- European Bank Of Investment (EBI)
The European Bank of Investment was created in 1958 with the major objective of
balanced development of different regions of the European Union.
This is the European banking institution to provide long-term financing.
The member states have jointly subscribed to the capital of the EBI. The EBI is very
active in the capital markets. It also borrows/operates in the major international markets
as well as markets of third countries.
EBI lends for following domains.
Regional development, Trans-European network, Environmental protection and
Modernization of industry.
Loans are accorded by the EBI either directly or through another financial institution.
These can be given in several currencies or in a single currency like dollar, yen, Swiss
franc, ECU, etc.
The EBI is a financial intermediary without the goal of profit making. Its resources
essentially consist of borrowing on capital markets. It is backed up by governments of
the European Union. Therefore, it enjoys a higher credit-rating on the market (AAA).
In view of its financial standing and sound credit rating, the EBI obtains marginally
higher rates on its lendings. The EBI does not accord soft rates (subsidized rates).
The EBI finances big projects through individual loans and those of moderate size
through global loans. It also refinances banks and financial institutions, granting loans
for such projects.
It limits its financing to 50 per cent of the project cost. Co financing of projects with
other lenders is the general rule.
The duration is generally between 7 and 12 years but it may go up to 20 years or more for
the infrastructure projects. The duration as well as delay of repayments is adapted to
specific characteristics of the investments.
The setting up of EMU in 1991 has been a step towards the introduction of a common
currency in the member states of EU.
The Objectives of EMU are:
a) Adoption of an economic policy, based on a close coordination between
economic policies of the member states.
b) Fixing of irrevocable exchange rates leading to a single currency.