The European Bank for Reconstruction and Development (EBRD) was established to help build a new, post-Cold War era in Central and Eastern Europe. It has since played a historic role and gained unique expertise in fostering change in the region - and beyond -, investing more than €130 billion in a total of over 5,200 projects.
Commitment to the market and entrepreneurship
The EBRD is committed to furthering progress towards ‘market-oriented economies and the promotion of private and entrepreneurial initiative’. This has been its guiding principle since its creation at the beginning of the 1990s and, new challenges and the welcoming of new countries to the EBRD world notwithstanding, will continue to be its mission in years to come.
A turning point in the history of Europe
The EBRD was set up in haste to meet the challenge of an extraordinary moment in Europe’s history, the collapse of communism in its East. In fact, a mere 18 months elapsed between the first mooting of the idea of a European development bank, by President François Mitterrand of France, in October 1989 and its opening for business with headquarters in London in April 1991.
Urgency and the ability to respond to momentous events swiftly and decisively, whether it be the end of the Soviet Union, financial crises or the ‘Arab Uprising,’ have been among the EBRD’s hallmarks from the start.
During the frenetic years of the early 1990s the EBRD’s emphasis on the private sector as the main driver for change in Central and Eastern Europe was vindicated many times over. This was the period that established the EBRD’s reputation as an expert on transition to the open market.
It was heavily involved in areas such as banking systems reform, the liberalisation of prices, privatisation (legalisation and policy dialogue) and the creation of proper legal frameworks for property rights, all vital ingredients for change.
The EBRD was founded on 15 April 1991. Here is a historic footage of Queen Elizabeth II welcoming the Bank to London.
Expanding the EBRD's regions of operations
Reforms were supported by sound advice, training and technical expertise, and supplemented by major investments in the private and public sectors. With domestic capital on its own insufficient to finance transition, the EBRD helped to bring in external capital from both private and public sources.
Such experience has stood the EBRD in good stead when it has expanded its original region of operations into new countries such as Mongolia (2006), Turkey (2009), Jordan, Tunisia, Morocco, Egypt and Kosovo (in 2012), Cyprus (2014), Greece (2015) and Lebanon (2017). It is currently active in nearly 40 countries from central Europe to central Asia and the southern and eastern Mediterranean, plus the West Bank and Gaza.
The Czech Republic is the only member to have ‘graduated’ from the EBRD and no longer receives investment from the Bank.
The EBRD’s understanding of how a market economy works and engagement with other international financial institutions also allowed us to play a crucial role in stabilising its regions and planning for recovery after the shock of the global financial crisis in 2008.
Part of our response to that crisis was a substantial and rapid increase in the volume of our operations. That increase continued throughout the second decade of the century, despite a new operational approach to Russia, previously the EBRD’s largest country by business volume, under which, following guidance from a majority of our Directors, the Bank is no longer undertaking new business there.
While the Bank remains as committed to fulfilling its original mandate as ever, its understanding of what the transition to market economics actually entails has evolved in the light of recent history.
At the beginning of 2017, for example, we began applying a new transition concept which defines a well-functioning market economy as more than just competitive; it should be inclusive, well-governed, green, resilient and integrated as well.
The EBRD's unique mandate
Uniquely for a development bank, the EBRD has a political mandate in that it assists only those countries ‘committed to and applying the principles of multi-party democracy [and]pluralism’.
Safeguarding the environment and a commitment to sustainable energy have also always been central to the EBRD’s activity. A commitment to promote ‘environmentally sound and sustainable development’ was made explicit at its founding. More recently, our Green Economy Transition approach has made climate finance a key measure of the Bank’s performance. In 2018 such finance accounted for 36 per cent of its total annual investment.
The EBRD serves the interests of all its shareholders - 67 countries from five continents plus the European Union and the European Investment Bank - not just those countries which receive its investments (€9.5 billion in 2018). At the same time, the number of EBRD shareholders is still increasing; recent new members include China and India. Indeed, the EBRD is one of only two major multilateral development banks currently expanding its shareholder base.
However many shareholders the EBRD has, we all stand to gain from the EBRD regions' closer and deeper integration into the global economy and their economies’ continued progress on their transition journeys.