It was the former French President François Mitterrand who initially came up with the idea that Europe needs a development bank. This particular idea soon became a reality, as – in accordance with the French President’s concept - the London-based European Bank for Reconstruction and Development (EBRD) was set up in 1991, with the aim of providing support for the transition to a market economy of countries in central and eastern Europe following the end of the Cold War.

The geographical scope of the EBRD, as well as its membership was later expanded to include first the countries of the former Soviet Union and then it was extended to those in the southern and eastern Mediterranean and the Central Asian region. The EBRD’s shareholders currently include 69 countries, as well as the European Union (EU) and the European Investment Bank (EIB). Hungary has been a member of the EBRD since the beginning with the Agreement Establishing the Bank promulgated under the Act LV of 1991. The EBRD is currently active in nearly 40 countries.

Initially, the EBRD took an active role in areas such as banking systems reform, the liberalisation of prices, privatization and the creation of proper legal frameworks for property rights in the CEE countries. Uniquely for a development bank, the EBRD has a political mandate in that it assists only those countries that are committed to applying the principles of multiparty democracy and pluralism. Although a significant part of the EBRD's activity is focused on financing businesses in the private sector, it also plays an important role in supporting financial institutions. Support for the latter has been both through direct investment and through credit to them for on-lending to businesses. Nevertheless, much of its efforts has been focused on transport, energy, water and sanitation infrastructure. While the EBRD remains committed to the original goals declared at the time of its creation, its understanding of what the transition to market economics actually entails has evolved in the light of recent history. Accordingly, a new transition concept has been recently applied which defines a well-functioning market economy as more than just competitive; it should be inclusive, well-governed, green, resilient and integrated as well.

Green Economy Transition - GET

A good example of this paradigm shift is the Green Economy Transition (GET) approach adopted by the EBRD in 2015. The objective is to increase the financing of projects that advance the transition to an environ-mentally sustainable, low-carbon economy, and help prevent economies from being locked into a carbon-intensive, polluting pathway that depletes natural assets. Through the GET approach, such finance accounted for 46% of the EBRD’s total annual investment in 2019. To date, the EBRD has signed €34 billion in green investments, financed over 1900 green projects which are expected to reduce 102 million tonnes of carbon emissions yearly. In 2019 alone, the EBRD financed over 2.2 GW of new renewable power capacity and aims to exceed that in 2020.

The structure of the EBRD

The Board of Governors has overall authority over the EBRD, and it is also responsible for strategic guidance of the organization. Its powers include admitting new members or suspending membership; increasing or decreasing the authorized capital stock of the Bank; authorizing the conclusion of general agreements for co-operation with other international organizations; electing the Directors and the President of the Bank and determining their remuneration; approving the general balance sheet and the statement of profit and loss of the Bank; determining the reserves and the allocation and distribution of the net profits of the Bank. It is also important to note that each member is represented on the Board of Governors. Shareholders can appoint one Governor and one Alternate, both of which serves at the pleasure of the appointing member. Hungary is represented on the Board by its Minister of Finance and one Alternate, appointed by the Minister. The Board of Governors holds its meetings at least once annually. For any meeting of the Board of Governors, the two-thirds of the Governors constitute a quorum, provided such majority represents not less than two-thirds of the total voting power of the members.

The Board of Directors – which consists of 23 members – is responsible for the operational management of the EBRD. These Directors should be persons of high competence in economic and financial matters. They hold their office for a term of 3 years with the possibility of re-election. This Board is responsible for the direction of the general operations of the Bank and shall exercise all the powers delegated to it by the Board of Governors. This means preparing the work of the Board of Governors; establishing policies and taking decisions concerning loans, guarantees, investment in equity capital, borrowing by the Bank, the furnishing of technical assistance and other operations of the Bank; submitting the audited accounts for each financial year for approval of the Board of Governors at each annual meeting; and approving the budget of the Bank. The Board of Directors functions at the EBRD's London headquarters.

The Board of Governors – by a vote of a majority of the total number of Governors, representing not less than a majority of the total voting power of the members – elects the President of the Bank for a term of 4 years with the possibility of re-election. This takes place by secret ballot during the annual meetings of the Board of Governors. However, the President ceases to hold office when the Board of Governors so decides by an affirmative vote of not less than two-thirds of the Governors, representing not less than two-thirds of the total voting power of the members. It is also important to note that the President do not vote, except for an equal division in which case the President may cast a deciding vote. Furthermore, the President may participate in meetings of the Board of Governors and chairs the meetings of the Board of Directors. In addition to that, the President is the legal representative of the EBRD and the chief of the staff of the Bank, who conducts the current business of the Bank under the direction of the Board of Directors. Notably, one or more Vice-Presidents can be appointed by the Board of Directors on the recommendation of the President to facilitate the efficient performance of the presidential duties.