The opinion piece that led your comment page last week, by Antonio Tricarico of Counter Balance (“The wrong battle at the wrong time”, 12-18 April), contains several fundamental misunderstandings about the mission of the European Investment Bank (EIB) and its view of financial regulation.
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The EIB firmly and unequivocally favours stricter regulation for banks. Our president, Werner Hoyer, has always fully supported the EU’s demand for stricter regulation, both in his new role and previously in the German government.
The article suggests that the EIB trades over-the-counter derivatives in the US markets. The EIB does not. The EIB uses hedging to limit the exchange-rate risk of the bonds that it issues.
Our task is to lend money to finance sound projects at favourable terms across Europe and beyond. The bank funds its activity by borrowing on international capital markets. Almost half of its funding comes from non-EU investors, reflecting their confidence in the bank’s role in the European economy. In 2012, the Bank will borrow €60 billion denominated in the main global currencies. These funds have to be converted into the currency needed to finance projects throughout the EU and in other countries. The EIB, therefore, does not trade on currency markets, but holds significant outstanding swaps connected to its fundraising, hedging and treasury transactions.
Concerning contact with the US authorities, we are only seeking the same exemption under US regulation as we already have in the EU. Under EU legislation, the EIB is exempt from clearing and collateral requirements. This allows the EIB to use its full financing power rather than locking up liquidity in a clearing-house. Other international financing institutions are also asking US authorities for similar treatment. Given this role, implementation of the Dodd-Frank Act would not be justified, or appropriate, as it would immobilise money that would otherwise support the real economy. Contrary to the EIB, the European Commission borrows and lends only in euro and does not use derivatives for hedging.
The bank’s financial activities are published in accordance with our transparency commitments and details of our foreign-exchange activity can be found in the EIB financial statements.
We strongly believe that Europe must be competitive in a new world of multiple economic centres of dynamism and growth. The EIB, as the EU bank, is committed to supporting European competitiveness in the global economy. It is this role that we wish to ensure within the appropriate legal framework.
European Investment Bank