Costs haunt the marble bank

THE European Bank for Reconstruction and Development is facing a fresh row over costs. Attention is on the 23-strong board of directors who together cost £16m per year - 12 per cent of the operating budget.

Shareholders Britain, Canada and Germany want more cost-cutting at the London-based bank, where lavish expenditure on marble and furnishings led to the resignation of its first president, Jacques Attali, in 1993.

They complain that directors and their support staff cost almost as much as the £17m rent for the bank's controversial headquarters in the City.

The issue is not formally on the agenda for the annual general meeting, which begins on Friday, but officials say the cost of the directors is a "hot topic".

However, many smaller bank shareholders are unwilling to see the number of directors or "alternate directors" cut, as it will be their board representatives who face the axe.

Directors earn around £80,000 a year for what critics say is a part- time job. They are also entitled to a housing allowance which in some cases can reach £20,000 a year, and other expenses. "Their expenses alone can come to more than the average Londoner earns each year," said one bank source.

Other costs include the 23 "alternate directors" who earn slightly less than the directors. Then there is an assistant and a secretary for each director. The operation takes up two floors of the bank's expensive Exchange Square headquarters.

Efforts to make dramatic savings are likely to fall foul of the smaller countries. Many accuse the bank's president, Jacques de Larosire, of trying to weaken the board so that he can get his own policies through more easily. They are unlikely to back plans to inject more capital into the bank if their officials have been fired.

Mr de Larosire is desperately fighting to cut costs to restore the bank's image. He has cut back travel, frozen wages and is considering moving the bank from its expensive offices.

Many bank staff share his view. One said: "How can you go on punishing the foot soldiers while the officers go on spending money freely?"

Increasing the capital base is another issue that Mr de Larosire wants to discuss behind the scenes at the AGM. Opponents say the bank has not yet proved the need for a further capital injection. Lending by the EBRD is still below expectations, at Ecu2bn last year.