Troubled bank born to rebuild Europe

Click to follow
Indy Politics

After the Berlin Wall fell in 1989 European Union states, backed by America, came up with the idea for a bank to help former communist states adapt to market economies.

The European Bank for Reconstruction and Development, which has its headquarters in London, was set up in 1991. The bank is jointly owned by its member countries, including Britain, America and Israel, and employs about 1,000 staff who enjoy tax-free salaries.

Billions of pounds are at its disposal to shore up developing economies, leading to accusations that it is a "glistening bank" not afraid of making losses.

After the United States, which has an 11.5 per cent stake, Britain is the second- largest shareholder in the bank, with 8.5 per cent.

The EBRD lends money to privatise and modernise state- owned industries, and to develop small and medium-sized businesses. Decisions are taken "on sound banking and investment principles" by directors from the 26 member countries.

It does not provide the same kind of "soft loans" made by other development banks, such as the World Bank and the International Bank for Reconstruction and Development, but lends at competitive market rates that vary according to the project.

However, the bank is inclined to step in to support business deals the commercial banks will not touch.

Soon after the bank was set up it courted controversy for spending millions more on decorating its City offices than the projects it was supporting.

More than £200m was spent on furnishings, decoration and travel by Jacques Attali, its first president, who was forced to quit with a £250,000 pay-off. About £750,000 went on imported Italian marble for the building's entrance hall, even though the bank spent only £101m on projects in Eastern Europe.

It was subject to more ridicule when a number of staff had to be taken to hospital after eating a chargrilled tuna steak in the canteen. The bank claimed diplomatic immunity in the face of attempts by health officials to launch an inquiry.

Comments