Financial Instruments in
Cohesion Policy 2014-2020
Proposed framework
NFOŚiGW
Luxembourg-Warsaw, 17 April 2012
Regional
Policy
Financial Instruments in
Cohesion Policy 2014-2020
Commission proposal
2
Regional
Policy
Financial instruments 2014-2020: Introduction
Background:
Increased importance of financial instruments in implementing EU
budget resources in future (MFF 2014-2020)
 EU central level / „direct management“: „EU Debt and Equity
Platforms“ to serve as standardised rules for financial instruments
using EU budget resources
 Regional Policy / „shared management“: Strengthening and
expansion of financial instruments in the context of Cohesion Policy
Legislative COM proposal 2014-2020 to
 provide a clear set of rules, building on existing guidance,
 capture synergies with other forms of support such as grants, and to
 ensure compatibility with financial instruments at EU level.
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Financial instruments 2014-2020: Coverage
Definition of financial instruments:
“Union measures of financial support provided from the budget on a
complementary basis in order to address, when necessary and duly
justified, one or more specific policy objectives. Such instruments may
take the form of loans, including loans with interest rate rebates,
guarantees, equity or quasi-equity, equity/debt investments or
participations, facilitated where appropriate by the Union through risksharing instruments, possibly combined with grants.”
(Financial Regulation, Article 130 of the Presidency compromise of April 2011)
 Not including repayable grants
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Financial instruments 2014-2020: Definitions
Managing Authority
Operation
•
Fund of Funds (FoF)
Constituted by the financial
contributions from OPs to a FI (incl
FoFs) and the subsequent financial
support provided by the FI
Beneficiary
Financial
Intermediary
Financial
Intermediary
Financial
products
Financial
products
Final recipients
•
The body implementing the FI,
having a contractual relationship
with MA
Final recipient
•
Final recipients
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Legal or natural person that
receives financial support from a
financial instrument
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Financial instruments 2014-2020: CPR provisions
1. Scope:
 Common provisions cover all five Funds
 Expansion to all thematic objectives & priorities foreseen by OPs,
economic viability of final recipients provided
 Financial instruments may be supported by several Funds
 Strengthening the combination of financial instruments and other
forms support
2. Ex-ante assessment, Art 32 CPR:
 MS/MAs to conduct ex-ante assessments prior to supporting
financial instruments, including
 rationale/additionality against existing market gaps and demand/supply
 potential private sector involvement
 target final recipients, products and indicators
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Financial instruments 2014-2020: CPR provisions
3. Implementation options, Art 33 CPR (1)
I.
Support to financial instruments set up at Union level and
managed directly/indirectly by COM in line with FR (Art 33
(1)(a)):



OP contribution to be ring-fenced within EU-level instrument
for investments in regions and actions covered by OP
No on-the-spot verifications, but management and control
bodies shall receive regular control reports
No audits of operations and management & control
systems, but audit bodies shall receive regular control
reports from auditors designated in relevant agreements
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Financial instruments 2014-2020: CPR provisions
3. Implementation options, Art 33 CPR (2)
II.
Support to financial instruments set up at national or
regional level, managed by or under the MA under „shared
management“ rules (Art 33 (1)(b)):
a.
Standardised instruments („off-the-shelf“) for which the
terms and conditions will be laid down by COM
(Implementing Act); ready-to-use (Art 33(3)(a))
b.
Already existing or newly created instruments, tailored
to specific conditions and needs (Art 33(3)(b))
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Financial instruments 2014-2020: CPR provisions
4. Implementation modalities for FIs under sharedmanagement, Art 33(4). Managing Authorities may:
 Invest in the capital of existing or newly created legal entities
 Entrust implementations tasks to


EIB
IFIs in which a MS is a shareholder or financial institutions acting in
public interest / under control of public authority
When implementing FIs through FoFs, the above bodies may further entrust
part of the implementation to financial intermediaries (Art 33(5))

A body governed by public or private law selected in accordance with
EU and national rules
 Undertake implementation tasks directly for FIs consisting solely of
loans and guarantees (MA = beneficiary)
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Financial instruments 2014-2020: CPR provisions
5. Co-financing and phased contributions, Art 35 CPR

Contribution to EU-level instruments under Art 33(1)(a): Up to
100% of the paid support may be reimbursed to MA; separate
priority axis to be foreseen

Phased contributions required to national/regional instruments
under shared management (Art 33(1)(b)):
 Payment applications to include total amount of support paid or
expected to be paid to FI for investment in final recipients over a period
of max. two years; Reimbursement of MA in line with co-financing rate
of relevant priority axis;
 Adjustment against actual investments and management costs/fees in
subsequent payment applications, and at closure.

Additional incentive: EU co-financing rate to increase by 10% if an
entire priority axis is implemented through financial instruments
(Art 110(5) CPR).
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Financial instruments 2014-2020: CPR provisions
6. Eligible expenditure at closure, Art 36 CPR
Total amount effectively paid by the FI within the eligibility period for:

Payments to final recipients

Resources committed to guarantees, covering a multiple of
underlying new loans or other risk-bearing instruments for new
investments (ex-ante risk assessment)

Reimbursement of management costs or fees


Capitalised interest rate subsidies or guarantee fee subsidies to
be paid for a period of max.10 years after the eligibility period, in
relation to loans/guarantees provided/committed within the
eligibility period (escrow account)
In the case of equity-based instruments and micro-credit,
capitalised management costs or fees to be paid for a max. period
of 5 years after the eligibility period (escrow account)
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Financial instruments 2014-2020: CPR provisions
7. Financial management of EU contributions to FIs

EU contributions to be placed in interest-bearing accounts in MS
or temporarily invested (sound financial management); Interest or
other gains generated prior to investment in final recipient to be
used for the same purposes as initial contribution

EU share of capital resources paid back from investments shall be
re-used for further investments in same or other financial
instrument, in accordance with OP objectives

EU share of gains/earnings/yields generated by investments shall
be used for:



Management costs/fees
Preferential remuneration of investors operating under MEIP and providing
co-investment at the level of FI or final recipient
Further investments in same or other instruments, in line with OP
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Financial instruments 2014-2020: CPR provisions
8. Use of legacy resources after closure, Art 39 CPR

EU share of capital resources and gains/earnings/yields shall be
used in line with OP aims for at least 10 years after closure.
9. Reporting on FI implementation, Art 40 CPR

MA to report to COM on FI operations, specific report as annex to
the annual implementation report, including:
Details of OP; description of FI and implementation structure; amount of
support paid to FI & support provided from FI to final recipients as per
statement of expenditure, by OP and/or priority axis; revenues of &
repayments to FI; multiplier effect; contribution to achievement of relevant
OP or PA indicators;

Electronic transmission of data foreseen from MA to COM
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Financial instruments 2014-2020: Delegated Act
Elements to be covered by envisaged Delegated Act (1)
1.
2.
3.
4.
5.
6.
7.
Ex-ante assessment (minimum content, role of MC, etc.)
Combination of support (rules for simultaneous support from FIs and
grants, avoidance of double-financing, audit trail, etc.)
Eligibility of expenditure (for new investments only; not for firms in
difficulty, etc.)
FI and product-specific matters (economic viability of projects, target
for FI business plan, multiplier ratio for guarantees, etc.)
Terms and conditions for contributions to FIs (minimum requirements
re funding agreements)
Selection of bodies that implement FIs (minimum requirements for
MA, etc.)
Responsibilities of bodies that implement FIs (sound financial
management, compliance with EU and national rules, etc.)
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Financial instruments 2014-2020: Delegated Act
Elements to be covered by envisaged Delegated Act (2)
8.
9.
10.
11.
12.
13.
Management costs and fees (simplified and incentive-based
methodology for their calculation, ceilings, arrangement fees, etc.)
Transfer and management of assets (contributions from several OPs,
conditions for national co-financing at the level of the final recipient, etc.)
Conversion of assets between euro and national currencies (procedural
aspects)
Management & control of FIs (compliance, audit trail, supporting
documents, audits and checks, etc.)
Payments and withdrawal of payments (procedural aspects regarding
phased contributions and conditions under which they may be withdrawn,
annex to statement of expenditure, etc.)
Calculation of capitalised interest rate or guarantee fee subsidies,
as well as capitalised management costs and fees
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Financial instruments 2014-2020: Implementing Act
Elements to be covered by envisaged Implementing Act
1.
Templates for “off-the-shelf” instruments: Standard terms and
conditions for financial instruments pursuant to Article 33(3)(a) CPR
2.
Template for the monitoring and provision of monitoring
information to the Commission under Art 40 CPR
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Additional information on financial instruments
1. COMMISSION STAFF WORKING DOCUMENT - Financial Instruments in
Cohesion Policy
http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/financial/finan
cial_instruments_2012_en.pdf

Financial Engineering Instruments Implemented by Member States with
ERDF Contributions. Synthesis Report
http://ec.europa.eu/regional_policy/thefunds/doc/instruments/financial/financial_engi
neering_report_2012.pdf

Annexes
http://ec.europa.eu/regional_policy/thefunds/doc/instruments/financial/financial_engi
neering_annex_2012.zip

Factsheet: Financial Instruments in Cohesion Policy 2014-2020
http://ec.europa.eu/regional_policy/sources/docgener/informat/2014/financial_instru
ments_en.pdf
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Thank you for your attention!
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ANNEX
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Financial (Engineering) Instruments in
Cohesion Policy 2007-2013
Background & state of play
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FEIs 2007-2013: What is Financial Engineering?
•
Financial Engineering in Cohesion Policy: Innovative way of delivering CP support
through revolving financing instruments (using new structures and processes) in
preference to traditional dependence on non-repayable public support through grants
•
Article 44 of the GR enables support through FEIs in three thematic areas:
– Art 44 (a): Enterprises, including SMEs & micro enterprises
– Art 44 (b): Sustainable urban development
– Art 44 (c): EE & RES in the building sector, including existing housing
FEIs are e.g. referred to as venture capital funds, guarantee funds and loan funds
•
Advantages of Financial Engineering Instruments
 Providing loans, equity or guarantees for revenue-generating (parts) of projects
 Revolving scheme > increased budgetary efficiency & financial sustainability
 Possible leverage from public or private sector partners (at all levels)
 Provide finance to final recipients before actual project expenditure
 Offer a high degree of flexibility > tailor-made support & delivery structures
•
FEIs represent a new approach to CP support, requiring new partnerships in
delivering CP support & assistance to MAs and relevant stakeholders
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FEIs 2007-2013: Where do we stand?
FEI Implementation progress in EU Member States
(as per 31.12.2010):
 ERDF + national contributions committed to FEIs:
 ERDF contributions committed to FEIs:
EUR 10.0 bn
EUR 7.6 bn
Stabilisation and strengthening of regulatory framework
2007-2013: COCOF note III, proposed amendment to GR
• Clarification of rules
• Strengthening monitoring and reporting requirements
• Inclusion of financial instruments directly implemented by MAs
Translating experiences into proposed regulatory framework
for 2014-2020
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