§ Sue DoughtyTo ask the Chancellor of the Exchequer what the timetable and process will be for deciding on the UK's contribution to the next replenishment of the European investment bank.[37804]
§ Ruth KellyCapital increases to the European investment bank have to be agreed by the bank's board of governors, acting unanimously. There are 15 such governors, representing the 15 member state shareholders of the bank. The UK governor is the Chancellor of the Exchequer.
The EIB is currently nearing its maximum permitted level of exposure (for 100 billion euros of subscribed capital, 6 per cent. of which is paid in, it may have up to 250 billion euros of outstanding liabilities, ie a gearing ratio of 1:2.5). Unless the bank dramatically curtails its lending activities, there will therefore need to be a capital increase agreed this year, to take effect from 1 January 2003. Proposals put forward by the bank's staff and management committee envisage a capital increase paid for from the bank's own funds. There will therefore be no requirement for any further paid in contribution from the UK or other shareholders. This principle (that capital increases should be met from reserves) will be entrenched for future capital increases too. Nevertheless, there are implications for the UK's contingent liability, the volume of which increases in proportion to the size of the bank's exposure.
The decision on the capital increase will be taken at the annual board of governors meeting, which takes place this year on 4 June. Proposals are currently being considered by the board of directors, which has three UK members.