The European Bank for Reconstruction and Development on Friday selected British top civil servant Suma Chakrabarti as its president to 2016, replacing German incumbent Thomas Mirow after a shock vote.
Chakrabarti, 53, is the first EBRD president who is neither German or French.
His candidacy raised eyebrows as it broke a supposed unwritten rule that a Briton would not run for the presidency in return for the bank being headquartered in London.
Founded in 1991 to help former Soviet bloc countries switch and adapt to a market economy, the EBRD is hoping to soon start investing across Arab regions.
British finance minister George Osborne said Chakrabarti's victory was "the product of a serious campaign and strong diplomacy" and because Britain's top civil servant at the Ministry of Justice was "the best person for the job."
Chancellor of the Exchequer Osborne added in a statement: "The success of a British candidate to lead this important European institution shows the strength of and support for Britain's influence in Europe and around the world."
Eurozone titans Germany and France had reportedly wanted the position to go to Frenchman Philippe de Fontaine Vive Curtaz, a vice president of the European Investment Bank. Britain is not a member of the eurozone.
Mirow, who has successfully steered the bank through the financial crisis, had hoped to win a second term but entered the contest without Berlin's backing.
"I wholeheartedly congratulate Sir Suma and wish him the best of luck," Mirow said of his rival.
"It has been a privilege and an honour to lead the EBRD over the past four years. I pay tribute to the Bank's staff who have put in such a strong performance during that time."
Chakrabarti beat off four rival candidates, including also ex-Polish prime minister Jan Krzysztof Bielecki and former Serbian deputy prime minister Bozidar Djelic.
"It's an honour to be elected president of the EBRD as it continues its outstanding work and as it rises to the challenges of the future," said Chakrabarti, who speaks fluent Bengali.
"It is a huge privilege to follow on from Thomas Mirow and I want to congratulate him for everything he has achieved," added the man who has also headed Britain's Department of International Development.
For the first time at the EBRD, shareholders considered more than one candidate for the role of president after European Union finance ministers failed in the run-up to the annual meeting to reach a consensus.
Chakrabarti will be tasked with supporting growth in former Soviet bloc countries and Arab nations hit by the eurozone debt crisis.
"In these economically distressing and uncertain times, the EBRD is an institution that has the financial standing and the resources to make a difference in the countries where we are active," Mirow said Friday at the start of the bank's two-day meeting.
EBRD shareholders were on Saturday to vote on whether to approve investment of 1.0 billion euros ($1.28 billion) for expansion into Arab regions.
After years of investing in mainly private-sector enterprises across mostly ex-communist nations in Europe and central Asia -- such as Hungary, Kazakhstan and Russia -- the EBRD has set its sights on Egypt, Morocco, Tunisia and Jordan following the Arab Spring uprisings.
On Friday, the EBRD said that the eurozone debt crisis would slash growth this year across its current and future "transition" countries of operation.
It forecast growth of 3.1 percent this year across a region that comprises 33 countries, including Arab nations plus Turkey and Mongolia.
"Growth in the transition region is expected to substantially slow from 4.6 percent in 2011 to 3.1 percent in 2012 before modestly picking up to 3.7 percent in 2013, as the eurozone debt crisis hurts the region," the EBRD said in its latest economic outlook.
"A further worsening of the eurozone crisis or an oil supply shock are both possible and pose significant downside risks for the region as a whole. In addition, domestic risks have risen in some countries," it added.
The bank's shareholders comprise 63 governments plus the European Union and the EIB.