The EBRD said on Saturday its mission to grow market economies in former Soviet states must not be diluted by a flood of new entrants if the development bank's members agree to widen lending to include Turkey.
The future of the European Bank for Reconstruction and Development - which is holding its annual meeting in the Ukrainian capital - is under intense scrutiny, with Turkey's request last month to become a recipient of EBRD funds as well as remaining a shareholder, becoming a focal point for debate.
The EBRD's members have set a timetable to decide on Turkey's application by the end of October. "There is overwhelming support for this process, including from all the largest shareholders," EBRD spokesman Anthony Williams told Reuters.
"Such strong support was based, in part, on the clear view that the change of Turkey's status would not set a precedent for any further countries, and would not dilute work in the current EBRD region," Williams said.
US Under Secretary for International Affairs David McCormick wrote in an article published on Saturday ahead of the start of the meeting that the bank needs to change the direction of its lending to remain relevant, or simply disband.
"The bank must decide whether to go beyond its initial mandate by assisting countries outside the Communist bloc or simply fade away, as its founders envisioned, becoming a smaller and more focused institution over time as its original mandate is fulfilled," McCormick wrote in the magazine Emerging Markets.
"While acknowledging the potential benefits of an expanded mandate, the United States and a number of other countries are concerned that it would dilute focus from the EBRD's mission, weaken its financial stability, and create redundancy with other multilateral institutions," McCormick said.
ACTIVITIES REFINED: The EBRD was set up in 1991 to help former Communist countries transition to market economies, a mission that has largely been achieved, according to some of the bank's shareholders, which are drawn from 61 countries together with the European Investment Bank and the European Union.
The bank has refined its field of activities in recent years as former eastern bloc economies like the Czech Republic have graduated from its lending programmes and become full members of the European Union. The EBRD by 2010 will stop investing in the seven other former communist countries which joined the EU in 2004, among them Slovakia which was given approval earlier this month to join the euro zone currency bloc in 2009.
The EU has been mulling various options, including closure or merger with the European Investment Bank - its own lending arm - for the future of the EBRD, while Australia wants to sell its one percent stake in the bank. But executives at the EBRD, which invested 5.6 billion euros in 2007 and plans to lend 5.2-5.8 billion euros to member economies this year, say more work remains to be done.
The bank provides project financing for businesses in countries from central Europe to central Asia and says it is the largest single investor in the region. It has been pushing further east and south across former Soviet territories and executives say the Turkey issue has provided a clear catalyst for a full review of the multi-lateral lender's operations.
Steering the bank's future development will fall on the shoulders of current German Deputy Finance Minister Thomas Mirow, who is poised to take over the leadership of the EBRD in July from current head Jean Lemierre.