ECB oversight of the EIB makes little sense

The European Investment Bank has reportedly agreed to discussions which could lead to it falling under the supervisory eye of the European Central Bank, following pressure from several European Union members. But this seems more like a political refusal to give something for nothing than a move likely to improve how the supranational operates.

  • By Craig McGlashan
  • 07 Aug 2018
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The development, reported by the Financial Times, comes after a group of EU governments including Austria, the Netherlands and Sweden demanded that any increases in capital for the EIB from member states — a necessary injection if Brexit leads, as expected, to the UK withdrawing its large share — should be tied to reform to oversight arrangements for the lender.

Quite why this reform should include having the ECB supervise the EIB’s lending is anyone’s guess.

The EIB’s board of governors — which “lays down credit policy guidelines, approves the annual accounts and balance sheet, and decides on the Bank’s participation in financing operations outside the European Union as well as on capital increases”, according to the EIB website — is made up of EU finance ministers.

It in turns appoints the board of directors (“approval of financing operations, approval of policies and the operational strategy, supervision of the management committee”), the management committee (“day-to-day management of the Bank under the authority of the EIB president”) and the audit committee (“auditing of the annual accounts, verifying the bank’s activities conform to best banking practice”).

That seems like quite a bit of oversight already — at the top level by members of EU governments and at the lower levels by people answerable to them. It certainly, as it should, makes the EIB more accountable to member states than any private investment bank or high street lender, and a good few agencies.

For good measure, the European Court of Auditors, which audits the EU’s finances, can audit “loan operations under the mandate conferred by the EU on the Bank as well as the operations managed by the Bank that are guaranteed by the general EU budget”.

Why having the ECB supervise the EIB will lead to any increased scrutiny is not clear. It’s not like banks supervised by the ECB haven’t had their share of problems over the last few years.

The calling for ECB oversight also ignores the fact that the EIB is not a normal bank.

For a start, it publishes a list of projects waiting to be financed and a list of those that have been, meaning anyone from prime ministers to amateur bloggers can scrutinise where money is being approved and spent.

The EIB has triple-A status (something rating agencies have said it will maintain so long as other countries make up the expected capital shortfall). It is a pioneer in green bond impact reporting and all the extra transparency that brings — after all, who better to scrutinise spending on projects than investors themselves?

The call for ECB supervision may well be a case of member states trying to look tough when granting extra capital to the EIB — otherwise the injection could easily be twisted as ‘handing over cash to foot the bill for Brexit’ by unscrupulous anti-EU politicians.

Those member states may well want to show that they won’t give something for nothing. But they can rest assured that if the ECB does start to supervise the EIB, the benefit will also be just that — nothing.

  • By Craig McGlashan
  • 07 Aug 2018

European Sovereign Bonds

Rank Lead Manager Amount €m No of issues Share %
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1 JPMorgan 13,145.26 17 13.20%
2 Citi 9,541.01 14 9.58%
3 HSBC 8,956.42 10 8.99%
4 BNP Paribas 7,456.75 9 7.49%
5 SG Corporate & Investment Banking 7,166.56 9 7.19%

Dollar Denominated SSA (Excl US Agency)

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 16,139.62 36 11.33%
2 JPMorgan 14,079.05 31 9.88%
3 Barclays 10,277.94 21 7.21%
4 HSBC 9,651.51 20 6.78%
5 Deutsche Bank 9,608.67 21 6.75%

Bookrunners of Euro Denominated SSA (Excl US Agency)

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 24,013.12 43 10.22%
2 HSBC 17,211.08 44 7.33%
3 BNP Paribas 16,950.33 29 7.22%
4 Credit Agricole CIB 16,768.27 33 7.14%
5 Barclays 15,192.79 29 6.47%

Bookrunners of Global SSA (Excl US Agency)

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 41,493.22 161 8.13%
2 HSBC 33,808.37 117 6.63%
3 Citi 31,911.03 89 6.26%
4 Barclays 30,500.85 91 5.98%
5 Deutsche Bank 25,450.03 69 4.99%