Report reveals bank transparency issues

15 November 2011, New Europe

On 15 November, the first-ever Aid Transparency Index was released by the UK based group Publish What You Fund. The index evaluated 58 major actors in the international financial institutions sector, and the results found did not reflect well on European banks.

Two of Europe’s largest banking institutions, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), both scored poorly on the transparency test.

“Considering that the EIB is ranked as ‘poor’ and the EBRD as ‘moderate’, European citizens can only guess where these banks spend their publicly backed money,” said Desislava Stoyanova, co-ordinator for the non-profit organisation Counter Balance.

The public has a right to be sceptical – the current economic crisis has prompted the EIB to offer more assistance in development finance for member states, but with a lack of transparency and accountability regarding its transactions, it is hard to see how.

The EIB has come under scrutiny before; last year, a report was published by Counter Balance, which stated: “EIB lending must lead to sustainable development and poverty eradication, and the EIB simply doesn’t do that. It is mired in an out of date ethos of corporate welfare and big contracts for multinationals, under the guise of development work.”

There is still hope for the bank to change its ways and adopt new transparency measures. If the EIB is so committed to helping in development finance, then“what better way to signal this intention than to follow the lead of the African Development Bank – and the European Commission – by signing up to and implementing the International Aid Transparency Initiative,” said Publish What You Fund Managing Director Karin Christiansen. If the EIB were to do this, then it would be well on its way to improving its score in transparency issues, and restore European confidence in an important international actor.

The EBRD faces similar issues. Ranking 15 out of the 58 multinational actors providing aid, it finds itself in a much better place than its compatriot. “The problem with the EBRD is that it fails to offer sufficient, early information about the projects it supports to affected local communities and civil society groups,” said Bankwatch’s Fidanka Bacheva-McGrath. “In recent years, it has also increasingly withheld information on projects in the natural resources sector before approval, using excuses about commercial confidentiality.”

As with the EIB, if the EBRD is to regain the confidence of the International community, it needs to implement better transparency procedures in its practices. If this can happen, then these two banks will be able to provide and inform International actors with their services.