Senior managers’ personal histories play a key role in the European Investment Bank (EIB) lending process, with loans for financing large infrastructure projects being more likely to flow into a region where one or more members of the EIB’s Board of Directors come from, while regions not represented on the Board are less likely to receive loans. This is the result of a recent study by ZEW Mannheim, which has evaluated all EIB loans since its foundation in 1958, comparing them with the respective careers of its Board members.

Flags in front of the building of the European Investment Bank in Luxembourg
Members of the EIB board of directors preferably grant loans to regions they are personally related to.

The probability for a European region to receive a loan from the EIB increases by 17 percentage points if at least one person from that region sits on the Bank’s Board of Directors. “We cannot rule out the possibility that this lending practice leads to a misallocation of resources and to economic inefficiency,” says Annika Havlik, a researcher in the ZEW Research Department “Corporate Taxation and Public Finance” and co-author of the study. “Our observation shows that the beneficiary regions coincide strikingly often with regions where a member of the EIB Board of Directors either currently holds or will hold a position in the future,” says Havlik.

Nevertheless, the researchers stress that Board members who tend to favour their region of origin when granting loans should not necessarily be accused of harbouring self-interested motives. It is possible that Board members simply decide in favour of their own region due to prevalent social connections, for example. Exclusive knowledge of the local conditions in the home region could just as well be a decisive factor in their choices, insofar as the staff responsible for granting a loan would have greater certainty that financial support from the EU is necessary and therefore justified. Through this practice, Board members would minimise information gaps between the EIB and beneficiaries, reducing the risk of potential misallocation of European funds.

Future working regions of board members benefit as well

The researchers have observed, however, that when members of the Board of Directors are in the process of relocating to another region during or after their term at the EIB, they increasingly lend to the region where they will be working. “This connection is only weakly pronounced. But it is hard to imagine that they have an information advantage about the new region, because up until now, the respective Board members have not been personally connected to the region,” explains co-author of the study Dr. Zareh Asatryan, deputy head of the ZEW Research Department “Corporate Taxation and Public Finance”. “Also worth noting is the fact that this phenomenon of preferential treatment occurs exclusively in connection with very large infrastructure projects. In comparison with small, less tangible measures at a local level, it is highly likely that the overall conditions for large and costly construction projects can be assessed without specific local knowledge,” continues Asatryan.

The EIB Board of Directors is one of the Bank’s three decision-making bodies and is responsible for strategic management. It is solely responsible for the final decision on granting loans. The Board of Directors consists of 29 full members, each representing an EU Member State and the European Commission for five years. As the new lending decision panel meets only occasionally at the EIB headquarters in Luxembourg, being a Board member is not a full-time position.

A loan is approved by the EIB when at least one third of the members of the Board of Directors vote in favour of it, and when these members represent at least 50 per cent of the capital registered with the EIB. Each country’s share of the EIB’s total capital is determined by the relative size of its gross domestic product (GDP) in the EU at the time of attaining EU membership.

Majority of EIB board members from economically strong regions

The study examined all EIB loans in terms of volume, purpose, and contract date at the regional level between 1959 and 2015, bringing together up to 5,000 projects with a total loan volume of almost 500 billion euros. The EIB makes such information publicly available on its homepage, while its Board members’ regions of origin can be found in their CVs and annual reports. This way, the researches collected data on a total of 254 full members and 216 deputy members of the EIB’s Board of Directors. 435 of these members come from regions where the capital of their EU Member State is located, while 109 representatives work in regions where per-capita GDP is below 90 per cent of the EU Community average and which are therefore eligible for funding from the EU Cohesion Fund.

The EIB is the world’s largest multilateral credit institution, financing projects in line with Europe’s integration and economic policy objectives while promoting innovation, small and medium-sized enterprises, as well as infrastructure and environmental projects. The EIB operates globally but lends mainly to the EU Member States, which are also shareholders. Loans can be applied for by all levels of government, as well as private and public companies. A significant part of the capital flows to poorer regions in the form of cohesion funds, which facilitates a balance of living standards within the Union. Since the EIB’s creation in 1958, its annual sum of signed loans has grown steadily from 34 million euros to around 77 billion euros in 2015.




Files to Download


Press Officer

Phone: +49 0621 1235-133