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Council of Europe Development Bank – ‘18-K’ for 12/31/21 – ‘EX-3’

On:  Tuesday, 4/12/22, at 12:44pm ET   ·   For:  12/31/21   ·   Accession #:  1104659-22-44977   ·   File #:  333-164460

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 4/12/22  Council of Europe Dev Bank        18-K       12/31/21    5:2.4M                                   Toppan Merrill/FA

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Exhibit 3

Description of the Registrant

This description of the Council of Europe Development Bank (the “CEB” or the “Bank”) is dated April 12, 2022 and appears as Exhibit 3 to the annual report on Form 18-K of the CEB for the fiscal year ended December 31, 2021.

THE DELIVERY OF THIS DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS DOCUMENT (OTHERWISE THAN AS PART OF A PROSPECTUS CONTAINED IN A REGISTRATION STATEMENT FILED UNDER THE U.S. SECURITIES ACT OF 1933) DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF COUNCIL OF EUROPE DEVELOPMENT BANK.

PRESENTATION OF FINANCIAL INFORMATION

The capital of the CEB is denominated, and its accounts are kept, in euro. As used herein, the terms “euros”, “EUR” and the euro sign (€) refer to the single European currency of the member States of the European Union (“EU”) participating in the euro, and the terms “dollars”, “U.S. dollars”, “USD” and the dollar sign ($) refer to United States dollars.

Any discrepancies in the tables included in this annual report between the amounts and the totals thereof are due to rounding.

THE COUNCIL OF EUROPE DEVELOPMENT BANK

Overview

The Council of Europe Development Bank is a multilateral development bank with a social vocation.

The CEB was established in 1956 by eight Council of Europe member states pursuant to a Partial Agreement between those states (the “Partial Agreement”). The Bank is governed by the Third Protocol to the General Agreement on Privileges and Immunities of the Council of Europe of March 6, 1959 (the “Protocol”), by its Articles of Agreement as amended (the “Articles”) and by regulations issued pursuant to the Articles. The CEB falls under the supreme authority of the Council of Europe but is legally separate and financially autonomous from it. The Bank is solely responsible for its own indebtedness. Currently, 42 European states are members of the Bank (the “Member States”). See “—Member States” below for further details.

Originally, the Bank’s primary purpose was to finance social programs related to the resettlement of refugees migrating to and between European countries in the aftermath of World War II. The Bank later extended the scope of its activities to providing aid to victims of natural or ecological disasters and to supporting other social objectives directly contributing to strengthening social cohesion in Europe. These other social objectives currently include education and vocational training, health, housing for low-income persons, supporting micro, small and medium-sized enterprises (“MSMEs”), improving living conditions in urban and rural areas, protection of the environment, protection of historic and cultural heritage, and infrastructure of administrative and judicial public services. See “Operations”.

In order to serve these objectives, the Bank grants or guarantees long-term loans to its Member States or institutions approved by them. Since its inception, the CEB has disbursed approximately €59 billion in loans. The CEB’s loans and guarantees typically cover only part of the cost of any project, supplementing each borrower’s own funds and credits from other sources, which may include other multilateral lending institutions. With certain exceptions, the Bank generally does not lend more than 50% of the cost of a project. As of December 31, 2021, the CEB had the equivalent of €18.9 billion of loans outstanding, excluding interest receivable and fair value adjustments of loans hedged by derivative instruments.

The CEB funds its operations primarily through debt offerings in the international capital markets. As of December 31, 2021, the Bank had total outstanding funded debt (debt securities, including interest payable thereon and value adjustments of debt securities hedged by derivative instruments) of €24.8 billion. The Bank’s capital consists of participating certificates which are subscribed to by its Member States. Starting with subscribed capital equivalent to €5.7 million in 1956, the Bank had subscribed capital of €5.5 billion as of December 31, 2021. See “Capital Structure”. As of December 31, 2021, €613.0 million of the Bank’s subscribed capital has been paid in.

The Governing Board may, upon a proposal of the Administrative Council, make calls upon subscribed and unpaid capital in order to enable the CEB to meet its obligations, including repaying the Bank’s indebtedness. Since the CEB’s inception, no such calls have ever been made. In addition, the Governing Board may, upon a proposal of the Administrative Council, decide to increase the Bank’s subscribed capital, as it did on February 4, 2011 when it approved the Bank’s sixth capital increase. See “Capital Structure”.

The CEB is supervised by a Governing Board and an Administrative Council, each of which is composed of representatives of each of the Member States. The Bank is represented in all of its transactions and legal proceedings by a Governor appointed for a five-year term by the Governing Board. The Bank’s operational headquarters are located at 55, avenue Kléber, 75116 Paris, France.

Legal Status

The CEB was established on April 16, 1956 pursuant to the Articles adopted by the Committee of Ministers of the Council of Europe (the “Committee of Ministers”). The Committee of Ministers is the Council of Europe’s decision-making body. It comprises the ministers of foreign affairs of all member states of the Council of Europe, or their permanent diplomatic representatives in Strasbourg, France. The Articles form an integral part of the Protocol that also governs the CEB. The Protocol endows the CEB with a separate juridical personality with the capacity to enter into contracts, acquire and dispose of property, institute legal proceedings and carry out transactions related to its statutory purposes. The Protocol also grants the CEB various privileges and immunities in the Member States, including (a) an exemption from all direct taxes, (b) freedom of its property and assets from governmental restrictions, regulations, controls and moratoria of any nature, (c) immunity of its property and assets from search, requisition, confiscation, expropriation or any other form of distraint by executive or legislative action, and (d) immunity of its property and assets from all forms of seizure, attachment or execution before the delivery against the CEB of a final enforceable judgment rendered by a court of competent jurisdiction. By virtue of the Protocol, the CEB is subject to a national law only to the extent expressly agreed to by the CEB and to the extent that national law does not derogate from the Protocol or the Articles. However, notwithstanding certain exceptions, the Protocol subjects the CEB to the jurisdiction of the courts of its Member States and those states where the CEB has contracted or guaranteed loans.

Member States

According to the Articles, members of the CEB may include member states of the Council of Europe, or, upon the Bank’s authorization, a European state which is not a member of the Council of Europe or an international institution with a European focus. No such international institution has ever been a member of the Bank.

The number of Member States of the Bank has increased from 22 in 1991 to 42 as of the end of 2021, as a result of new Member States joining primarily from Central and Eastern Europe. The current members of the Bank and their dates of accession are set forth in the table below:

Member States of the Council of Europe Development Bank and Year of Accession

As a sign of solidarity among Member States, the Bank aims to provide increased support to a group of 22 Central, Eastern and South Eastern European countries, namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Georgia, Hungary, Kosovo, Latvia, Lithuania, Malta, Moldova (Republic of), Montenegro, North Macedonia, Poland, Romania, Serbia, the Slovak Republic, Slovenia and Turkey (collectively, the “Target Group Countries”).

Relationship with the Council of Europe

Founded in 1949, the Council of Europe is a 47-member international organization that works to protect human rights, pluralist democracy and the rule of law; to promote awareness and encourage the development of Europe’s cultural identity and diversity; to find common solutions to the challenges facing European society; and to consolidate democratic stability in Europe by backing political, legislative and constitutional reform. Most countries in Europe are members of the Council of Europe.

Only one member state of the EU, Austria, is a member of the Council of Europe but not of the CEB. The Holy See, while a member of the CEB, is not a member of the Council of Europe but an observer to the Committee of Ministers. Kosovo is a member of the CEB but not of the Council of Europe.

The CEB was established pursuant to the Partial Agreement between those Council of Europe member states that wished to become members of the CEB. As a general matter, partial agreements permit member states of the Council of Europe to engage in Council of Europe activities without the approval of all member states. Activities governed by a partial agreement remain an activity of the Council of Europe in the same way as other Council of Europe activities, except that activities pursuant to partial agreements are endowed with their own budgets and working methods determined only by the member states which have entered into the partial agreement. A “Secretariat of the Partial Agreement” acts as a liaison between the Council of Europe and the CEB. The relationship between the two organizations is also guided in practice by the Articles, the Protocol, and various rules of procedure for the Bank’s governing bodies.

The CEB acts under the supreme authority of the Council of Europe, and its social objectives are in line with those of the Council of Europe. The CEB’s statutory purposes cannot be changed except with the approval of the Committee of Ministers. In addition, the Council of Europe must be regularly informed of the CEB’s activities, and the CEB’s Governing Board is required to state a position on any recommendations and opinions concerning the Bank that the Committee of Ministers and the Parliamentary Assembly of the Council of Europe may transmit to it. The Secretary General of the Council of Europe is also permitted to participate in, or be represented at, meetings of the CEB’s Governing Board and Administrative Council, without the right to vote. Finally, the Council of Europe also evaluates projects from a political and social perspective.

Except as noted herein, however, the CEB is separate from the Council of Europe, is governed by separate supervisory and administrative bodies and maintains its own sources of revenues and financial operations.

Cooperation with the European Union and Other International Institutions

Over the years, the CEB has forged partnerships with other international organizations and donors to bring additional financing and greater expertise to the projects it supports. In addition to its natural links with the Council of Europe, the CEB has become a partner of choice to the EU (CEB’s main donor) and regularly cooperates with other international financial institutions (“IFIs”), as well as with several United Nations specialized agencies. The CEB takes part in the following programs:

In 2021, the CEB applied to become an implementing partner of the InvestEU loan guarantee facility. The CEB also established two grant-funded joint initiatives with the European Union: Housing and Empowerment of Roma (HERO) and Partnerships and Financing for Migrant Inclusion (PAFMI). These initiatives in favor of Roma and migrants exemplify the Bank’s cooperation with donors: the CEB uses funds raised from donors to support more projects in favor of highly vulnerable groups, in particular migrants and refugees.

At the end of 2021, the balance of fiduciary accounts related to the RHP and of fiduciary accounts funded entirely or mainly by the EU stood at €34 million. Accounts related to the RHP accounted for the vast majority of this balance, i.e. 74% of the total.

The CEB has also signed Memoranda of Understanding or other cooperation agreements with the EBRD, the European Stability Mechanism (ESM), the World Bank Group, the Nordic Investment Bank (NIB), the EIB, KfW, the United Nations Children’s Fund (“UNICEF”), which was renewed in July 2019, the UNHCR, and the United Nations Development Program (“UNDP”, with which the existing bilateral cooperation agreement was extended on February 6, 2017 for another five years), as well as with the United Nations International Computing Centre (UNICC) on November 19, 2020. Furthermore, the Bank maintains a collaboration with other UN agencies, such as the World Health Organization (“WHO”) and the International Organization for Migration (“IOM”). The amount of grants approved by the CEB in favor of UNICEF, UNHCR, UNDP, WHO and IOM stood at €26 million at the end of 2021.

Migrant and Refugee Fund

In response to the increase in the number of migrants seeking asylum in Europe, the CEB set up the Migrant and Refugee Fund (“MRF”) in 2015, a grant-based financial instrument to help Member States deal with migrant and refugee flows. Following a proposal by the Governor, the CEB’s Administrative Council unanimously approved the establishment of the MRF in October 2015. In July 2020, the termination date of the MRF was postponed from March 2021 to December 2025.

The MRF supports the CEB Member States’ efforts to ensure that migrants and refugees who arrive on their territory enjoy basic human rights, such as shelter, food and medical aid, as well as personal security. The MRF may also be used to help Member States integrate these populations and enable them to rebuild their lives in dignified conditions.

At year-end 2021, total funds committed to the MRF amounted to €29 million, while grants in an aggregate amount of €28 million had been approved in favor of 30 projects.

As of the date of this report, the war in Ukraine has caused a massive displacement of population. According to UNHCR, more than 4.2 million Ukrainians have already sought refuge in neighboring countries. As an immediate response, and in line with its statutory priorities, the Bank will provide, among other things, grants to its member states that share a border with Ukraine to help them cope with the inflows. At the end of March 2022, grants approved by the Bank for this purpose already amount to €2.7 million. These grants will be financed from the CEB’s Migrant and Refugee Fund.

Green Social Investment Fund

The Green Social Investment Fund (“GSIF”) was established by the CEB in March 2020 to help accelerate its Member States’ transition towards low carbon and climate resilient economies. The GSIF will be used to scale up the de-carbonization and climate-proofing of social infrastructure and to make climate action measures more socially affordable and accessible to vulnerable groups. The GSIF has been endowed with an initial contribution of €5 million, allocated from the CEB’s annual profit. Member States have also been invited to provide grant contributions to the fund. In 2021, the GSIF received its first contribution in the amount of nearly €50,000 from the Czech Republic.

The CEB as ODA-Eligible International Organization

In 2014, the CEB was added to the list of Official Development Assistance (“ODA”)-eligible international organizations. ODA is a term coined by the Development Assistance Committee (DAC) of the OECD that is widely used to measure international aid flows from donors to developing countries to support their economic development. ODA is the key measure used in practically all aid targets and assessments of aid performance. In reporting their ODA, donor countries refer to a list of ODA-eligible international organizations. Contributions to these organizations, which are not earmarked, may be reported as ODA in whole or in part.

The CEB’s ODA eligibility recognizes the concessional character (at least partially) of the CEB’s lending and its grant element. It also aligns the CEB with its peers, such as the EBRD, the EIB and the World Bank Group, all of which are also listed as ODA-eligible international organizations.

CEB Strategy 2020-2022

Established in 1956 in order to finance social programs for European refugees, the CEB’s scope of action has progressively broadened to include other objectives that contribute to strengthening social cohesion. The CEB’s current development plan for the period 2020-2022 (the “Development Plan 2020-2022”) was adopted in December 2019 as a confirmation of the Bank’s distinctive social mandate and its main strategic goals in support of more inclusive, resilient and sustainable societies in its Member States. The strategy focuses on strengthening the Bank’s capability to respond to the numerous challenges faced by its Member States through three ‘lines of action’ that underpin the CEB’s social mandate:

Under the Development Plan 2020-2022 the CEB seeks to achieve a volume of loan approvals of around €4 billion per year, with the level of disbursements in both Target Group and non-Target Group Countries increasing steadily. All activity targets have been set with a +/– 10% flexibility. The ongoing COVID-19 pandemic has not changed the overall strategic orientation of the Development Plan 2020-2022; the established benchmarks remain in force as yardsticks against which to measure and evaluate CEB’s mobilization in support of its Member States’ response to the health crisis.

In terms of operational approach, the Development Plan 2020-2022 has put a particular focus on mobilizing the Bank’s capability to capitalize on its strong cooperation with sub-national governments, further enhance its support for vulnerable populations and hone its participation in EU-funded programs. In particular, the CEB intends to:

Impact of the COVID-19 Pandemic

Overview

The implementation of the Development Plan 2020-2022 in early 2020 coincided with the onset of the COVID-19 pandemic. While the response to the COVID-19 pandemic significantly shaped the CEB’s activities in 2020, financing remained firmly focused on social sectors and the strategic objectives set out in the Development Plan 2020-2022. In 2021, following historically high levels of project and loan activity recorded in 2020, the CEB activity levels smoothly transitioned back to the targets set out in the Development Plan 2020-2022.

Lending Activity

Among the first IFIs to respond to the COVID-19 pandemic, the CEB has swiftly put in place COVID-19 related financing to help mitigate the health, economic and social fallout from the pandemic on its borrowers. As a result, the CEB’s lending activity in terms of volume and number of operations increased sharply during 2020 and reached historically high levels of project approvals and loan disbursements at year-end 2020.

COVID-19 related projects supported by the Bank sought to provide timely funding to its Member States, mostly national and regional governments, to help strengthen healthcare service delivery and broaden civil protection measures, thus ensuring business continuity during the ongoing pandemic, while continuing to implement additional measures for a resilient socio-economic recovery.

A portion of loan proceeds has also been allocated to supporting the provision of digital tools needed to ensure distance learning or to compensate local governments for the lack of tax revenues in order to allow them to continue to provide public services as well as, importantly, increase focus on the most vulnerable population groups. In the long term, the CEB may provide additional support to enhance the resilience and reinforce the preparedness of its Member States in the post-COVID-19 recovery phase.

As of December 31, 2021, the CEB had approved 57 projects in an aggregate amount of €4.2 billion (compared to 56 projects in an aggregate amount of €6.0 billion as of December 31, 2020), of which 16% were dedicated to COVID-19 support in 6 countries. A total of €4.0 billion in loans – both ordinary course of business and COVID-19 related – were disbursed in 2021 compared to €4.5 billion in 2020. Of these, 37% have been disbursed as COVID-19 related loan tranches. While a fast-track written procedure allowed for a swift approval of COVID-19 related projects, including by the CEB’s governance bodies, which met virtually more frequently in extraordinary session, rapid disbursements and the implementation of COVID-19 related loans were facilitated through a number of relevant derogations and waivers. Specific measures include waivers regarding the proportion of the total cost of projects that may be financed by CEB loans and the possibility for first loan tranches to exceed the usual ceiling of 50% of the total loan amount. Moreover, under COVID-19 emergency financing for MSMEs, funding of working capital needs is being provided without the usual sub-loan limits for the period of 12 months following approval.

Funding and Treasury

The CEB’s liquidity indicators have remained in line with the Bank’s prudential framework at all times since the start of the COVID-19 pandemic. The CEB’s approach of maintaining ample liquidity, as well as diversifying its funding sources, has allowed the Bank to make the extra loan disbursements resulting from the COVID-19 pandemic despite a global context of high volatility. Funding transactions in various markets and of different tenors were executed in order to ensure the liquidity of the Bank.

For example, the CEB issued a €1 billion 7-year “COVID-19 Response Social Inclusion Bond” benchmark issue on April 2, 2020. This transaction constituted the Bank’s first Social Inclusion Bond under its updated Social Inclusion Bond Framework, which is aligned with the International Capital Markets Association’s Social Bond Principles and which now also permits financing projects in the health sector, in addition to social housing, education and support for MSMEs. Following additional issuances in 2020, the CEB issued a EUR 500 million seven-year benchmark Social Inclusion Bond in April 2021 and a USD 500 million three-year benchmark Social Inclusion Bond in June 2021. The net proceeds of these funding transactions have been allocated to eligible loan projects under the CEB’s Social Inclusion Bond Framework.

The CEB’s credit ratings by international credit rating agencies have remained unchanged, although the outlook on the rating by Fitch Ratings was changed from stable to positive in July 2021.

Operations and Governance

The CEB has taken various measures to guarantee business continuity in light of the ongoing COVID-19 pandemic and related governmental measures, while respecting the Bank’s internal control framework. The Bank’s business continuity management has enabled it to switch all business lines to remote working. A swift transition was possible due to intense and timely preparation. In addition to the annual business impact analysis, an in-depth analysis with each business line was performed as soon as the COVID-19 pandemic broke out in Asia, enabling the CEB to identify and address specific needs to ensure business continuity. Meetings of the CEB’s Governing Board and Administrative Council have been held virtually as per the annual schedule, covering all the usual agenda items, with extraordinary meetings held to approve additional COVID-19-related projects / loans.

The COVID-19 pandemic has also translated into cost reductions due to a slowdown in staff recruitment, reduced travel activity, and some institutional events being held remotely.

CAPITALIZATION AND INDEBTEDNESS

The following table sets forth the CEB’s capitalization and indebtedness as of December 31, 2021. It does not otherwise give effect to any transaction since that date. Since December 31, 2021, there has been no material change in the capitalization of CEB.

Since December 31, 2021, the CEB has conducted the following issuances:

CAPITAL STRUCTURE

Subscribed, Called and Uncalled Capital

Any European state (whether a member or non-member state of the Council of Europe) may, in principle, become a Member State of the Bank. Each Member State of the Bank is required to subscribe to the Bank’s capital. The amount of capital required to be subscribed by the applicant as a percentage of total subscribed capital is equivalent to the applicant’s anticipated percentage contribution to the budget of the Partial Agreement on the CEB. This amount results from comparing the gross domestic product and the population of the applicant country to those of all Member States combined, with the weighting given to gross domestic product being five times that given to population.

The Bank issues participating certificates, each with a nominal value of €1,000, to its Member States. The number of certificates to be held by each Member State is fixed by the Governing Board and represents that Member State’s subscribed capital. At any given time, however, each Member State is required to pay in only a portion of the subscribed capital represented by its certificates. The minimum percentage of subscribed capital to be paid in is fixed by the Governing Board: currently, it is fixed at 11.1%. Total subscribed capital paid-in and to be paid-in is referred to as “called capital”. Subscribed capital not paid in remains subject to capital calls by the Governing Board. The difference between the subscribed capital and the called capital is referred to as “uncalled capital”.

Although the Member States do not guarantee the CEB’s obligations, the Governing Board may make calls upon subscribed and unpaid capital in order to enable the CEB to meet its obligations, including repaying the Bank’s indebtedness. Since the CEB’s inception, no such calls have been made. In addition, the Governing Board may decide to increase the Bank’s subscribed capital, in which case it sets forth the conditions of such increase, including the percentage of such increased subscribed capital to be paid in and the corresponding payment dates. Capital increases only become effective once the conditions set forth by the Governing Board for such increase have been satisfied (such as a minimum percentage of the capital increase being subscribed). Member States are not required to subscribe to capital increases.

The Bank has had six capital increases since 1956. The CEB launched its sixth capital increase in February 2011, for which the subscription rate was 98%. At December 31, 2021, the Bank’s subscribed capital amounted to €5.5 billion, stable compared to year-end 2020. The CEB’s own funds (subscribed capital, reserves, gains or losses recognized directly in equity and profit for the year) increased slightly to €8.1 billion at year-end 2021 from €8.0 billion at year-end 2020, mainly as a result of the 2021 net profit.

Capital allocation by Member State, as of December 31, 2021, is presented in the table below:

Capital Allocation

In 2020, further to Andorra’s accession, the CEB’s subscribed capital increased by €4,925 thousand, of which €547 thousand related to the called capital. Andorra’s contribution to the reserves totals €2,296 thousand. The payments of the called capital and the contribution to the reserves are scheduled in four equal annual instalments. The first two instalments of €574 thousand each were paid in 2021 and 2020. The total of the two outstanding instalments is set forth below:

Reserves

The CEB’s general reserves are derived principally from the Bank’s profit. Acting upon annual recommendations of the Administrative Council and final resolutions of the Governing Board, the Bank has historically allocated substantially all of its profits towards reserves. In addition, reserves have increased over the years as a result of the accession of new Member States, which are not only required to subscribe to the Bank’s capital and to contribute the amount required to be paid in, but also to contribute to the general reserves in proportion to their share in the capital.

At year-end 2021, the general reserve increased to €2.63 billion compared to €2.55 billion at year-end 2020, as a result of €74.8 million of 2020 net profit allocated to the general reserve.

OPERATIONS

Overview

The CEB aims to contribute to the strengthening of social cohesion in Europe through long-term lending to governments, local and regional authorities, public and private financial institutions and other public and private legal entities approved by a Member State. The Bank’s activities have broadened and shifted since its founding in 1956, when its statutory priorities were to provide aid to refugees and migrants and support projects related to natural or ecological disasters.

The CEB carries out its mission within the strategic framework of a formal development plan that describes the objectives underpinning the CEB’s actions and sets forth guidelines for its activity in the medium term in relation to the context within which the Bank operates. In addition to the development plan, general guidelines for the CEB’s project financing activity are set forth in its policy framework for loan and project financing (the “Loan and Project Financing Policy”) and, from an operational perspective, in an operational manual called the CEB Handbook for the Preparation and Implementation of Projects.

The CEB’s current strategic course as set forth in its Development Plan 2020-2022 focuses on promoting inclusive growth and providing support for vulnerable groups, while integrating environmental sustainability as a cross-cutting line of action. The Bank’s lines of action reflect both its specific social vocation and the development logic underpinning all its activity in the following sectors of action: aid to refugees, migrants, displaced persons and other vulnerable groups; housing for low-income persons; improving living conditions in urban and rural areas; natural or ecological disasters; protection of the environment; protection and rehabilitation of the historic and cultural heritage; health; education and vocational training; administrative and judicial infrastructure; supporting MSMEs for the creation and preservation of viable jobs. For more information on the CEB’s Development Plan 2020-2022 and lines of action, see “The Council of Europe Development Bank—CEB Strategy 2020–2022”.

The shift in and expansion of the Bank’s social objectives over time have been accompanied by a changing geographic focus. When first formed by its eight founding Member States, the Bank’s activities were primarily concentrated in Germany, France, Italy, Greece, Turkey and Cyprus. During the late 1970s and 1980s, as the Bank’s membership base expanded so did its geographical reach, in particular to the countries of Southern Europe, such as Spain, Portugal and Yugoslavia. The end of the Cold War prompted a new wave of countries adhering to the institution and consequently permitted increased lending to Central and Eastern Europe. Today, the Bank’s resources are widespread across its membership base, with 48% of loans outstanding in favor of Target Group Countries.

Financial Means of Action

The CEB provides assistance in the form of loans, guarantees and contributions from the trust accounts in order to finance bankable projects. To do this, it evaluates the debt sustainability of the borrower and, where applicable, of the guarantor.

Loans granted by the Bank take one of the following forms: (i) loans to Member States; (ii) loans guaranteed by a Member State granted to any legal person approved by that Member State; (iii) loans granted to any legal person approved by a Member State, when the Bank’s Administrative Council is satisfied that the loan requested is covered by adequate guarantees.

Upon conditions to be stipulated by the Bank’s Administrative Council in each case, the Bank may grant guarantees to financial institutions approved by a Member State for loans to further the Bank’s statutory purposes as set out in the Articles and may open and operate trust accounts.

Loan applications are prepared by the borrower in coordination with the CEB and are formally submitted by the borrower following the appraisal of the envisaged project by the CEB. Depending on the borrower’s capacity and the project complexity, the CEB may provide technical assistance for the preparation of the loan application. Once approved, loan applications are placed in the Bank’s stock of projects awaiting financing. They must give rise to a framework loan agreement within twelve (12) months following the approval. As disbursements are made, the amount of the stock of projects diminishes correspondingly. For more information on the Bank’s stock of projects, see “Financial Review—Balance Sheet—Financing commitments and stock of projects awaiting financing” below.

The loans are granted under the general conditions of the Bank’s loan regulations and under the special conditions established in the framework loan agreement. In case of breach of these conditions, the Bank may demand early reimbursement of disbursed loans, in particular in the case of corruption, fraud, money laundering, misprocurement or when the implementation of the project leads to a violation of the CEB’s Environmental and Social Safeguards Policy, the “Convention for the Protection of Human Rights and Fundamental Freedoms” or the “European Social Charter”.

Project Financing

The principal financing instruments for the CEB’s loan operations are as follows:

The CEB may finance projects directly or via an intermediary financial institution. The CEB’s share of financing may not exceed 50% of the eligible costs of the project/program. Nevertheless, on a case by case basis and subject to the approval by the Bank’s Administrative Council, the CEB’s share of financing may be increased up to 90%, especially in the Target Group Countries.

While the CEB’s reference currency is the euro, this does not exclude recourse to other currencies according to borrower specifications and the CEB’s refinancing possibilities on the capital markets. The CEB raises funds on the best terms available on the capital markets. It passes these terms on to its borrowers, applying the lowest possible margin which takes into account the need to cover its operating costs.

The CEB’s loans are disbursed in tranches, with fixed or floating rates and flexible structures. Tenors and grace periods match the project’s financing needs to the extent possible the project’s financing needs. The mechanisms for disbursement applicable to each loan are specified by the CEB in the loan document at the time of the project’s approval by the Administrative Council.

Monitoring is carried out from the time of the project’s approval up to its completion. The purpose of the monitoring process is to ensure that the project is implemented in compliance with the framework loan agreement and executed in accordance with the conditions included in the loan document approved by the Bank. Once a project is completed, a completion report summarizing the project’s results is prepared. The Bank draws up an Annual Report on Project Preparation and Monitoring which provides an overall evaluation of the most significant projects while highlighting the problems encountered in the course of their appraisal and implementation.

Upon fulfilment of the relevant eligibility criteria, the CEB’s borrowers may be supported by the CEB’s Social Dividend Account (“SDA”) and/or other trust accounts during the preparation or implementation phase of projects. The SDA was established by the CEB member states in 1996 and financed mainly by contributions from the Member States, through allocations from the Bank’s annual profit, which constitute dividends of a social nature. The SDA is used to provide loan guarantees, technical assistance, interest subsidies and grant contributions in favor of high social impact projects, located mainly in the Bank’s Target Group Countries. For more information regarding the SDA, see Note L (“Social Dividend Account”) of the CEB’s financial statements for the fiscal year ended December 31, 2021 included in Exhibit 2 to the annual report on Form 18-K of the CEB for the year ended December 31, 2021 (the “CEB 2020 Annual Report on Form 18-K”).

Three trust accounts have been established by Member States to also finance technical assistance in favor of CEB projects located mainly in the Bank’s Target Group Countries. The Spanish Social Cohesion Account (SCA), established by Spain in 2009, is endowed with €4 million. The Slovak Inclusive Growth Account (SIGA), established by the Slovak Republic in 2016, is endowed with €4 million. The Italian Fund for Innovative Projects (IFIP), established by Italy in 2017, is endowed with €1 million.

Overview of CEB’s Lending Activities

The tables below summarize the CEB’s lending activity in terms of project amounts approved and loans disbursed by country of the borrower over the past two years, as well as the five-year cumulative totals over the 2017–2021 period. Because the Bank’s policies and procedures generally result in loans being approved and disbursed in different years, amounts approved and amounts disbursed in any given year do not necessarily relate to the same projects.

Projects approved are projects that have been submitted to the Administrative Council and approved for funding. Loans disbursed are loans that have actually been paid to the borrower.

Projects Approved⁽¹⁾⁽²⁾

Loans Disbursed⁽¹⁾

NB:          Information regarding amounts disbursed reflects the location of the registered office of the borrower and not that of the ultimate beneficiary, who may be based in another country. Consequently, the figures provide information on the risk profile of the Bank’s borrowers and not that of the ultimate beneficiaries of its lending operations.

FINANCIAL REVIEW

The following discussion should be read in conjunction with the CEB’s audited financial statements and notes thereto included in Exhibit 2 to the CEB 2021 Annual Report on Form 18-K.

Overview

As a development bank with a social vocation, the CEB does not operate with the objective of maximizing profit. The Bank makes every effort to obtain funds in the international capital markets on the best possible terms and to pass these advantages on to beneficiaries minus an intermediation margin to cover the Bank’s risk and general operating expenses. The CEB’s net banking income essentially derives from interest margin (see “Results of Operations” below). The Bank’s policy is to allocate substantially all of its profits towards general reserves, which may then be used to support increased lending activity.

In 2021, marked by an uneven recovery and renewed concerns about the COVID-19 pandemic, the CEB achieved a solid financial and operational performance, reinforcing its position within the European financial architecture and the quality of its credit profile was confirmed by leading international rating agencies.

In a year marked by its 65-year anniversary, the CEB’s lending activity encountered a strong demand for financing. The quality of the loan portfolio remained robust and showed high levels of both approvals and disbursements in 2021, similar to pre-pandemic levels. At December 31, 2021, the Bank’s outstanding loans (excluding accrued interest and IFRS fair value adjustments) amounted to €18.9 billion compared to €17.4 billion at December 31, 2020. Outstanding debt including interest payable and IFRS fair value adjustments used to support these operations amounted to €24.8 billion at December 31, 2021, compared to €22.8 billion at December 31, 2020. In 2021, the CEB did not record any non-performing loans and therefore did not realize any associated losses.

The Bank’s net profit in 2021 was €94.8 million in a difficult financial context, compared to €74.8 million in 2020, with 2021 profits increasing by 26.7% compared to 2020, primarily due to the partial release of IFRS provisioning related to the impact of the COVID-19 pandemic and the positive variation of valuation effects regarding financial instruments.

General reserves increased by 2.9% to €2.63 billion at December 31, 2021 from €2.55 billion at December 31, 2020, mainly as a result of 2020 profit allocation to the general reserves. Total equity increased by 3.2% from €3.13 billion at December 31, 2020 to €3.23 billion at December 31, 2021.

The adjusted¹ cost-to-income ratio² increased slightly to 40.1% for the year ended December 31, 2021, compared to 39.6% for the year ended December 31, 2020.

Results of Operations

Interest and similar income

Interest and similar income aggregates the net interest received from assets and liabilities. Until December 31, 2020, this item included net interest received and net interest paid on assets. Interest and similar income increased by €21.2 million in 2021 to €175.9 million compared to €154.7 million in 2020, primarily as a result of an increase in interest from debt securities in issue at amortized cost and a decrease in interest from loans and advances.

Interest expenses and similar charges

Interest expenses and similar charges aggregates the net interest paid on assets and liabilities. Until December 31, 2020, this item included net interest received and net interest paid on liabilities. Interest expenses and similar charges increased by €20.6 million to €28.5 million in 2021 from €7.8 million in 2020, mainly due to changes in interest on loans and advances and financial assets at fair value through equity.

Interest margin

Interest margin remained relatively stable at €147.4 million compared to €146.9 million in 2020, reflecting a slight increase by €0.6 million (0.4%). Despite the severe economic impact of the COVID-19 pandemic on global economic conditions, no credit incident or late payment occurred and the Bank did not receive any requests for loan forbearance in 2021. For information on the change of presentation of the interest margin in the CEB’s income statement, see Note B (“Change of presentation of the Interest margin”) to the CEB’s financial statements for the fiscal year ended December 31, 2021, included in Exhibit 2 to the CEB 2021 Annual Report on Form 18-K).

¹ Excluding change in fair value of derivative instruments and netting cost recovery for fiduciary activities – recorded under ‘other income’ – against administrative expenses.

² General operating expenses including depreciation and amortization charges of fixed assets divided by net banking income excluding unrealized gains and losses.

Net banking income

Net banking income increased by €7.5 million (5.4%) to €146.8 million in 2021 from €139.3 million in 2020, mainly due to the positive contribution of net gains or losses from financial instruments at fair value through profit or loss and a decrease in commission expenses.

General operating expenses

General operating expenses increased by €2.2 million to €53.2 million for the year ended December 31, 2021 compared to €51.0 million for the year ended December 31, 2020.

IFRS 9-related cost of risk and valuation of financial instruments

Since January 1, 2019, the CEB has been applying the principles of IFRS 9 instead of IAS 39 “Financial Instruments Recognition and Measurement” concerning hedge accounting (fair value of derivatives) and cost of risk (expected credit loss). In accordance with the new standard, the CEB recorded:

-       changes in the fair value of derivatives of –€3.1 million in 2020 and €0 million in 2021;

-       impairment charges for expected credit loss of €7.8 million in 2020, while it recorded write-ups of €7.8 million in 2021.

Core earnings and net profit

Core earnings (net income excluding IFRS-related cost of risk and valuation of financial instruments, without economic or financial significance for the CEB) amounted to €87.0 million in 2021 compared to €85.7 million in 2020, representing a slight increase of 1.5%.

For a discussion of net profit and the adjusted cost-to-income ratio, see “Overview” above.

Balance Sheet

Overview³

As of December 31, 2021, total assets amounted to €29,715 million compared to €27,959 million as of December 31, 2020, which represents an increase of 6.3%. This was essentially due to an increase of outstanding loans (excluding interest and value adjustments) which reached €18.9 billion as of December 31, 2021, representing an increase of 8.5% compared to €17,427 million at year-end 2020. Treasury assets⁴ increased by 18.6% from €6,613 million at year-end 2020 to €7,846 million at year-end 2021, mainly due to an increase in cash in hand and balances with central banks. Debt securities declined by 12.0% from €1,785 million at year-end 2020 to €1,571 million at year-end 2021, mainly due to the fact that certain debt securities matured and no new debt securities were acquired in 2021 due to the low interest rate environment.

As of December 31, 2021, total liabilities amounted to €26,481 million compared to €24,827 million as of December 31, 2020, which represents an increase of 6.7%. Borrowings and debt securities in issue (including accruals) increased by 8.9% from €22,812 million at year-end 2020 to €24,851 million at year-end 2021. New issuances in 2021 amounted to €4,738 million compared to €5,112 million in 2020, while reimbursements in 2021 amounted to €3,268 million compared to €3,120 million in 2020. Other liabilities increased by 77.4% from €313 million at year-end 2020 to €556 million at year-end 2021, mainly due to a decrease of 81.1% in cash collateral received. Provisions increased by €7.9 million, or 2.2%, from €360 million as of December 31, 2020 to €368 million as of December 31, 2021, almost entirely relating to pension commitments.

³ Values in euros are at the exchange rate as of December 31, 2021.

⁴ Treasury assets consist of financial assets at fair value through equity, advances and cash in hand, balances with central banks.

Total equity, including net profit for 2021, amounted to €3,234 million at year-end 2021, an increase of 3.2% compared to €3,132 million at year-end 2020. This increase resulted mainly from the 2021 net profit of €94.8 million.

Finally, the balance sheet showed a variation in derivative instruments (financial instruments at fair value through profit or loss and hedging derivative instruments) of -€6.7 million, i.e., a decrease of 0.6%, on the assets side, and €585.9 million, i.e., a decrease of 48.8%, on the liabilities side, respectively, at year-end 2021. These items represent the fair value, either positive (assets) or negative (liabilities), of the derivative instruments (currency exchange and interest-rate contracts) used for hedging purposes on loans, financial assets at fair value through equity and debt securities in issue.

Treasury Portfolios

The Bank’s balance sheet assets include four treasury portfolios, including one monetary portfolio and three securities portfolios:

The Treasury Monetary Portfolio consists of short-term placements with maturities of up to one year. The strategic objective of this portfolio is to manage day-to-day cash flows in all required currencies. Short-term placements with maturities of up to three months must have a minimum rating of BBB+ at the time of purchase. Short term placements with maturities between three months and one year must have at least an A- rating at the time of purchase. At December 31, 2021, the total value of short-term placements in this portfolio amounted to €2,094 million.

The Short-Term Liquidity Securities Portfolio consists of short-term securities with maturities of up to one year. These securities represent an alternative to bank deposits and complement the Treasury Monetary Portfolio in strengthening the Bank’s short-term liquidity position. At the time of purchase, short-term sovereign bonds with maturities of up to three months must have a minimum internal rating of 6.0 (i.e. BBB), and short-term securities with maturities between three months and two years must have a minimum internal rating of 7.0 (i.e. A-). At December 31, 2021, the total value of short- term securities in this portfolio amounted to €1,586 million.

The Medium-Term Liquidity Securities Portfolio consists of securities investments with maturities from one year up to 15 years. The strategic objective of this portfolio is to strengthen the Bank’s liquidity position, while achieving a satisfactory return. Medium-Term Securities must have a minimum internal rating of 8.0 (i.e. A+) at the time of purchase. At December 31, 2021, the total value of securities in this portfolio amounted to €2,000 million.

The Long-Term Liquidity Securities Portfolio consists of securities with maturities from one year up to 30 years. Securities in this portfolio are required to have a minimum rating of A+ at the time of purchase. At December 31, 2021, the total value of securities in this portfolio amounted to €1,499 million.

For more information on the breakdown of the securities portfolios by, maturity, rating, country and credit rating (of the counterparty), see Note C (“Risk Management—Credit Risk—Finance Directorate Activity—Securities Portfolios”) to the CEB’s financial statements for the fiscal year ended December 31, 2021, included in Exhibit 2 to the CEB 2021 Annual Report on Form 18-K.

Funding

Subject to an annual borrowing authorization granted by the Administrative Council, the CEB issues debt in the international capital markets, and the level of the CEB’s debt securities in issue may fluctuate accordingly. For the year 2021, the annual borrowing authorization set by the Administrative Council for issuances with a maturity of at least one year amounted to €5.5 billion.

In 2021, the Bank borrowed a total of €5.5 billion in 20 financing operations, including six re-opening transactions of existing issuances, with maturities of one year or more, fully consuming CEB’s annual borrowing authorization. This amount is higher than the volume of funding in 2020, which stood at €4.5 billion and consisted of fifteen funding operations, including three re-openings of existing issuances. The 2021 funding program fulfilled three main objectives: to cover the requirements arising from the Bank’s lending activity, to enable the Bank to honor its debt maturities and to enable the Bank to maintain its liquidity at the level set by the Administrative Council.

In an effort to ensure the necessary funding to finance its activities, the Bank continues to combine benchmark transactions in major currencies targeting a broad range of mostly institutional investors with debt issuances in other currencies or with a more specific structure designed to meet specific investor demands.

In 2021, 38.5% of the funds raised by the Bank were denominated in euros, 38.3% in U.S. dollars, 14.3% in British pounds, 3.8% in Canadian dollars, 3.4% in Australian dollars, 0.9% in Norwegian krone, 0.6% in Hong-Kong dollars and 0.3% in Turkish lira. These transactions enabled the Bank to diversify the markets in which its activities are financed while at the same time allowing for a broadening of its investor base.

In EUR, nine bonds were issued under the borrowing authorization for 2021: a EUR 1 billion ten-year benchmark and a EUR 50 million re-opening thereof in January, the Bank’s fifth seven-year Social Inclusion Bond benchmark (EUR 500 million) and a EUR 150 million reopening maturing in April 2024 in April, a callable EUR 15 million eleven-year private placement in June, a EUR 100 million re-opening maturing in April 2026 in July, a EUR 100 million re-opening maturing in April 2024 in August and two re-openings each maturing in April 2024 for EUR 100 million each in September.

In USD, three bonds were issued under the borrowing authorization for 2021: a USD 1.0 billion three-year benchmark in October 2020 (prefunding for 2021), a USD 500 million three-year Social Inclusion Bond benchmark in June and a USD 1.0 billion five-year benchmark in September 2021.

In GBP, three bonds were issued under the borrowing authorization for 2021: a GBP 400 million long three-year benchmark in March, a GBP 175 million reopening of the December 2025 in May and a GBP 100 million reopening of the December 2025 in July.

In other currencies, five bonds were issued under the borrowing authorization for 2021: a HKD 300 million three-year transaction in January, a NOK 500 million re-opening maturing in February 2024 in October, an AUD 300 million three-year transaction in October, a CAD 300 million three-year transaction in October, and a TRY 168 million three-year transaction in November.

After taking swaps into account, the total amount of funds borrowed was denominated in euros.

The average maturity of the issuances launched under the borrowing authorization 2020 was 5.3 years. The table below shows funds raised in their original currencies:

Funding in 2021⁽¹⁾ (with Maturities Greater than One Year)

In 2021, in order to ensure the refinancing of the Bank’s loans and avoid cash gaps in the coming years, 57.8% of the issuances carried out under the CEB’s borrowing program had maturities of close to five years or more, compared with 75.2% in 2020.

At December 31, 2021, the outstanding debt represented by bonds, excluding interest payable, amounted to €24.2 billion, up from €21.9 billion at December 31, 2020. In 2021, as in 2020, the Bank did not repurchase any of its long-term debt and also did not make any early repayments.

The breakdown of debt by maturity is as shown in the chart below:

Financing commitments and stock of projects awaiting financing

In connection with its lending activities, the Bank enters into project financing commitments for loans to be disbursed in the future.

Financing commitments consist of amounts which remain to be disbursed for projects with respect to which a framework loan agreement has been signed. Stock of projects awaiting financing consists of financing commitments plus any amounts in respect of projects that have been approved but for which the Bank has yet to enter into a financial commitment. For additional information on financing commitments, see Note C (“Risk Management—Credit Risk—Stock of projects and Financing commitments”) and Note T (“Financing commitments given or received”) to the CEB’s financial statements for the fiscal year ended December 31, 2021, included in Exhibit 2 to the CEB 2021 Annual Report on Form 18-K.

The total stock of projects awaiting financing at December 31, 2021 amounted to €8.9 billion, representing a 6.2% decrease compared to €9.5 billion at December 31, 2020 mostly due to the rapid disbursement of COVID-19-related loans. In 2021, the CEB approved new loans for social projects worth €4.2 billion, which was in line with the activity targets set in its Development Plan 2020-2022. This compares to the extraordinary volume of €6.0 billion in new projects the CEB approved in 2020 in response to its Member States’ needs during the COVID-19 pandemic. Loan disbursements totaled €4.0 billion in 2021, down from the exceptional €4.5 billion disbursed in 2020.

The stock of projects awaiting financing for Target Group Countries represented €3.9 billion, or 43%, of the total stock of projects awaiting financing at December 31, 2021.

The table below presents information on the CEB’s stock of projects awaiting financing (including financing commitments) at year-end 2021 and 2020.

Risk Management

The CEB maintains risk management procedures designed to limit its exposure to credit risk, market risk, liquidity risk and operational risk, and to ensure its long-term financial sustainability and operational resilience while enabling it to fulfill its social mandate. The CEB has also established a set of prudential ratios to assess and monitor the risks arising from its activities. For more information, see Note C (“Risk Management”) to the CEB’s financial statements for the fiscal year ended December 31, 2021, included in Exhibit 2 to the CEB 2021 Annual Report on Form 18-K.

GOVERNANCE

The CEB is administered, supervised and managed by a Governing Board, an Administrative Council, a Governor and an Auditing Board.⁵

Governing Board

Powers

The Governing Board is the supreme organ of the Bank and is vested with all powers that have not been delegated to the Administrative Council. The Bank’s Articles of Agreement specify certain functions and powers exercised by the Governing Board, including setting out the general orientations for the Bank’s activity and authorizing cooperation agreements with other international organizations, laying down the conditions for Bank membership, deciding capital increases, and approving the annual Report of the Governor, the accounts and the Bank’s general balance sheet. It elects its own Chairperson and the Chairperson of the Administrative Council and appoints the Governor, the Vice-Governors and the members of the Auditing Board.

The Governing Board is also required to state a position on the recommendations and opinions transmitted to it by the Committee of Ministers and the Parliamentary Assembly of the Council of Europe.

Decision-making

The discussions and decisions of the Governing Board are not valid unless two-thirds of its members are present. Each Member State of the CEB has one vote for each participating certificate held by it. Any Member State that has failed to pay required capital that has come due may not, for as long as such non-payment persists, exercise the voting rights corresponding to the sum due and not paid up.

Decisions are reached by a majority of the Member States voting in favor or against and holding two-thirds of the votes cast. A majority of three-quarters of the Member States voting in favor or against and holding three-quarters of the votes cast is required for assuming, under exceptional circumstances and for a specified period, powers delegated to the Administrative Council. The same majority is required for adjusting the apportionment of ownership not resulting from the admission of new Member States. A unanimous vote is required for suspending or terminating the Bank’s operations and amending the Articles, although any change in the stated aims of the Bank expressed in the Articles requires approval of the Committee of Ministers.

Composition

The Governing Board is composed of a Chairperson and one representative appointed by each Member State, which as a general rule is the Member State’s ambassador to the Council of Europe in Strasbourg, France.

The Chairperson reports on the Bank’s activities to the Parliamentary Assembly of the Council of Europe and to the Committee of Ministers at least once a year and forwards the Annual Report of the Governor to the Committee of Ministers. Each Member State of the Bank is entitled to present a candidate for the Chairpersonship.

The Secretary General of the Council of Europe or his representative is entitled to participate in the meetings of the Governing Board without the right to vote. As a general rule, the Governor or his representative, the Bank’s legal adviser and the Secretariat of the organs also participate in meetings.

Administrative Council

Powers

The Administrative Council possesses all those powers delegated to it by the Governing Board under the Articles, although the Governing Board may reassume such powers from the Administrative Council in exceptional circumstances for a specified period. Among other functions, the Administrative Council establishes and supervises operational policies, approves loan projects and votes on the Bank’s operating budget. The Administrative Council may at any time appoint committees from among its members and delegate specified powers to such committees.

Decision-making

Decisions of the Administrative Council are only valid if two-thirds of its Member States’ representatives are present. Each Member State possesses one vote for each participating certificate held by it. Most decisions of the Administrative Council are taken by a vote with simple majority of the votes cast, although some require a majority of the Member States (not counting those Member States which abstain from voting) and a majority of the votes cast. These include decisions on proposals and opinions addressed to the Governing Board concerning (i) adjustments to the Bank’s capital and its apportionment, increases or reductions in the authorized capital; (ii) the suspension or termination of the Bank’s operations and, in the event of liquidation, distribution of its assets; (iii) the appointment of the members of the Auditing Board; and (iv) the appointment of the external auditor and establishment of its terms of reference. In addition, the Administrative Council takes, by simple majority of the Member States and a majority of two-thirds of the votes cast, decisions regarding investment projects that have not received an opinion as to admissibility.

Composition

The Administrative Council is composed of a Chairperson appointed by the Governing Board for a three-year term and one representative appointed by each Member State, as a general rule from the ministry of finance of the Member State. Its Chairperson is elected by the Governing Board. The term of office of the Chairperson is three years and is renewable for a second three-year term. The Chairperson does not have the right to vote.

The Secretary General of the Council of Europe may participate in or be represented at the meetings. As a general rule, the Governor or his representative, the Bank’s legal adviser and the Secretariat of the organs also participate in meetings. The Administrative Council may, when it deems necessary, invite representatives of international organizations or any other interested person to participate in its proceedings, but such invitees do not have the right to vote.

Current Membership of the Governing Board and the Administrative Council

The following are the representatives to the Governing Board and Administrative Council of the CEB as of April 12, 2022.

The Governor

The Governor of the CEB is the Bank’s legal representative and represents the CEB in all of its transactions and legal proceedings. The Governor is the head of the Bank’s operational services and is responsible for carrying out the day-to-day business and operating activities of the CEB based on the guidelines and the authorizations of the Administrative Council. He is responsible for the organization of the CEB’s operational services and for the Bank’s staff within the framework of the regulations adopted by the Administrative Council. He is assisted by one or more Vice-Governors and replaced by one of them if necessary. Pursuant to the Bank’s Articles of Agreement, the Vice-Governors are appointed by the Governing Board based on a proposal from the Governor, following an opinion on conformity from the Administrative Council and after consultation with the members of the Governing Board. The Governor determines the responsibilities of the Vice-Governors taking into account post descriptions approved by the Administrative Council.

The Governor and Vice-Governors are each appointed by the Governing Board for a five-year term (renewable once in the case of first-time appointments after November 2010).

On June 11, 2021, the Governing Board appointed Mr. Carlo Monticelli as successor to former Governor Rolf Wenzel for a five-year mandate. Mr. Monticelli took office as Governor on December 18, 2021. On December 3, 2021, the Governing Board of the CEB opened the nomination procedure for the posts of Vice Governor for Financial Strategy and Vice Governor for Social Development Strategy. The nomination procedure for candidacies for these posts ended on March 31, 2022.

The current Governor and Vice-Governor are the following:

Auditing Board

Powers

The Auditing Board is required by the Articles to inspect the CEB’s accounts and verify that the operational accounts and balance sheet are in order, to certify in an annual report that the balance sheet and operational accounts accord with the books and records of the Bank, that they give an accurate and true picture of the state of the CEB’s affairs, and that the CEB is being managed according to the principles of sound financial management. Its audit is required to be conducted in accordance with generally accepted auditing standards.

The Auditing Board, as an independent supervisory body of the Bank’s activities, is entitled, separately from other controlling entities, to examine specific projects financed by the Bank. The audit may take place by review of documentation at the Bank and/or, in exceptional cases, and subject to the agreement of the Governor, by on-site visits. The Auditing Board has regular access to reports on internal audit activities, which includes a list of internal audits completed, audits in progress and status reports of audit findings. Moreover, the Auditing Board has full access to or may request for review all internal documents which it deems necessary to examine in order to carry out its duties. The Auditing Board may use external experts in cases where it is faced with a particular problem for which it requires specialized technical expertise that is not available among its members.

The Governor is required to inform the Auditing Board about the tenders for the appointment of the external auditor. Thereupon, the Auditing Board presents its opinion on the choice of the external auditor to the Administrative Council and the Governing Board as well as to the Governor and the Secretariat of the Partial Agreement.

ERNST & YOUNG Audit was appointed by the Governing Board to be the Bank’s external auditor for a second term through 2024.

Composition

The Auditing Board is composed of three members originating from the Member States of the CEB. The Governing Board appoints the members of the Auditing Board, including substitute members, according to a rotation scheme. The Member States are invited to present candidates having significant professional experience in the financial audit field. The term of office of each member is three years and not more than one member is permitted to retire each year. Outgoing members are required to attend the meetings of the Auditing Board as an advisor until the next rotation becomes effective the following year.

The current members of the Auditing Board and their principal professions as of April 12, 2022, are Jacek Dominik (General Counsellor, International Cooperation Department, Ministry of Finance, Warsaw, Poland), Nata Lasmane (Director of Audit Department, Head of EU Fund’s Audit Authority, Ministry of Finance, Riga, Latvia) and Lucia Kašiarová (Project Coordinator, State Reporting Section, Ministry of Finance, Bratislava, Slovak Republic).

Staff

Over the years, the CEB has increased its staff numbers in accordance with the development of its activities. At year-end 2021, the Bank had a total of 213 permanent staff members in addition to appointed officials, up from 209 at year-end 2020. Of the 213 staff members, 149 were professional staff (of which 46% were women and 54% were men) and 64 were support staff (of which 72% were women and 28% were men). Although women are generally well represented at the Bank, continued efforts are undertaken to improve diversity, particularly through higher representation of women at senior levels and in management positions. The CEB monitors other aspects of diversity, including educational background, and recruits actively from all Member States.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘18-K’ Filing		Date		Other Filings
		12/17/26
		8/15/26
		4/13/22
Filed on:		4/12/22
		4/8/22
		4/6/22
		3/31/22
For Period end:		12/31/21
		12/18/21
		12/3/21
		6/11/21
		12/31/20		18-K,  18-K/A
		11/19/20
		11/12/20
		4/2/20
		1/1/19
		2/6/17
		2/4/11
				List all Filings

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5 Subsequent Filings that Reference this Filing

As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 1/19/24 Council of Europe Dev Bank 424B5 1:452K Toppan Merrill/FA 7/10/23 Council of Europe Dev Bank 424B5 1:550K Toppan Merrill/FA 5/17/23 Council of Europe Dev Bank 424B5 1:513K Toppan Merrill/FA 1/23/23 Council of Europe Dev Bank 424B5 1:515K Toppan Merrill/FA 6/10/22 Council of Europe Dev Bank 424B5 1:508K Toppan Merrill/FA

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