Mr. Andrew McDowell:

I thank the Chairman and members of the committee for the invitation to speak today on the subject of capital investment. As the Chairman mentioned, we opened our first EIB office in Ireland in Dublin last December. I thank the Chairman for the introduction he gave Mr. Cormac Murphy, who is the head of our office in Dublin. We have offices in most EU member states with a few remaining gaps. Opening an office in Dublin was long overdue and Mr. Murphy's presence here will be very valuable to the bank.

As vice president of the European Investment Bank since September 2016, among my responsibilities is oversight of our operations in Ireland and some other EU countries. The EIB was created under the Treaty of Rome. We are a treaty-based EU institution. We are the European Union's long-term lending institution, owned directly by the 28 EU member states. That may be an issue we can come back to. We are often known as the EU bank. We are distinguished in that from the European Bank for Reconstruction and Development, EBRD, and other international financial institutions, IFIs, by the fact that we are the only bank that is owned only by EU member states. The EBRD has shareholders in the United States, Japan and outside Europe.

Our mission is to use loans and other financial instruments, including equity investments, to finance long-term investment projects that support EU policy goals. We are headquartered in Luxembourg. As well as the bank, we are the majority owner of the European Investment Fund, EIF, which was created in 1992 to focus on financing Europe’s small and medium-sized enterprises. We are self-financing; we do not look for budget money from the EU budget every year. We finance all our projects through the capital markets. We are the largest international public bank in the world and the largest non-state borrower in the world. Last year, we raised about €65 billion on the capital markets and we loaned about €83 billion. That is about twice the size of the World Bank in terms of the overall volume of operations. On average, we finance around 500 projects each year in over 160 countries. By volume, the vast majority - about 90% - of our business is within the EU and 10% is outside of the European Union. That proportion is increasing. The activity is designed to support EU foreign policy goals.

Our ability to support the European economy was significantly enhanced in 2015 when the European Council and Parliament agreed on a new joint European Commission and EIB initiative, known as the investment plan for Europe or the Juncker plan, to kick start long-term investment in key areas. The aim is to use guarantees of €16 billion from the EU budget and €5 billion of EIB’s own capital to form this fund called the European Fund for Strategic Investments, EFSI, which is designed to mobilise a total of €315 billion of higher risk investments in transport, broadband, energy, innovation, renewable energy, energy efficiency and SME financing. This was the mainstay initiative of the Juncker commission on the economy. We are well over half way through the goal of financing €315 billion in investment. The latest estimate is that we have financed about €180 billion of investments since the start of it. We are very confident we will reach that target. The European Council, Commission and Parliament are already negotiating the extension of this EFSI initiative from mid-2018 all the way to mid-2020.

The EIB has been a long-term financing partner for Ireland and has provided nearly €15.5 billion for investment since it joined the EU in 1973. Our lending activities here significantly increased during the financial crisis with annual lending now representing nearly double the engagement since 2008. As other banks were exiting Ireland during the financial crisis and deleveraging their Irish exposures, the EIB was significantly increasing its exposure to Ireland, consistent with the Government's policies and EU policy to support the Irish economy.

In the past five years, EIB lending in Ireland totalled €4.2 billion, supporting, among other projects, the motorway programme, Dublin Port expansion, Dublin Airport terminal 2, the Luas extension and university campus expansions. We signed loans with every university in Ireland over this period. These were the first borrowings taken up by the Irish university system. We financed schools and primary care centres through regular Exchequer financing and PPPs, and social housing, at a time when other sources of financing for enterprise and infrastructure investment were being cut back significantly.

Before the banking crisis, EIB lending in Ireland averaged around €400 million per year and this year we are in a position to provide more than €1 billion depending on the level of demand. We are subject to promoters seeking disbursement of cash. We are not in control of how much we lend each year - the promoters are - but we are in a position to lend that figure.

The EIB is also diversifying the nature of its engagement. Last year, we financed 13 initiatives across a spectrum of areas of different infrastructure classes and enterprise areas compared to just three in 2008. Our relationship with Irish State partners, particularly the National Development Finance Agency, NDFA, and the Strategic Banking Corporation of Ireland, SBCI, continues to strengthen.

During 2014, the EIB provided a €400 million facility to the newly established Strategic Banking Corporation of Ireland - representing 50% of the total initial funding - at extremely attractive conditions to kick-start increased lending to Irish SMEs. More recently, the EIF, our subsidiary, and the SBCI signed the first competitiveness of small and medium-sized enterprises, COSME, agreement in Ireland. COSME is the European programme for SMEs. This transaction, guaranteed by the EFSI initiative, has recently been extended and will allow the SBCI to support up to €330 million of agriculture-related loans to up to 10,000 SMEs, primarily farmers, by commercial banks in Ireland over the next three years. In addition, the EIF has supported a number of equity funds for high tech sectors, a €20 million Business Angels co-investment instrument with Enterprise Ireland and a guarantee in favour of Microfinance Ireland issued under the EU programme for employment and social innovation, EaSI, to support very small businesses.

To further support Ireland's strong economic recovery, particularly in the context of the growing infrastructure bottlenecks here, as well as out of recognition that Ireland is uniquely exposed to the economic impact of Brexit, the EIB hopes to increase its level of support for Irish projects. With this aim in mind, as well as opening a permanent office in Dublin last December, we established with the Irish Government an Ireland-EIB financing group. The group, which was chaired initially by the former Minister, Deputy Noonan, and which is now chaired by the current Minister, Deputy Donohoe, includes senior management from the EIB, led by the president and myself, as well as Government Ministers and senior officials from relevant Departments and agencies. The first meeting of the group was held last December and the second meeting was held in Luxembourg last month, with the former and current Ministers present, to discuss progress and formulate further actions that will facilitate the EIB's engagement in Ireland, notably discussions on support to negate the potential negative impacts of Brexit for Irish enterprise. To support the financing group, a number of thematic working groups have been established, covering: financing connectivity, including road, rail, air, ports, broadband and energy networks; financing social infrastructure, including housing, health and education; and financing enterprise, including venture capital, our support for the banks, agribusiness and so on.

Without prejudging the outcome of the detailed and constructive discussions currently taking place, areas where we have signalled the potential for greater EIB financing include: increased lending to the Irish sovereign for Exchequer capital projects to be identified in the revised capital programme; increased mobilisation of private finance, under public private partnerships, PPPs, and similar structures, for investment in roads, public transport, social housing and other areas, consistent with the Government’s need to expand infrastructure investment while staying within the EU fiscal rules; direct lending support for the investment programmes of Irish semi-States such as the ESB, Ervia, the DAA and so on; increased direct investment in mid-sized Irish corporates, including through equity-type products; and credit guarantees to Irish commercial banks to increase their lending into key sectors, such as agribusiness, residential and business energy-saving projects and the SME sector, consistent with the banks’ own needs to preserve scarce capital while financing a growing economy and supporting those sectors particularly exposed to Brexit. To have maximum effect, these initiatives will often combine EU and national budget resources, as well as EIB and SBCI funding and capital; and we have an appetite to increase the amount of project finance we will provide for the renewable energy sector in Ireland, including solar energy.

The Ireland-EIB financing group has committed to meet at least twice a year and the next meeting, planned for later this year in Dublin, will follow the review of the capital programme and will provide further clarity on priority projects across multiple sectors.

On that note, I will conclude my opening remarks. Mr. Cormac Murphy and I will be happy to answer any questions members of the committee may wish to ask.