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CEB, the “social” bank of the Council of Europe: finance that does good

The Council of Europe Development Bank (CEB) is situated in Paris. It was established in 1956 to address the tragedy of World War II refugees and it is closely linked to the Strasbourg institution. It finances projects for schools, hospitals, public buildings, sport compounds. It recently allocated hundreds of millions to finance the post-earthquake reconstruction in central Italy and to small and medium-sized enterprises in the south of the Country. CEB Vice-Governor Carlo Monticelli explained its “mission”: “to improve the conditions of citizens and provide support in moments of difficulty”

Parigi: la sede e il logo della Banca di sviluppo del Consiglio d’Europa

The Council of Europe Development Bank is situated at a short distance from the Arch of Triumph, along the sober and elegant Avenue Kléber, in Paris. The institution was created in 1956 to bring solutions to the problem of World War II refugees with eight Member States of the Council of Europe on the basis of a partial agreement, with a 7 million dollar asset. It currently counts 41 member Countries, including the Holy See. Since then its mission has been to “finance investments in the social sector providing technical expertise”, Carlo Monticelli, CEB vice-governor for financial strategy, told SIR. The financial performance report for the year 2017, published in January by the Bank, shows a +6.8% growth in net profit, along with “record-breaking activities” amounting to 41 new projects funded with 3.9 million Euro (3.5 million Euro and 35 projects the previous year).

Vice-Governor, in concrete terms, what is the activity of a development bank? I have recently returned from Belgrade where I signed a 250thousand Euro concession agreement of projects for the building of a new paediatric hospital in the city. It’s but an example of funds allocated for the creation of new schools, the redevelopment of hospitals, public buildings, sports centres. All our investments have a social purpose that we support with long-term loans at very favourable rates. We have fund packages for emergency interventions, such as the migration crisis, for which we created a special fund with dedicated contributions aimed at financing direct intervention with concessional loans to alleviate the suffering of immigrants, especially those following the Balkan route at a time of serious crisis.

How are you related to the Council of Europe? 
We share the same goals. We believe that the establishment of democracy, peace and freedom, that represent the goals of the Council, are best sustained by increased interventions in the social sector, to improve the living conditions of citizenry and ensure support in difficult situations. In operational terms, there is a meticulous exchange of information to ascertain that the projects we fund comply with the Council’s priorities. As relates to management, the Bank is independent.

What is the role of the Holy See? It acts as a shareholder, this means that it participates in the Administrative Council that approves the projects and it is a member of the Governing Board that sets out the general strategies for the Bank’s activity. By its own choice it abstains formally from the provisions concerning appointments, in the various councils, but it has all the prerogatives of the other shareholders, even if the paid-up capital is minimal and purely symbolic. Its presence consists in significant direct patronage, an endorsement of the Bank’s goals and of the ways in which they are pursued.

Who are the recipients of your loans? Loans are granted to Member States institutions, not only the central States but also the regional ones, in some cases also private sector institutions. For example in the case of support to employment, one of our major goals, we grant loans to institutions that act as intermediaries, ensuring that the financial support granted through our intervention will reach the final recipient, so as to pursue the final goal of labour protection and job growth. We publish detailed “reporting” and we closely monitor the use of the loans, pursuant to their allocation. Monitoring activity begins when we receive a request, examined by our internal offices, to ensure compliance with the institution’s objectives. In some cases the Bank contacts potential recipients, especially in Countries with weaker structures, as in the case of funding for the building of hospitals in the Western Balkans.

 

Over a period of just a few weeks CEB and Cassa Depositi e Prestiti (Deposit and Loan Bank) signed a €350 million loan agreement to support Italy’s earthquake-stricken areas, along with another 290million Euro loan to the Cassa Depositi e Prestiti in support of small and medium enterprises in Southern Italy. What is the reason for this special attention to Italy? The Bank seeks to prioritise support to Countries that are experiencing the most serious difficulties, the so-called “target-Countries”, namely, all of its members except for advanced European Countries (France, Germany, Italy, Nordic Countries), but also large Countries fall within our goals, regardless of geographic repartition. In terms of risk balance we seek to diversify among the various Countries, following no specific rule. Italy has been the recipient of two significant contracts over a short period, but for many years it had received none, signalling that Italy falls within the scope of the institution. 

Which new developments for the Bank lied ahead? Last year we issued the first “social inclusion” bond and we are considering it also for the present year, in line with the objectives of the Bank: the proceeds are reserved for financing eligible loans to support social projects. The social bond market runs parallel with the green bond market. Now it is developing also with the issuance of bonds to finance investments in support of the social sector. This product is attracting great interest especially on the part of investors of Nordic Countries that set ethical priorities to the financial market.

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