EIB studies its impact on new capital markets

The European Investment Bank (EIB) is publishing an Evaluation Study on "The impact of EIB borrowing operations on the integration of new capital markets".

The study was carried out by the autonomous Evaluation Unit of the EIB, in cooperation with inhouse services and independent experts, as well as a number of Multilateral Development Banks (MDBs).

The evaluation was carried out in three countries, Portugal and Spain, as well as Greece, in which the EIB inaugurated new capital market segments in 1988 and 1994 respectively. The study concludes that EIB bond issues in these countries have contributed in broadening and deepening local capital markets, by triggering other domestic and foreign issues. By opening up these markets, the EIB has helped in diversifying markets traditionally dominated by government borrowings. In some cases it has set up a process of extending the yield curve, introducing new financial products, and improving the functioning and efficiency by offering alternatives to the government issues.

The study pioneers the ex-post evaluation of MDB floated bond issues in emerging capital markets. Its conclusions throw light on another side of development banking, by demonstrating that MDBs, the largest non-sovereign borrowers in the world, can contribute to economic development also through their borrowing operations.

The EIB is owned by the fifteen European Union (EU) Member States and has its headquarters in Luxembourg. It supports EU policies on a self-financing and non-profit basis, raising its resources on the world's capital markets for onlending to sound capital investment projects that promote primarily the balanced development of the EU. While its activities are concentrated in the Union, the EIB also helps to implement the financial aspects of the EU's cooperation policy towards third countries in Africa, the Caribbean and the Pacific under the Lomé Convention, as well as countries in the Mediterranean region, Latin America, Asia and Central and Eastern Europe, which have concluded cooperation agreements with the Community.

The volume of the EIB's operations has grown steadily and the Bank is today one of the largest financing institutions of its kind in the world. As a major international borrower, which has always been awarded the highest "AAA" credit rating by the world's leading rating agencies, the EIB raises large volumes of funds on fine terms. In 1998 total borrowings amounted to EUR 30 billion, of which some 60% in euros and the 1998 total lending amounted also to some EUR 30 billion.

In 1988, the EIB inaugurated the Portuguese escudo-denominated foreign bonds market (the caravela market) with one issue of PTE 5 billion and was instrumental in the opening up of the Spanish peseta market for non-residents (the matador market) with two issues totalling ESP 33 billion. In the period 1988-98, the EIB has made matador issues totalling ESP 1 373 billion, whereas the market emerged totals ESP 4 112 billion. In Portugal EIB bond issues totalled in the same period to PTE 512 billion, out of a market total of PTE 2 320 billion. In 1994 EIB's first Greek drachma issue of GRD 10 billion, opened up the domestic drachma bond market for non-residents, which at the end of 1998 totalled GRD 2 269 billion, of which GRD 115 billion, represent EIB issues.

The EIB has also encouraged the growth and internationalisation of the capital markets in Central and Eastern Europe with issues in Czech Koruna, Estonian Kroon, DEM-indexed synthetic Polish Zloty and Hungarian Forint.