Bloomberg News

EIB Could Boost Lending Via Banks to $102 Billion Over Two Years

November 07, 2011

Nov. 7 (Bloomberg) -- The European Investment Bank could boost lending to businesses through banks over the next two years to 74 billion euros ($102 billion) if given greater support from the European Union budget and national governments, a draft EU document showed.

The prospects for economic growth in the euro area are “faltering,” according to the document, which was prepared for the region’s finance ministers. It is important to “maintain and even increase to the extent possible” EIB lending to the real economy via banks, the draft said. The EU may set up a body prefunded by national governments to guarantee banks’ debt issuance next year, according to a separate document.

The EIB could “almost immediately” boost lending through banks to 24 billion euros a year from the current level of about 20 billion euros using a combination of EIB loans and other subsidies, according to the EIB document. Further increases could be made if “risk-supporting funds” were mobilized from the EU budget, or if the bank was given a cash injection, it said. These increases combined could boost two-year lending by up to 74 billion euros.

Banks in Europe have to refinance 655 billion euros of senior bonds next year and may need government backing if the debt crisis continues to block access to markets, according to a CreditSights Inc. report released last month. Western European lenders raised about 80 billion euros from selling senior unsecured debt this year, according to data compiled by Bloomberg. That’s down from 97 billion euros for the same period in 2010, as investors are concerned that banks, the biggest holders of sovereign debt, will face losses as the crisis escalates.

“At this stage, EIB has been requested to state what additional support could be made available to European banks,” according to the document.

--Editors: Jones Hayden, Peter Chapman

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net; Rebecca Christie in Brussels at rchristie4@bloomberg.net; Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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