Outlook European Union officials have been among the harshest critics of the banks whose behaviour caused the financial crisis. The bankers on the end of that bashing might be tempted to ask a few questions of the EU itself following the European Investment Bank's announcement it will no longer lend money to Glencore, "due to serious concerns" about its "governance". Europe's taxpayers, who finance such loans by underwriting the EIB's capital, should also be concerned.
The striking thing about the row over the loan the EIB made to Mopani Copper Mines, a Glencore subsidiary in Zambia, is that the bank is unapologetic about it – dismissing claims about environmental damage (and waiting to hear the results of an inquiry into tax-evasion allegations). The reason it has decided not to make any further loans is that those governance concerns "go far beyond the Mopani investment".
That rather begs two questions. Firstly, what are these concerns and why has the bank only just become aware of them? They are presumably connected to Glencore's IPO last month, which saw the spotlight shone upon the commodities trader like never before. But surely an EU-backed bank investing taxpayers' money should not have needed an IPO prospectus or the media coverage it generated to identify the sort of problems at Glencore that would lead it to veto any future lending? Glencore denies any wrongdoing, but had the EIB's staff done their due diligence properly any concerns should have been identified at the time of the loan.
The second question is this: if the EIB isn't up to the job of identifying potential concerns at a company based in Switzerland, how can we be confident in its investigations in Zambia, or that it has properly considered other loans it has made to support projects in developing countries?
In other words, what else should we worry about in a portfolio of investments worth several hundred billion euros, all of it taxpayers' money? The EU makes a lot of noise about bankers' reckless lending, but it appears its own development bank is no shining example of how to do business responsibly.Reuse content