The history of the European Bank for Reconstruction and Development (EBRD) (original) (raw)

The EBRD is committed to furthering progress towards ‘market-oriented economies and the promotion of private and entrepreneurial initiative’. This has been its guiding principle since its creation at the beginning of the 1990s and, new challenges and the welcoming of new countries to the EBRD world notwithstanding, will continue to be its mission in years to come.

The EBRD was set up in haste to meet the challenge of an extraordinary moment in Europe’s history, the collapse of communism in its East. In fact, a mere 18 months elapsed between the first mooting of the idea of a European development bank, by President François Mitterrand of France, in October 1989 and its opening for business with headquarters in London in April 1991.

Urgency and the ability to respond to momentous events swiftly and decisively, whether it be the end of the Soviet Union, financial crises, the ‘Arab Uprising,' the coronavirus pandemic or the war on Ukraine have been among the EBRD’s hallmarks from the start.

During the frenetic years of the early 1990s the EBRD’s emphasis on the private sector as the main driver for change in Central and Eastern Europe was vindicated many times over. This was the period that established the EBRD’s reputation as an expert on transition to the open market.

It was heavily involved in areas such as banking systems reform, the liberalisation of prices, privatisation (legalisation and policy dialogue) and the creation of proper legal frameworks for property rights, all vital ingredients for change.

This period also witnessed the start of the EBRD's work to help safeguard and transform the site of the Chernobyl disaster in Ukraine and its involvement in nuclear safety elsewhere as well.

Expanding the EBRD's regions of operations

Reforms were supported by sound advice, training and technical expertise, and supplemented by major investments in the private and public sectors. With domestic capital on its own insufficient to finance transition, the EBRD helped to bring in external capital from both private and public sources.

Such experience has stood the EBRD in good stead when it has expanded its original region of operations - four times already - into new countries such as Mongolia (2006), Türkiye (2009), Egypt, Jordan, Morocco, Tunisia and Kosovo (in 2012), Cyprus (2014), Greece (2015) and Lebanon (2017).

It is currently active in more than 35 countries from central Europe to central Asia and the southern and eastern Mediterranean, plus the West Bank and Gaza.

At our 2023 Annual Meeting our Governors have approved amendments to the Bank’s statutes to enable the limited and incremental expansion of its operations to sub-Saharan Africa and Iraq. From 2025 to 2030, the EBRD will be able to invest in up to six countries in sub-Saharan Africa.

Czechia is the only member to have ‘graduated’ from the EBRD, which it did in 2007. However, in 2021, after a request by its government to help with the recovery from the coronavirus pandemic, the Bank agreed to resume investing in the country for a limited period.

The EBRD’s understanding of how a market economy works and engagement with other international financial institutions also allowed us to play a crucial role in stabilising its regions and planning for recovery after the shock of the global financial crisis in 2008.

Part of our response to that crisis was a substantial and rapid increase in the volume of our operations. That increase continued throughout the second decade of the century, despite a new operational approach to Russia, previously the EBRD’s largest country by business volume, under which, following guidance from a majority of our Directors, the Bank no longer undertook new business there. In 2022, soon after Russia's invasion of Ukraine, the Bank's Governors voted to suspend Russia's and Belarus's access to Bank resources.

At the end of 2023 our governors approved a resolution to increase the Bank’s paid-in capital by €4 billion, bringing its capital base to €34 billion. This was the third such increase in our history (the others being in 1996 and 2010).

The additional capital from shareholders is aimed at providing significant and sustained investment for Ukraine’s real economy, both in wartime and during reconstruction, and helping support our other priorities across all economies where we operate. The EBRD significantly ramped up its support for Ukraine after Russia’s invasion of the country in February 2022.

While the Bank remains as committed to fulfilling its original mandate as ever, its understanding of what the transition to market economics actually entails has evolved in the light of recent history.

At the beginning of 2017, for example, we began applying a new transition concept which defines a well-functioning market economy as more than just competitive; it should be inclusive, well-governed, green, resilient and integrated as well.

And over the nearly 30 years of our existence, we have become more convinced than ever before that financing projects alone cannot bring about the changes our countries need. They need help with policy reform and in creating an enabling investment climate as well.

The EBRD's unique mandate

Uniquely for a development bank, the EBRD has a political mandate in that it assists only those countries ‘committed to and applying the principles of multi-party democracy [and]pluralism’.

Safeguarding the environment and a commitment to sustainable energy have also always been central to the EBRD’s activity. A commitment to promote ‘environmentally sound and sustainable development’ was made explicit at its founding.

More recently, our Green Economy Transition approach has made climate finance a key measure of the Bank’s performance. We are now committed to ensuring that, by 2025, the majority of our business volume is green. That target was first hit in 2021, when green finance accounted for 51 per cent of our annual business volume. At our 2021 Annual Meeting our Governors also approved our full alignment with the Paris Agreement by the end of 2022 and we plan to be a majority green bank by 2025.

The coronavirus pandemic of 2020 was a huge challenge to the countries where the EBRD works, all our shareholders and the Bank itself. The EBRD responded by committing all its activity in 2020 and 2021 to countering its economic impact.

The EBRD serves the interests of all its shareholders - 73 countries from five continents plus the European Union and the European Investment Bank - not just those countries which receive its investments (a record €13.1 billion in 2022). At the same time, the number of EBRD shareholders is still increasing; recent new members include China, India, San Marino, Libya, United Arab Emirates, Algeria and Iraq.

However many shareholders the EBRD has, we all stand to gain from the EBRD regions' closer and deeper integration into the global economy and their economies’ continued progress on their transition journeys.

Today it is based in new headquarters in London's Canary Wharf, premises which were officially opened by King Charles III in March 2023. And, from its new home, the Bank is doing more than ever before - across three continents - to help the regions where it works on their way.