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Financial Instruments supported by the European Structural

and Investment (ESI) Funds in 2014-2020

9 July 2014, BrusselsStefan Appel, DG Regional and Urban Policy

European Commission

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Financial Instruments 2014-2020 Commission encourages more extensive use of FIs

Advantages:

• Efficiency gains due to revolving funds (remain in the programme area)

• Leverage of resources, increase of impact of ESI funds• Financing provided before investment takes place

(different from grants)• Better quality of projects (investment must be repaid)• Incentives to use FIs as alternative to grants

(move away from "grant dependency" culture)

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Financial Instruments in MMF proposals 2014-2020

Infrastructure

Horizon 2020Equity and Risk Sharing Instruments

Instruments under Structural and Cohesion

Funds

Contribution to EU level (central management)

National/regional instruments (shared management) Off-the shelf FIs Tailor made FIs

Significant higher amounts than currently!

Competitiveness & SME (COSME)

Equity & guarantees

Connecting Europe Facility (CEF)Risk sharing (e.g. project bonds) and equity

instruments

Social Change & Innovation

Creative EuropeGuarantee Facility

Erasmus for allGuarantee Facility

Shared Management with MS (Common Provisions Regulation)

Centrally managed by COM (Financial Regulation)

Research, Development Innovation

Growth, Jobs and Social Cohesion

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Financial instruments 2014-2020: legislation and guidanceCommon Provisions Regulation: Title IV, Articles 37 – 46•http://ec.europa.eu/regional_policy/information/legislation/index_en.cfm

Delegated Act: Section II, Articles 4-14 (published on the 13/05/2014!)•http://ec.europa.eu/regional_policy/information/delegated/index_en.cfm

Implementing Act: Off the shelf instruments, funding agreement SME initiative

Financial Instruments in ESIF programmes 2014-2020: A short reference guide for Managing Authorities•http://ec.europa.eu/regional_policy/thefunds/fin_inst/pdf/fi_esif_2014_2020.pdf

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Financial instruments 2014-2020: Common Provisions Regulation (1303/2013)1.Wider scope2. Ex-ante assessment3. More implementation options for managing

authorities Traditional implementation: :

• Tailor made instruments (cf 2007-2013)

• Standardised “off-the-shelf” instruments MA can contribute OP allocations to EU level instrument

(COSME, Horizon, "SME Initiative") MA can implement loans or guarantees directly (or

through intermediate body) without formal set-up of a fund

4. Opportunity offered to contribute to the SME Initiative (Art39CPR);

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5. Better combination of FIs & other forms of support

6. EU co-financing• Incentives regarding EU co-financing rates• Flexibility for national public & private co-financing contributions

under operational programmes

7. Phased contributions to FIs8. Eligible expenditure at closure 9. Interest and other gains, re-use of resources10. Reporting on FI implementation

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Financial instruments 2014-2020: Common Provisions Regulation (1303/2013)

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1. Loan for SME's based on a portfolio risk sharing loan model (Risk Sharing Loan).

2. Guarantee for SMEs (partial first loss portfolio, capped guarantee).

+ Equity fund for SMEs and start-up companies (in the future).

Two for SMEs

One for energy efficiency/renewable energies and one for urban development

3. Renovation Loan based on a Risk sharing loan model (RS Loan).

+ Urban Development Fund (in the future).

Financial instruments 2014-2020: "Off-the-shelf"

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2. Guarantee for SMEs (partial first loss portfolio) (Capped guarantee)

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2. Capped Portfolio Guarantee: Aim of the instrument: Providing credit risk

coverage up to a certain limit allowing the financial intermediary to facilitate SMEs access to finance at better/preferential conditions;

Guarantee rate: up to 80% on a loan by loan basis (credit risk retains by the financial institution in no case less than 20%);

Target: Eligible SMEs, are excluded: SME in difficulty, de-minimis exclusions, delinquent/default, etc.

Loan maturity: between 1y and 10y (including grace period);

Guaranteed loan amount: up to EUR 1.5m; Cap rate (up to 25%) to be further determined in the

ex ante risk assessment (Article 8 DA); Multiplier: min.5x;

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2. Capped Portfolio Guarantee:

State aid: state-aid free at the level of the financial

intermediary (full pass on of the financial advantage) and

Compliant with de-minimis rule at the level of SMEs

Duration: typically 4 years after the signature of the funding agreement between the managing authorities and the financial intermediary;

Purpose of the loan guaranteed: financing tangible & intangible investments as well as the working capital link to the investment financed;

Advantage for the SMEs: access to finance at preferential conditions (interest rate and collateral reductions).

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Financial instruments 2014-2020: key steps Common Provisions Regulation and ESI Funds specific Regulations

adopted, published on 20 December 2013;

Delegated Act published on 13 May 2014 and Implementing Act "on-going"

Development of "off-the-shelf" instruments on-going (to be laid down in Implementing Act) » expected adoption mid 2014;

TA platform for financial instruments in cohesion policy 2014-2020 under development.

Negociation of the Partnership Agreements and Operational Programmes with Member States/ Managing Authorities (2014) 12

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Further publications on ESIF FIs

• Factsheet: Financial Instruments in Cohesion Policy 2014-2020http://ec.europa.eu/regional_policy/sources/docgener/informat/2014/ financial_instruments_en.pdf

• Panorama Autumn 2012: Using financial instruments to leverage support for regional policy http://ec.europa.eu/regional_policy/sources/docgener/panorama/pdf/mag43 /mag43_en.pdf

• Financial Instruments: A Stock-taking Exercise in Preparation for the 2014-2020 Programming Periodhttp://ec.europa.eu/regional_policy/thefunds/instruments/doc/fls_stocktaking_ final.pdf

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Main points

The Regulation provides greater flexibility for Member States and managing authorities

Help Member States and regions achieve the strategic investment levels needed to implement the Europe 2020 Strategy

Access to finance can be significantly improved for the benefit of a wide range of socio-economic actors on the ground

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Thank you for your attention!

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