Financial Instruments supported by the European Structural and Investment (ESI) Funds in 2014-2020

9 July 2014, Brussels Stefan Appel, DG Regional and Urban Policy European Commission

Regional Policy

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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) 3 Regional Policy

Financial Instruments in MMF proposals 2014-2020

Centrally managed by COM

(Financial Regulation)

Shared Management with MS

(Common Provisions Regulation) Research, Development Innovation Growth, Jobs and Social Cohesion Infrastructure

Horizon 2020

Equity and Risk Sharing Instruments

Competitiveness & SME (COSME)

Equity & guarantees

Social Change & Innovation Creative Europe

Guarantee Facility

Erasmus for all

Guarantee Facility

Connecting Europe Facility (CEF)

Risk sharing (e.g. project bonds) and equity 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!

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Financial instruments 2014-2020: legislation and guidance

Common 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 scope 2. Ex-ante assessment 3. 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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Financial instruments 2014-2020: Common Provisions Regulation (1303/2013)

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 FIs 8. Eligible expenditure at closure 9. Interest and other gains, re-use of resources 10. Reporting on FI implementation

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

Two for SMEs

1.

2.

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

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

+ Equity fund for SMEs and start-up companies (

in the future

).

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

).

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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:

intangible investments financing tangible &

as well as the

working capital link

to the investment financed; Advantage for the SMEs: access to finance at

conditions preferential

(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 Regional Policy

Further publications on ESIF FIs

• • •

Factsheet: Financial Instruments in Cohesion Policy 2014-2020

http://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 Period

http://ec.europa.eu/regional_policy/thefunds/instruments/doc/fls_stocktaking_ final.pdf

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Main points

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The Regulation provides greater flexibility for Member States and managing authorities

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

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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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