordance with the political strategies of the European Union.
Currently, the EIB employs around 3,000 people, most of whom work at its headquarters in Luxembourg, and operates two satellite offices in Brussels, Belgium, and Abidjan, Côte d’Ivoire.
What Does the EIB Do?
The primary activity of the European Investment Bank is to use its capital reserves to back bonds that are sold on international capital markets in order to raise funds that are then used to provide loans and loan guarantees for development projects primarily inside the European Union.
Approximately 90% of the EIB’s activities involve providing loans (and loan guarantees) to local governments and Small to Medium Enterprises (SMEs) in order to support growth and jobs. Other EIB activities include providing capital to clients in order for the clients to then attract additional financing for their projects and offering technical assistance for non-EU members.
Who Owns the EIB?
The EIB is wholly owned by the member states of the European Union. The governance structure of the EIB is rather complex as it is run by three overlapping decision-making bodies: the Board of Governors, the Board of Directors, and the Management Committee.
The Board of Governors is composed of the current Finance Ministers of EU member states, and it is this board that determines the long-term strategy of the EIB. The Board of Directors oversees the strategic direction of the EIB while the Management Committee handles day-to-day operations.
The Board of Governors appoints the members of the Management Committee to renewable six-year terms. Once appointed, they are then solely answerable to the EIB. As a result of several scandals, the EIB now employs an internal audit division with autonomous powers and cooperates with external watchdog agencies such as the European Anti-Fraud Office (OLAF), the European Court of Auditors, and the European Ombudsman.
The EIB does not receive any funding from the European Union budget, however, all member states contribute to the EIB’s reserves. All of the EIB’s working capital is raised by issuing bonds on the open market.
In 2021, EIB approved projects worth EUR 55.8 billion, raising EUR 55.2 billion for further financing.
What Does “EIB” Stand For?
The acronym EIB stands for the European Investment Bank.
What Are the EIB’s Goals?
Aside from its macro goal to support the policy aims of the European Union, the European Investment Bank’s primary goals are to provide debt assistance, invest in small to medium-sized enterprises (SMEs), and “green” finance, primarily for companies, individuals, and local governments in the European Union.
Initially, the EIB’s goals were to work in cooperation with the International Bank for Reconstruction and Development to provide financing for EU member states as they recovered from the devastation resulting from World War II.
However, the 1973-1975 recession in Europe saw high levels of inflation and low unemployment across the region as an aftermath of the 1973 oil crisis in the Middle East. The resulting financial turmoil and the addition of three new countries to the European Union (Ireland, Denmark, and the UK) made it difficult for some member nations to achieve their policy objectives. As a result, the EIB pivoted to a focus on EU-wide projects and providing financing for member nations with struggling economies.
In the 1980s, the EIB took on the mantle of providing technical and financial advice to countries like Greece, Spain, and Portugal which were in the process of joining the European Union. As more countries joined the EU, so, too, did the EIB gain more capital investments from member states, allowing the EIB to begin focusing more on loans to small and medium-sized enterprises (SMEs) as a way to foster innovation and improve urban transportation networks.
Following the end of the Communist era at the end of the 1980s, the EIB began investing in projects in Eastern Europe, including Slovakia, the Czech Republic, Bulgaria, Hungary, Poland, and Romania, all of which later became members of the European Union.
In 1991, the EIB provided financing and technical support for the creation of the European Bank for Reconstruction and Development (EBRD), which continues to work cooperatively with the EIB today.
After the turn of the millennium, the EIB expanded its operations outside of Europe following the signing of the Cotonou Agreement between the EU and 78 African, Caribbean, and Pacific Ocean countries. The EIB also reoriented its objectives to adhere to the Lisbon Strategy to make the European Union a “high-technology and knowledge-based” economy.
Starting in 2002, the EIB also began focusing its investments on achieving the development goals relating to sustainable energy policies and the reduction of carbon use, which later took the form of the UN 2030 Sustainable Development Goals (SDGs).
In 2014, the EIB launched the European Fund for Strategic Investments (now known as InvestEU) to help “mobilize” private financing for projects deemed to be in the strategic interest of the European Union.
In 2016, the EIB created the Economic Resilience Initiative to provide financing for non-European countries in order to stimulate their economies and thus help reduce the flow of economic migrants into Europe.
Today, the two primary goals of the EIB are to provide lending and loan guarantee services for SMEs and to provide financing and technical assistance for climate and environmental sustainability, predominantly inside the European Union.
Other components of the EIB’s mission include providing financing support for transportation network projects, promoting job skills training and “innovation,” ensuring regional cohesion through balanced economic development, and working to reduce poverty and inequality around the world.
