2012 business plan and budget

Executive summary

The Bank’s Business Plan and Budget for 2012 reflects the second year of the implementation of the Fourth Capital Resources Review strategy and framework (CRR4), which covers the period 2011 to 2015.

Context

The Bank’s medium term strategy is clearly articulated in the CRR4 strategy.  In 2011, which is the first year of CRR4, the Bank achieved annual business volume at the upper end of the CRR4 and 2011 Business Plan and Budget objectives range of €8 to €9 billion, with a strong performance for the Early Transition Countries (ETC), West Balkans and Sustainable Energy (SEI) strategic initiatives. 

The CRR4 medium term resource framework recognises that the pursuit of the CRR4 strategic priorities will have resource implications driven by the complexity and the number of projects. This includes planned growth of policy dialogue activities and integrated approaches, by a growing portfolio of projects and TC activities, and by the development of innovative financing instruments to implement the strategic objectives for example in the area of local currency financing or energy efficiency financing.    

The Bank is preparing to expand its region of operations and to become active in the countries of the Southern and Eastern Mediterranean (SEMED) given historic changes in a number of countries following the ‘Arab Spring’. Governors adopted a series of resolutions effective 30 September 2011 to make the necessary amendments to the Agreement Establishing the Bank to enable this transition. This provides a mandate to the Bank to provide technical cooperation to Egypt, Morocco, Tunisia and Jordan, and to prepare for possible future investment projects in these countries. This approval gives the Bank the opportunity to apply the 20 years of experience it has built up supporting the process of economic and democratic change in Eastern Europe to a new region undergoing an equally dramatic transformation.

The recent economic slowdown in some of the existing countries of operations combined with weak leading indicator data and a degradation of the external environment resulting from the ongoing sovereign debt crisis in the Eurozone all point to weaker growth rates in 2012.

Within this complex and uncertain operational environment, taking account of current transition challenges and business trends, the operational objectives of the EBRD for 2012 are to:

• maintain strong focus on delivery of CRR4 transition and operational objectives; 
• achieve rapid operational start in new region reflecting timing of governance process;
• strengthen portfolio management capacity to handle growing portfolio of complex operations within high risk context;
• be prepared to respond to shifting challenges and potential game-changing crisis events; 
• pursue active implementation of ETC and Western Balkans initiatives, further development of SEI and start of the Information and Communications Technology initiative;
• promote client focus across the organisation and dynamic business development; and
• building on strengthened matrix management, ensure efficient resource allocation across business segments.  

IFI coordination has been considerably boosted in the Bank's prospective new region of operations under the aegis of the Deauville Partnership, announced in May 2011 by G8 leaders.  The EBRD will continue to promote gender equality and women's empowerment in accordance with its Gender Action Plan (GAP) that seeks to ensure that the Bank’s commitments to promote gender equality find concrete application both internally and in the Bank’s investments and technical cooperation projects.

Business Plan Objectives

The objectives within the Business Plan and Budget for 2012 include:

• number of operations within a range of 350 to 400 for the existing region of operations and within a range of 370 to 420 including the SEMED region;
• annual business volume within a range of €8.0 to €9.0 billion for the existing region of operations and within a range of €250 to €500 million for the SEMED region, with a high transition impact target;
• net operating asset growth within a range of €2.6 to €3.6 billion supporting the continued build-up of the operating assets base of the Bank.

Budget

The 2012 budget is established on a reasonable balance between strict cost control and positive response to the business needs.

The 2012 Budget in real terms for the existing region represents a ‘zero real budget growth’ within the underlying budget to implement the CRR4 objectives, except for the cost impact in 2012 of approved structural changes to benefits arrangements and additional accounting costs of the Bank’s final salary retirement plan under International Accounting Standards, driven by stock market performance.  With these items, the resulting 2012 Budget for the existing region of operations represents a real growth of 1.5% and includes a total of 36 positions for 2012 within the CRR4 resource framework. 

The 2012 Budget incorporates additional resources required to develop the Bank’s operational capacity in the SEMED region, representing an additional 4.2% budget and 89 additional positions for 2012. These frontloaded resources are urgently required to deliver on the planned operational objectives to deliver around 40 new annual projects by 2013 in the SEMED region.

The Bank’s competitiveness and attractiveness as an employer, in job markets in both London and in several countries of operations including the expansion into the new region of operations, continues to require targeted recruitment efforts and compensation to ensure that the Bank can attract the necessary professional skills across functions and departments.

The approved 2012 overall compensation proposals are limited to actual inflation and are applied based on individual performance and gap to market. These include:

• a total 5.2 per cent provision for headquarters based staff;
• a total 8.0 per cent provision for resident office based staff; and
• a performance related compensation pool based on 13.5 per cent of the eligible professional staff payroll.

The approved budgets for the Bank consist of:

• a 2012 Budget for Administrative Expenses of EUR 326.0 million (GBP 271.7 million), including operating expenses of EUR 300.8 million (GBP 250.7 million) and depreciation of EUR 25.2 million (GBP 21.0 million); and
• a 2012 Capital Expenditure programme of EUR 26.3 million (GBP 21.9 million).

The Bank’s cost to income ratio highlights the efficiency of the cost base compared to income generation.  This ratio has remained low at an average of 24% over the last three years and is projected to be at around 25% for 2012 (ranking among the most efficient of the large financial institutions worldwide). This low cost ratio is an ongoing contributor to the growth of the Bank’s capital.

Last updated 20 April 2012