EU report to lay out options for development financing overhaul: sources

A European Union review of how to deploy the bloc's international lending firepower will be delivered to finance ministers next week, sources have told Reuters, with three options for a major overhaul of its current set-up.

The report by a "wise persons" group led by former senior EU official Thomas Wieser proposes ways to build a more effective EU development bank that also cuts the current overlap between the European Investment Bank in Luxembourg and London-based European Bank for Reconstruction and Development.

Options put forward include making the EBRD the EU's external development bank focused primarily on Africa, and the EIB its internal lender, according to three sources with knowledge of the report who spoke on condition of anonymity.

A second possibility would be to use the EIB, or a subsidiary of the EIB, while third option is for new entity that would be something of a joint venture between both the banks as well as national development banks.

"The message in the report is about sub-Saharan Africa and the climate," one of the sources said. "It is also the European response to what is happening in the global development space where countries like China are becoming much more aggressive." A spokesman for the EIB said it was "looking forward to the final report and discussing its implications with European finance minister's next week."

An EBRD spokesman declined to comment.

The sources said that all three options laid out in the report had benefits but also challenges.

Including Britain, the EBRD is currently 62 per cent owned by EU countries, but other G7 countries have large stakes. The United States is its largest shareholder but it would lose that position if EU governments pump in more money and increase their own stakes.

A US Treasury spokesperson did not immediately respond to a request for comment.

A new standalone bank would be complex, while utilising a new EIB overshoot, as has been floated by the bank itself over the last couple of years, would raise questions about the EBRD's future purpose especially if EU grants were funelled away from it into the EIB.

All the options would also require changes to the EBRD and EIB's current charters.

EU capitals are expected to get the final version of the report in the coming days and finance ministers will be presented with it at their regular Ecofin meeting in Luxembourg next week.

Discussions around the options as well as the technicalities and legalities would then have to be hammered out before formal changes can be agreed either later this year or next year.

"From a development perspective, I think the first option would be the more attractive option. But it's a more difficult option politically," one of the sources said, referring to the EBRD's non-EU shareholdings.