Although both the impartiality and vigilance of ratings agencies have come under fire in recent months, the fact that the European Investment Bank enjoys the highest ratings from Moody's, Standard & Poor's and Fitch is not at issue. The rating agency Moody's says that the EIB's Aaa rating and its stable outlook are underpinned by "the high quality of the bank's loan portfolio, the ongoing support of the EU member states, and the bank's prudent financial policies". It was during the 1960s that the bank established its reputation on the financial markets, a reputation that it has relied on during other challenging times, such as the economic difficulties of the 1970s and the Russian and Asian crises of the late 1990s.


The EIB is one of the world's largest issuers in international capital markets and has an annual funding programme comparable with that of European governments. Nonetheless, it has not been able to fully escape the consequences of the recent market turmoil. "Everyone is having a difficult time in the market. It is challenging," said Peter Munro, head of investor relations at the EIB.

Since August 2007 and the financial crisis that has struck Europe, the EIB considers that it has continued to enjoy a comparative advantage in terms of funding levels and to some extent market access. It puts this down in particular to its credit rating, underpinned by EU shareholder support, and the liquidity attributes of EIB benchmark bonds. When the EIB managed to access the markets, it says it found its funding levels improved, in contrast with other Aaa-rated securities, such as covered bonds and asset-backed securities that faced worsening conditions. "In broad terms, this could be described as a flight to both quality and liquidity," Munro said.

Since Lehman Brothers filed for bankruptcy in autumn 2008, market difficulties have nevertheless multiplied and considerations of a flight to quality and liquidity have been overshadowed by other challenges. Government-guaranteed bank issuance under economic recovery plans, support for businesses and massive injections of funds have created more competition. The current situation is one of uncertainty and difficulty, although the markets have shown signs of recovery since Easter 2009.The EIB's experts say that constant repricing of interest rates represents a complication, primary market demand is unclear and secondary market liquidity has dropped.


Among the...

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