European Investment Bank More Likely to Give Loans to Regions Represented on Board of Directors

| Press release

European regions which have representatives on the board of directors at the European Investment Bank (EIB), the world’s largest multilateral lending and borrowing institution, are more likely to receive loans than those regions in Europe which aren’t represented, according to new research from EconPol Europe and ZEW Mannheim.

Researchers Zareh Asatryan (EconPol Europe, ZEW Mannheim) and Annika Havlik (EconPol Europe, ZEW Mannheim, University of Mannheim) collected information on the regions of origin of around 500 national representatives at the EIB’s Board of Directors (the decisive body for loan approvals) since its foundation in 1959. They found that a representative's appointment increases the probability of their sub-national region receiving a loan by 17 percentage points. This “home-bias" effect is particularly present in large loans financing infrastructure projects.

And, while they acknowledge they cannot conclusively demonstrate economic inefficiency, the report’s authors call for further transparency on the decision-making process of the EIB, including stronger rules for the disclosure of conflicts of interest by the board of directors and other senior staff.

“We provide several pieces of evidence, which are consistent with the hypothesis that home-bias lending may lead to resource misallocation,” Asatryan says. “Our evidence does not provide a definitive answer to the crucial question of whether this bias is economically inefficient. However, we think that the question of whether favoritism plays a role in resource allocation decisions at the EU and particularly at the EIB deserves a further debate.”

“This evidence also stresses the important role to be given to debates on institutional reforms for the EU's various financing instruments before any further and more complex arrangements are established,” Havlik adds.

In 2015, the EIB signed loans worth 77 billion euros, a significant proportion of which went to less developed regions in the EU. As the bank of the EU, the EIB generally finances projects that are in line with the economic policy objectives of the EU. Currently, some of the main priorities of the EIB include support to innovation activities, small and medium sized enterprises, infrastructure projects, and projects enhancing sustainable environment.

Scientific contact: Annika Havlik,, +49 (0)621 1235 204

EconPol Europe contact: Juliet Shaw,, +34 686481877/+44(0)7837 360470

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