Ausgabejahr 2024
Datum 19.06.2024

Press release for the special report on the performance of government tasks related to the Federal Government’s shareholding in the European Investment Bank

Reducing risks for the Federal Government – increasing transparency and accountability

The European Investment Bank (EIB) is not covered by external banking supervision, nor is the majority of its operations subject to independent external public audit. EIB's liable equity capital stems from the budgets of the member states of the European Union (EU). “The use of public funds entails a special responsibility. Given the liability risks for Germany and in view of the EU banking standards, the EIB's supervisory and control framework is not adequate. The Federal Government should work to change this” says Kay Scheller, the President of the Bundesrechnungshof. “This would strengthen the EIB's protection mechanisms and reduce the liability risks for EU member states. It would also increase transparency and enhance accountability to national parliaments.” The audit findings presented are part of a special report on the Federal Government's shareholding in the EIB, which has now been submitted. In the audit we examined how the Federal Government performed its tasks in this context.

Germany’s share in the EIB is €46.7 billion

As the development bank of the EU member states, the EIB finances investments by providing loans and guarantees on favourable terms. With total assets of more than €500 billion, the EIB is the world's largest multilateral development bank. The EIB's subscribed capital currently totals €248.8 billion and stems from the budgets of the EU member states. Germany contributed €46.7 billion. Germany's financial commitment has increased almost ninefold over the last three decades. In addition, the EIB receives funds from the EU budget. “This involves a considerable liability risk. If the EIB suffers losses that it cannot bear itself, the EU member states will have to provide additional capital, which they will have to take from their respective national budgets”, Scheller adds.

Low protection level due to lack of banking supervision

In the EU, commercial banks that are of a similar size to the EIB are subject to European banking regulation. The banking regulatory framework stipulates  that credit institutions in the EU have to meet certain requirements in their operations and services, in particular with regard to risk management. An independent external supervision is to ensure that credit institutions comply with these requirements and have effective protection mechanisms in place. The EIB is not subject to independent external banking supervision. Instead, it oversees itself through an internal process. This means that supervision of the EIB is far below EU banking standards.

 It is not plausible why the EU member states should accept a lower level of protection for the EIB than shareholders in other banks within the EU. Against this backdrop, we believe that the EIB should be subjected to independent external banking supervision without delay. The Federal Government, as a shareholder, should support this proposal. Otherwise, there is a threat that risks in the EIB's structures and operations will not be identified and mitigated in a timely manner. According to our findings, the EIB's internal review and evaluation process lacks independence, sufficient autonomous powers, consistency and assertiveness.

 Scheller stresses: “The supervision of the EIB should be strengthened. The low level of protection provided by the supervisory framework is not in line with the increased liability risks for the federal budget. The liability primarily relates to the capital provided. In addition, major social and economic damage can also arise from financial market crises if banks are no longer able to control the risks they have assumed. This makes independent external supervision all the more important to ensure efficient and professional risk management. We urge the Federal Government to work towards ensuring that the EIB is supervised by the Single Supervisory Mechanism.”

Expanding independent external public audit – closing the audit gap

The task of an independent external public audit is to check whether public funds are being used efficiently and properly. In this way, it helps to ensure transparency vis-à-vis parliament and the public and to provide accountability for the management of budget funds. However, the majority of the EIB's operations are not subject to independent external public audit. This mainly concerns the funding activities carried out by the EIB on the basis of its subscribed capital and at its own risk. However, it remains uncertain how much of these operating activities are funded by the member states – and thus how large the audit gap is. We estimate that this applies to around three-quarters of EIB funding activities that are not covered by the mandate of the European Court of Auditors (ECA). The ECA's audit mandate does only cover the portion of operations that are financed or secured by the EU budget.

The member states SAI's do currently not possess a complementary audit mandate that could close this gap. An internal audit committee of the EIB only examines the regularity, but not the effective and efficient use of resources. This audit committee is neither independent nor does it inform the member states' parliaments. Scheller says: “An estimated three-quarters of the EIB's operations, with a financial volume of billions of euros, which is financed essentially by public funds, are not subject to effective audit by an independent institution. Transparency and accountability for the use of these resources vis-à-vis parliament and the public are not ensured. This audit gap should be closed as soon as possible. Along with the other shareholders, the Federal Government should work to ensure that the appropriate legal requirements are put in place.”

Involving the German Parliament in a timely and comprehensive manner

It must be ensured that the Federal Government informs the Parliament appropriately about significant developments at the EIB. The Federal Government is constitutionally obliged to provide the German Parliament with timely and comprehensive information on EU matters.

Background information:

Together with the Austrian SAI, the Bundesrechnungshof carried out a parallel audit of the performance of the respective government's tasks at the EIB. Both SAIs found structural shortcomings within the EIB's supervisory and control framework and outlined such findings in a national audit report and, in an aggregated manner, in a joint report. The reports include recommendations aiming at enhancing transparency and accountability and reducing the risks for national budgets.