NIB 35 years: Building Nordic economic cooperation

After almost 35 years as NIB employees, Chief Compliance Officer Siv Hellén and Loan Administration Specialist Barbro Eriksson look back at an important era in the history of Nordic economic cooperation-the foundation and development of the Nordic Investment Bank.

Stockholm, November 1975: The delegates of the Nordic Council are called in for an extra session. The Council is to vote for or against the founding of a new investment bank, jointly owned by the five Nordic countries.

More than twenty years of discussions and debate about the existence of such a bank have led up to this moment. Now, in 1975, the Nordic countries are suffering from considerable deficits and unemployment as a result of the recent oil crisis and the related recession. There is an urgent need for outside capital to speed up investments, and the plans to establish a Nordic investment bank have finally been brought to the table. The Council votes in favour of the new bank with the clear majority of 59 to 10.

Helsinki, June 2011: The Nordic Investment Bank celebrates its 35 years of activity. The Bank, which started its operations in Helsinki in 1976, is today a triple-A-rated, well-established international finance institution with some 180 employees.

Finland’s first international organisation
Barbro Eriksson started her career at NIB in October 1976, right after the establishment of the Bank. She was the sixth employee to be recruited by the Bank.

“I had finished my studies in international finance, and was looking for a job within an international organisation. Before NIB, there was no such institution in Finland, so when I read in an advertisement that a new Nordic bank was looking for a secretary, I immediately applied,” says Ms Eriksson.

A few months later, in spring 1977, she was joined by Siv Hellén.

“My first recollection of NIB is reading a newspaper interview with Bert Lindström, from Sweden, who had been chosen to be the Bank’s first managing director. The article was presenting the new Nordic financial institution, and I remember thinking that this is a place where I want to work,” says Ms Hellén.

“I was interested in Nordic cooperation ever since my law studies when I got a lot of contacts among law students in other Nordic countries,” she continues. “When I later read in an advertisement that NIB was looking for a banking lawyer, I knew at once that it was the job for me, even though at the time I was considering a diplomatic career.”

Starting up a bank

It was generally felt that it was Finland’s turn to host a Nordic institution, as all the other Nordic countries already had such institutions in their capitals. Still, some discussions and debate preceded the new bank’s location in Helsinki, says Siv Hellén.

“Finland was seen as being quite peripheral geographically, and the Finnish language was thought to prevent the recruitment of foreign staff. The battle stood between Stockholm and Helsinki, and it is said that the Swedish and Finnish prime ministers Olof Palme and Kalevi Sorsa reached a final agreement in a smoke sauna in Finnish Lapland during a ministerial meeting.”

After the location had been settled and the Helsinki office opened, the newly recruited staff started to build up the Bank’s operations. The Managing Director Bert Lindström had started his work in August 1976, and it was time for the first member country payments of the Bank’s capital.

“Administering the equity payments was quite a dramatic affair,” Barbro Eriksson remembers. “All communications were handled by telex, and the transfer of funds was not all that easy in those days as NIB’s capital was in an artificial currency, SDR (Special Drawing Rights).”

“Yes, I remember that we were quite concerned about the technical problems with the payments, not least because of the effect reporting delays could ultimately have had on the Bank’s creditworthiness”, Siv Hellén adds.

“Of course, at the same time we also worked hard on raising the awareness of NIB in the financing world and among potential investors. We published a lot of press releases and arranged seminars, road shows and receptions,” explains Ms Eriksson. “And as it turned out, the Helsinki-location was no obstacle in attracting new staff members. The Bank raised a lot of interest among the international banking community.”

The first loans and borrowings
The first company to apply for a loan from NIB was the ferrosilicon producer Icelandic Alloys, and that loan, financing a new production plant, was the second to be granted. The first approved loan went to the Finnish power company Imatran Voima, for the building of a power cable between Finland and Sweden.

“My first task as a lawyer at NIB was to close the deal with Icelandic Alloys,” says Siv Hellén. “It was the first project finance loan, and NIB was the biggest creditor.”

“At the same time, I also worked on the Bank’s first borrowing in US dollars on the European capital market,” she continues. “In that context, our challenge was to decide on the governing law and jurisdiction for the issue. Finding a jurisdiction that clearly recognised an organisation without a domicile in one particular country was not all that easy in those days.”

Expanding the field of operation

As stated in the mission and mandate given by the member countries at the time, NIB was to strengthen the Nordic economies by giving loans and guarantees to projects of Nordic interest. But both Barbro Eriksson and Siv Hellén remember the 1980s as a decade when NIB worked intensively on further specifying the Bank’s added value on the financing arena.

“In 1982, two important events took place, says Siv Hellén. “First, the Bank was awarded its top credit rating AAA/Aaa, something we had worked very hard to achieve. And in the same year we launched our Project Investment Loan facility, which took us into financing outside our membership area, and also led us into a stronger cooperation with the World Bank and other international finance institutions.”

Ms Eriksson comments that the Project Investment Loan facility was a result of a political discussion that had a big impact on the Bank’s further activities.

“First when NIB was established, we were not allowed to finance any borrowers outside the Nordic area. But the new loan facility lifted that restraint, and because of the member countries’ guarantees, we could start to finance investments also in middle-income countries. It really changed the whole picture a lot.”

Looking eastwards

The political and historical events in Europe in the early 1990s also changed the course of history for NIB. Soon after the Baltic countries regained independence, the Nordic and Baltic countries established the Baltic Investment Programme.

“That was a major thing for NIB, a result of the biggest research and studies made in the Bank since the implementation of the Project Investment facility,” says Siv Hellén. “Things happened very fast in the political arena, and we had to change our assumptions all the time. But the programme became reality in 1992, and NIB’s activities were very much hands on. We granted special loans, administered technical assistance and took equity positions in the three Baltic investment banks that were established. Already then, the Baltic countries expressed an interest in becoming members of NIB, and I am still sorry that it took as long as ten years before that happened.”

When the three Baltic countries became members of NIB in 2005, a new supreme decision-making body was established for the Bank; the Board of Governors formally replacing the Nordic Council of Ministers.

“Having its own Board of Governors strengthened NIB’s position as a true IFI, but on the other hand the Bank also became somewhat alienated from the political debate,” says Siv Hellén. “When NIB formally was a part of the Nordic cooperation, it was constantly on the agenda. Even if our projects were sometimes criticised, in the end the Bank always got the praise of being the best example of practical Nordic economical cooperation. I hope that NIB, also with its new owner structure, finds a prominent place in the political debate and discussions as a useful tool in the regional cooperation.”

Looking forwards

After more than three decades of service at the Nordic Investment Bank, both Barbro Eriksson and Siv Hellén will retire in the coming year. Looking both back and forwards, how do they see the future of NIB and its operations?

“I see the environmental sector as a very important part of NIB’s activities, both now and in the future,” says Ms Eriksson, and adds that she is especially proud of what the Bank has done for the Baltic Sea in the St Petersburg region, referring to the financing of the Southwest Wastewater Treatment Plant inaugurated in 2005.

Siv Hellén agrees, and notes that visible regular support from the owners continues to be very important.

“Even if NIB has been successful there is no place for complacency. Against many larger players a small institution can easily be marginalised. But I still think there is a great demand for NIB’s financing because it is flexible and provides a good complement to other funds, primarily those from the private sector,” she concludes.