The European Investment Bank, the EU's main source of long-term lending, today pledged to lend more than €7bn (£6.4bn) to the ailing auto sector in the first half of this year alone.
Rejecting carmakers' complaints that the EIB is lending too little too slowly, Philippe Maystadt, the bank's president, said the likely loans to the industry in the first six months of 2009 would amount to more than 10% of the total loan portfolio of €70bn this year.
The EIB, which is contributing the bulk of the £2.4bn Britain is making available to UK-based car firms, has set a limit of €400m a company a year and insists it cannot concentrate its lending on only one sector. The European cars lobby group, ACEA, is pushing for loans of €40bn this year alone.
Maystadt said the bank is not there to bail out car firms that require heavy restructuring, with lending given to companies to produce "clean, green" vehicles.
BMW underlined the plight of the European sector today by reporting a 24% decline in its global sales last month, with Mini sales down 27% but Rolls-Royce up 18% to 67. Overall global sales declined 27% in February.
Maystadt said it would be a mistake for a "sound" bank to concentrate too much of its lending on a single sector. "We're ready to do a bit more but there are some limits as regards the risks of sectoral concentration."
The EIB, which boosted loans to small business by 42% to €8.1bn in 2008 and has lent €2bn to commercial banks, is a lynchpin of the EU's €200bn economic recovery programme. It is in the middle of a capital increase of €67bn to €232bn – at no cost to the taxpayer as this is financed out of its own reserves.
Last year it borrowed €59.5bn on capital markets through 247 bond issues in 22 currencies and plans to issue substantially more this year, borrowing €66bn. It has a triple-A credit rating.
Maystadt said it had already raised more than €24bn in the first two months of this year – or more than a third of its planned borrowing – despite the huge calls on sovereign-rated bonds for governments forced to finance swollen budget deficits. It could, he added, apply to tap the European Central Bank's unlimited liquidity as "in a way that would be normal".
"The fact that the EIB is responding quickly to the crisis without sacrificing financial prudence shows that we have not over-promised and are performing well in the current challenging climate," Maystadt told reporters.
"Although we cannot work miracles on our own, the EIB stands at the service of Europe and will continue to play a strong and active role in spurring economic recovery."
The EIB's statutes mean that its outstanding loans portfolio cannot exceed 250% of its capital.
The bank's president said its business plan assumed a huge increase in lending and borrowing this year and next with a decline starting in 2011 and 2012, when it will return to "a more normal level of operations".
The EIB, which is committing €10bn this year to energy projects to combat climate change, made a net profit of €1.65 in 2008, up from €1.63bn in 2007, giving it a capital adequacy ratio of 35.5%. Maystadt said this was "perhaps too high" but essential to underpin its activities.
"We're facing difficult and unpredictable times. We're asked to do more and faster and take more risk and that's possible only because we have this financial strength."
