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Updated June 21, 2022
European Bank for Reconstruction and Development (EBRD)
The European Bank for Reconstruction and Development
(EBRD), the first international financial institution of post-
Cold War Europe, was founded in 1991 to ease the path of
the former communist countries of Central and Eastern
Europe (CEE) and the former Soviet Union from planned to
free-market economies. Its geographic area has expanded
over time and, today, the EBRD finances projects in 37
countries throughout Europe, the Middle East, and Central
Asia. In October 2021, Algeria became the 73rd member of
the EBRD. The United States is a founding member of the
EBRD and is the single largest shareholder with a 10%
share of the Bank's capital. U.S. membership in the EBRD
is authorized by P.L. 101-513, the European Bank for
Reconstruction and Development Act (22 U.S.C. §2901 et
seq.).
The EBRD is headquartered in London, United Kingdom.
The Bank was originally designed to function differently
than other multilateral development banks in two key ways:
first, it was given a political mandate to support democracy;
and second, it was designed to support the development of
the private sector in the former communist countries.
Changes in Europe over the past two decades were viewed
to make both mandates less pressing, leading the Bank to
expand its membership. Russia's expanded war on Ukraine,
some argue however, underscores the importance of the
EBRD maintaining robust operations in Eastern and Central
Europe. EBRD President Odile Renaud-Basso, former
Director General of the French Treasury, was elected in
October 2020 for a four-year term.
Political Mandate
Other multilateral development banks (MDBs) and the
International Monetary Fund (IMF) have mandates to
promote economic development and economic stability.
The EBRD's mandate, in contrast, also includes political
factors, specifically to foster democracies and free-market
economies. Article 1 of the EBRD's Articles of Agreements
states
In contributing to economic progress and
reconstruction, the purpose of the Bank shall be to
foster the transition towards open market-oriented
economies and to promote private and
entrepreneurial initiative in the Central and Eastern
European countries committed to and applying the
principles of multiparty democracy, pluralism and
market economics.
In contrast, the other major MDBs have Articles asserting
their members' political independence, stating that the
MDB shall not interfere in the political affairs of any
member; nor shall they be influenced in their decisions by
the political character of the member or members
concerned
Membership
The EBRD's Articles of Agreement limit membership to
European countries; non-European countries that are
members of the IMF; the European Community (EC) (now
the European Union [EU]); and the European Investment
Bank (EIB). The Articles also require that EC members, the
EC, and the EIB hold a majority of the institution's capital
stock and a majority of the vote. EBRD membership has
grown in recent years as the Bank has expanded its
geographic range. Libya became a member in July 2019,
marking an expansion of the Bank's presence in the
Mediterranean region. Other new members include
Lebanon and the United Arab Emirates. At the beginning of
2016, China became a non-borrowing member of the
EBRD, and contributes a small share (0.097%) of the
Bank's capital.
Operations and Select Policy Issues
It has been over 10 years since the EBRD's last capital
increase. In May 2010, the Board of Governors approved a
request from the EBRD's president for a t10 billion
($11.05 billion) increase in authorized capital to t30 billion
($33.15 billion), a 50% rise from 2009 levels. Of the total
authorized amount, t6.2 billion ($6.85 billion) is paid-in
capital and t23.5 billion ($25.97 billion) is callable capital.
The Bank's portfolio of operations increased from t48.4
billion ($50.74 billion) in 2020 to t50.2 billion ($52.64
billion by the end of 2021.
While the EBRD continues disbursements on older projects,
as of 2021, the EBRD's exposure to Russia accounted for
2.9% of total EBRD operating assets, compared to around
26% in 2013. At the same time as it reduced its Russian
exposure, the EBRD expanded its lending south into the
Balkans, the Caucasus, and the Southeastern Mediterranean
(Figure 1). In April 2008, Turkey, a founding shareholder
of the EBRD, applied to become a recipient country and
now accounts for 19% of EBRD operations, despite its
status as an upper-middle income country. Moving forward,
the EBRD will likely need to develop a more robust
strategy to graduate high-income member countries. To
date, the Czech Republic is the only country that has
graduated from EBRD borrowing.
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