Malta and the Council of Europe Development Bank
In June 2013 Malta will host the annual meeting of the Council of Europe Development Bank (CEB). It will be 40 years since Malta joined the Bank, previously known as the Social Fund. After joining in 1973, Malta took several loans for social housing. Then in 2003 it obtained a loan for over €200 million to help finance the construction of Mater Dei hospital; two-thirds of that sum has been repaid and the rest are to be repaid by 2018. In the CEB’s decision-making bodies, Malta has played an active role in promoting greater transparency and accountability. It has also strongly defended the interests of the ‘target group countries’ (that is, the less rich among the member states) and worked towards consensual decisions among the large shareholders and the small and medium-sized ones.
The capital contribution of the member states to the CEB depends on their economic weight. Germany, France and Italy together account for about half its capital. Malta’s share is about 0.2 per cent but its share of outstanding loans is currently three times as high. Social housing and health-related projects are some of the CEB’s areas of concern; others are schools, prisons and old people’s homes. In the European financial landscape the CEB specialises in the social sector, as distinct from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). The EIB is the European Union’s bank and concentrates on industry, services and large public infrastructure projects. The more broadly-based EBRD fosters transition to market economies in countries in Central and Eastern Europe, Central Asia and North Africa.
The CEB was set up by the Council of Europe in 1956 to deal with the specific issues of refugees, displaced persons and migrants following the Second World War. Since then its membership and scope have broadened gradually to make it what it is today: the social development bank in Europe. At present, the CEB supports its member states through three lines of action: strengthening social cohesion; managing the environment; and supporting public infrastructure. At the same time, the CEB’s membership has increased to 40 countries. Today almost all, but regrettably not all, the members of the Council of Europe are also members of CEB and support actively social cohesion policies in Europe.
To achieve its objectives CEB finances social projects more particularly in the countries of Central, Eastern and Southern Europe, or what it calls the “target group countries”. In a difficult economic and financial environment, the Bank has continued to provide support for projects complying with the values and objectives of the Council of Europe.
The CEB passes on a number of important advantages and benefits to its member states. Its unique social mandate allows a focus on the segments of the population most in need, such as migrants or displaced persons, and regions with a low average GDP per capita. Its excellent reputation in the financial markets, and its continued AAA rating by all three major rating agencies since 2000, allow it to lend to member states at very advantageous rates.
In addition, its lean and modern organisation allows quick and comprehensive responses to the needs of its member states while its partnership agreements with the European Commission and the EIB make the loans offered by the Bank more effective.
The CEB’s model is characterised by a balance between low-cost medium and long term funding and a prudent financial management. Against the background of profound changes in the economic and financial environment, it has to respond to the new emerging challenges. Like its peers, the CEB has to prove its added value to its shareholders and its technical competence and relevance to its business partners while maintaining sound prudential management systems to keep its excellent ratings.
Since its establishment the CEB has made disbursements of some €42 billion and contributed to investment projects for a total of twice that sum. As a result of sound financial management it has made average profits of €100 million per year over the last decade; these have been allocated to reserves thus raising the CEB’s total equity to over €2 billion for an initial cash investment of less than €100 million by its shareholders. In 2011 alone, 34 projects with a financing volume of €2.1 billion were approved and about €1.8 billion were disbursed.
The CEB’s continued relevance was reaffirmed in 2011 by its member states when they swiftly approved the sixth capital increase which saw the subscribed capital increasing from €3.3 billion to €4.9 billion.
At a time when the economic outlook is increasingly challenging, the strengthened capital base will enable the CEB to vigorously pursue its mandate. In this context it is noteworthy that smaller member states, in particular, were among the first to subscribe, hence underscoring their commitment to CEB and to the values of the Council of Europe.
On taking over in 2011, the new management launched a debate within CEB and with shareholders on how it can strengthen its social mandate while keeping an AAA rating.
It decided to improve the screening of projects, better target projects to social needs and improve the monitoring of project implementation. At the same time, transparency and communication within the Bank and with its shareholders, and open dialogue with partner institutions, will further increase the Bank’s visibility.
As a Partial Agreement of the Council of Europe, the CEB has always worked towards a strong partnership with its parent institution. In addition to aligning itself with the Council of Europe’s vision of human rights, democracy and the rule of law, it also endorses them as its own priorities. A concrete example of this special relationship is the CEB’s focus on human rights, inspired by the conclusion of the Third Summit of Heads of State and Government of the Council of Europe, held in Warsaw in 2005.
At present there is scope to strengthen cooperation in three important areas. First, at the political level, more frequent exchanges with the secretary general, the Parliamentary Assembly and the Committee of Ministers would enable the CEB to better align its actions and projects with Council of Europe priorities. Secondly, at the operational level, the CEB could continue to collaborate on selected Council of Europe priority initiatives. Lastly, in addition to the Human Rights Trust Fund which is administered by the Bank, both institutions could cooperate to raise funds and voluntary contributions for future dedicated trust funds in a more concerted and effective manner.
The CEB thus remains highly relevant as a multilateral institution with a special mandate on social issues and provides value-added to its shareholders. The first exchanges of views held by the new management within the Bank and with shareholders have confirmed that the CEB is heading in the right direction and proving ever more transparent and efficient. By the time it holds its 2013 annual meeting in Malta, the CEB will be well embarked on a new phase of its evolution.
|CEB: Key figures (in million euros)||2011||2012||2009|
|Loans disbursed during the year 1||855||1 782||1 806|
|Projects approved during the year||2 110||2 267||2 665|
|Financing commitments signed during the year||1 798||2 311||2 050|
|Loans outstanding||12 075||11 988||12 198|
|Equity (after allocation of profit)||2 111||2 054||1 953|
|Total assets||26 083||24 721||22 731|
Rolf Wenzel is Governor of the Council of Europe Development Bank. Joseph Licari, Malta’s Ambassador to the Council of Europe, is chairman of the Administrative Council of the Council of Europe Development Bank.