Bank pledges bail-out billions

The European Investment Bank (EIB), the European Union’s main source of long-term lending, pledged last week to lend more than €7-billion to the ailing motor sector in the first half of this year alone.

Rejecting carmakers’ complaints that the EIB is lending too little, too slowly, Philippe Maystadt, the bank’s president, said the likely loans to the industry in the first six months of 2009 would amount to more than 10% of the total loan portfolio of €70-billion this year.

The EIB, which is contributing the bulk of the £2.4-billion Britain is making available to United Kingdom-based car firms, has set a limit of €400-million a company a year and insists it cannot concentrate its lending on only one sector. The European cars lobby group, ACEA, is pushing for loans of €40-billion this year alone.

Maystadt said the bank was not there to bail out car firms that require heavy restructuring, with lending given to companies to produce “clean, green” vehicles.

BMW underlined the plight of the European sector last week by reporting a 24% decline in its global sales last month, with Mini sales down 27%, but Rolls-Royce up 18%. The industry’s global sales declined 27% in February.

Maystadt said it would be a mistake for a “sound” bank to concentrate too much of its lending on a single sector.
“We’re ready to do a bit more, but there are some limits as regards the risks of sectoral concentration.”

The EIB, which boosted loans to small business by 42% to €8.1-billion in 2008 and has lent €2-billion to commercial banks, is a linchpin of the EU’s €200-billion economic recovery programme. It is in the middle of a capital increase of €67-billion to €232-billion—at no cost to the taxpayer as this is financed out of its own reserves.

Last year it borrowed €59.5-billion on capital markets through 247 bond issues in 22 currencies and plans to issue substantially more this year, borrowing €66-billion. It has a triple-A credit rating.

Maystadt said it had already raised more than €24-billion in the first two months of this year—more than a third of its planned borrowing—despite the huge calls on sovereign-rated bonds for governments forced to finance swollen budget deficits. It could, he added, apply to tap the European Central Bank’s unlimited liquidity, as “in a way that would be normal”.

The EIB’s statutes state that its outstanding loans portfolio cannot exceed 250% of its capital.—

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