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Clarke questions size of board for European Bank

ST PETERSBURG, (Reuter) - Kenneth Clarke, the Chancellor of the Exchequer, questioned the size of the board of the European Bank for Reconstruction and Development, saying cost effectiveness should apply to all areas.

Mr Clarke, in his speech to the annual meeting of the EBRD, set up to aid eastern Europe, welcomed the efforts of the bank's president Jacques de Larosiere to reform the organisation which had a reputation for unneccesary spending.

Mr Clarke questioned the justification for the 23-member board of directors which accounts for 12 per cent of the bank's budget.

The board also has costs not included in that figure such as its share of renting the EBRD's London headquarters.

Bank sources say the issue of reducing the board is gaining momentum and on Monday, US Treasury Under-Secretary Lawrence Summers said the question of number of directors would have to be raised.

But proponents of reform say reducing the board is politically difficult. The bank's 59 members are represented by directors who all have alternates and other staff. In addition, they use resources from the bank.

Cutting the size of the board would mean constituencies would have to be bigger and more countries would be indirectly represented.

One idea for reducing its size is to have a smaller executive resident board to deal with day to day matters while other members could be shipped in to approve projects. There is also a proposal that directors should get more support from their London embassies rather than have separate staff based at the EBRD.