An international coalition of NGOs is pressing for a fair hearing to be given tomorrow at the European Parliament's economic and monetary affairs committee (EMAC) to a report which is highly critical of the European Investment Bank (EIB), the EU's secretive house bank.

Spanish MEP Monica Ridruejo's report raises fundamental concerns about the EIB, which is now larger than the World Bank in terms of lending and borrowing. NGOs have been critical of the

EIB for some time, and have communicated their concerns to EMAC members in a statement in advance of tomorrow's meeting. These include:

- the Bank's weak corporate governance structure

- its lack of transparency and unwillingness to disclose information

- its lack of accountability due to its unclear status as both an EU institution and a bank

- its lack of procedures and capacity to thoroughly assess and monitor hugely expensive projects both before and after it agrees to finance them.

The EIB was originally set up to promote regional development and integration through sound investments within the EU. It is now grown significantly and has a mandate to invest outside the EU.

Yet it lags far behind all the other major international financial institutions when it comes to basic institutional standards and responsible lending practices.

The NGO appeal sent to all members of EMAC is below:

APPEAL to the members of EMAC regarding the meeting of March 15, 2004

The draft report on the EIB by Rapporteur Ridruejo raises the right questions. Withdrawing the demand for the report would send the wrong signal to the EIB

We, non-governmental organisations who have monitored the European Investment Bank over the last ten years, commend with great satisfaction the draft report on the EIB by Rapporteur Monica

Ridruejo. The report highlights some of civil society's central concerns with regard to the corporate governance structure of the EIB, its lack of transparency and its unclear relation to the European institutions.

Previous own-initiative reports of the Committee on Economic and Monetary Affairs of the European Parliament on the EIB, dating from 2000, have helped to stimulate reform processes within the

Bank. We believe that EMAC's role is extremely important and that the Committee should continue with its own initiative reports on a regular basis. Therefore, EMAC would be well advised to uphold

this current important initiative and consider the most appropriate ways to support the draft report and bring it to a successful conclusion.

We would like to draw your attention to the central aspects of the draft report which merit your support, independent of the more specific allegations raised in the explanatory statement. We would

also like to remind you that the Statute of the EIB is currently under review by the ECOFIN Council in the frame of required amendments due to the enlargement of the European Union and a new European Constitution. These current signs from the European Parliament with regard to the governance of the EIB are thus very timely and should inform the wider-ranging reform processes which the EIB is presently called to undertake.

Corporate governance structure of the EIB

No shareholder of any major corporate company would accept a line of command which does not guarantee the independence of its directors and management. Not so in the case of the EIB. The

Board of Governors (BoG) appoints the Board of Directors, the Management Committee and the Audit Committee. The BoG acts as judge and jury at all levels of EIB operations, structurally

impeding transparency in decision-making and severely diminishing the capacity for corrective measures in the event of activities not being correctly conducted by the EIB.

Shareholders of any major corporate company would make sure that managers are appointed on a yearly base, rolled over for a maximum of three years, and then replaced. Not so in the case of

the EIB. The Management Committee members are appointed for six years, with no apparent accountability for their actions. There is hardly any possibility to dismiss Management Committee

members in the event of poor performance. This may become an expensive way to run a business.

The statutory changes presently proposed by the EIB Board of Directors to the ECOFIN Council leave the corporate governance structure fully in place, with minor cosmetic features added.

Lack of transparency in the EIB's financial operations

Stakeholders of any major public company would insist on having thorough access to information regarding its financial health and the potential financial risks deriving from its activities. Not so in the

case of the EIB. There exists no publicly accessible list of bad loans or badly performing lending operations. According to sources in the Bank, outstanding loans and obligations currently amount to

approximately EUR 400 billion, with only EUR 170 billion backed through the mechanism to call on capital subscribed by the members. Any calling on members to pay in the capital subscribed would mark the end for the EIB's triple A rating and its possibility to successfully issue bonds on the financial markets.

Stakeholders of any major public company would insist on having a clear picture on where credits are allocated and whether they perform in line with the stated goals of the company. Not so in the

case of the EIB. Ever more lending is channelled through global loans to commercially operating intermediary banks which are neither required to publicly inform about final resource allocations

nor the lending terms of the intermediary.

The EIB's responsiveness to interested public, often the subject of EIB financed projects, neither lives up to the standards performed by other international financial institutions such as the World Bank or the European Bank for Reconstruction and Development nor to the Aarhus Convention on Access to Information of which the European Union is a signatory. The EIB also questions the right of

other EU institutions, such as the European Parliament, to information on its actions and performance.

The statutory changes presently proposed by the EIB Board of Directors to the ECOFIN Council do not provide a means to increase the transparency and accountability of EIB lending operations. This needs to be considered in the context of the ongoing diversification of financial services provided by the EIB, namely in the field of risk management and guarantee operations.

The EIB's unclear relation to the European institutions

The lack of effective accountability mechanisms controlling the EIB is caused to large extent by its double status as a European institution and a bank operated by the member states of the

European Union. . The Tripartite Agreement between the EIB, the Commission and the Court of Auditors, the recent ruling of the Court of Justice on the competences of OLAF with regard to the

EIB's financial conduct, and other specific arrangements can not substitute for supervision by an independent body.

Among other things, the situation seems to have led to a growing deferral of responsibility on the part of the EIB's Board of Directors, with the effect that the Bank is increasingly used by the member

states to top up the three percent public deficit spending threshold for the Euro-zone participants. This may partly explain the over-proportional lending to the big and wealthy member states which

least need the financial support of the EIB.

Evaluation results are an important measure for establishing a reliable basis for accountability. Also in this regard, the EIB could improve its structures. Difficulties with evaluation are mainly due to

the Bank's unclear objectives. However, even a partial evaluation carried out by an internal evaluation unit shows profound problems with the EIB's ability to fulfil its own goals and contribute to

sustainable development.

There is an urgent need to clarify the EIBs status in the new European Constitution. It needs to become directly subject to European legislation and to become the subject of supervision from

institutions such as the European Parliament, the European Central Bank, the European Court of Auditors and OLAF. However, the statutory changes presently proposed by the EIB Board of

Directors to the ECOFIN Council do not provide a remedy for clarifying the status of the Bank with regard to the European institutions. On the contrary, a clear tendency is prevailing to maintain the EIB outside the realm of the European institutions.

In the vivid hope that this information is helpful for the proceedings of the EMAC meeting of March 16, 2004, and may spur your concern about increasing the European Parliament's scrutiny of the

EIB

Friends of the Earth International, CEE Bankwatch Network, FERN, A SEED Europe. Amici della Terra (Italy), BothEnds (Netherlands), Campagna per la Riforma della Banca Mondiale (Italy), CEIE (Bulgaria) CEPA (Slovakia), Clean Air Action Group (Hungary), Community Atgaja, Lithuania, Eclogistas in Accion (Spain), Friends of the Earth EWNI (UK), Green Federation Gaja (Poland), Hnuti Duha/FoE (Czech Republic), Les Amis de la Terre (France), Local Economic Accountability Network (UK), Milieudefensie (Netherlands), Polish Green Network (Poland), Urgewald (Germany), WEED (Germany), Za Zemiata (Bulgaria).

More information on the NGO EIB campaign can be found here:

http://www.bankwatch.org/issues/eib/meib.html