Explanatory Memorandum to COM(2016)582 - Amendment of Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2016)582 - Amendment of Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions. |
|---|---|
| source | COM(2016)582  |
| date | 14-09-2016 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The present proposal forms part of the ambitious External Investment Plan ("EIP") announced in the Commission communication of 7 June 2016 on establishing a new Partnership Framework with third countries under the European Agenda on Migration 1 . The EIP initiative was subsequently endorsed by the European Council on 28 June 2016 and aims to address root causes of migration, while contributing to the achievement of sustainable development goals. The present proposal introduces two amendments to Council Regulation (EC, Euratom) No 480/2009 of 25 May 2009. Together with a separate legislative proposal to amend Decision No 466/2014/EU of the European Parliament and of the Council of 16 April 2014 on granting an EU guarantee to the European Investment Bank ("EIB") against losses under financing operations supporting investment projects outside the Union, the proposal will enable the EIB to contribute to the EIP by expanding both quantitatively and qualitatively the EIB External Lending Mandate ("ELM"). This will enable the EIB to rapidly contribute to the EIP's objectives, in particular by providing additional financing to private-sector beneficiaries.
As part of the Commission's efforts to address root causes of migration, it is proposed to give a new private sector lending mandate to the EIB. Under that private sector lending mandate, the Union will be entitled to the risk premium revenues generated under EIB financing operations. Those revenues should be transferred to the Guarantee Fund for external actions regulated by Council Regulation (EC, Euratom) No 480/2009 of 25 May 2009.
The amount of the Guarantee Fund in surplus exceeding 10% of the total outstanding of loans will be paid back to the budget. This adjustment aims at better protecting the budget against potential additional risk of default of the EIB operations related to migration crisis.
Until now, the assets of the Guarantee Fund have been managed by the EIB. The Commission has a strong experience managing similar financial operations. It is well prepared to manage the Guarantee Fund independently which would represent an effort to streamline and consolidate the asset management activities of the Commission, building on existing structures and a good track record. The Commission is already entrusted to manage the Guarantee Fund for the European Fund for Strategic Investments ("EFSI"). Thus, the management of the assets of the Guarantee Fund should be transferred to the European Commission.
• Consistency with existing policy provisions in the policy area and with other Union policies
This proposal forms an integral part of the EIP, a key policy in initiative of the Union. It contains ancillary provisions necessary for the functioning of the EIP, in particular the new private sector lending mandate to the EIB.
The Commission is proposing in parallel a revision of the Regulation (EU, Euratom) No 966/2012 of the European Parliament and the Council (the Financial Regulation), where it proposes a new section on budgetary guarantees that will provide a common regulatory framework for Union's guarantees bearing a contingent liability, as well as a common provisioning fund managed by the Commission. The provisions foreseen in this proposal are consistent with those included in the proposal for the revision of the Financial Regulation.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
Articles 209 and 212 of the Treaty on the Functioning of the European Union.
• Proportionality
The proposal contains ancillary provisions and is thus necessary for the functioning of the EIP, in particular the new private sector lending mandate to the EIB.
• Subsidiarity (for non-exclusive competence)
In accordance with the principles of subsidiarity and proportionality set out in Article 5 TEU, the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore be better achieved by the EU. By reason of the disparities in the capacity to act of Member States' financial institutions, action at Union level can better achieve the objectives pursued, by reason of its scale and effects.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
An external study by a consultant has been undertaken in 2016 with the main purpose of assessing the main parameters governing the Guarantee Fund. The Report concluded that the 9% Target Rate set out in Regulation (EC, Euratom) No 480/2009 is still deemed appropriate for the current risk level of the loans portfolio. A further external review of the target rate will take place most likely in 2019. Moreover, the Guarantee Fund mechanisms have proven effective at protecting the EU budget and at enabling the achievement of the EU external interventions.
4. BUDGETARY IMPLICATIONS
Under the new private sector lending mandate set up by a separate legislative act, the Union will be entitled to the risk premium revenues generated under EIB financing operations. The risk premium revenues will remunerate the higher risk and contribute over the lifetime of the instrument to the funding of the additional provisioning needs for the Guarantee Fund. The proposal is not expected to have any net budgetary implication because the risk premiums constitute inflows to the Guarantee Fund. They will be charged to the EIB in return for risks born by the Union budget.
In order to better protect the budget against potential additional risk of default of the EIB financing operations related to migration crisis, the amount of the Guarantee Fund in surplus which will exceed 10% instead of 9% of the outstanding of loans will be paid back to the budget.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
According to the Regulation (EC, Euratom) No 480/2009, the Commission shall by 31 May of each year report to European Parliament, the Council and the Court of Auditors on the situation of the guarantee fund and the management thereof. It is now proposed that the Commission reports by 31 March on the situation of the guarantee fund in the context of the financial statements of the Commission. The report on the management of the guarantee fund shall be sent to European Parliament, the Council and the Court of Auditors by 31 of May of each year.
EIB financing operations under EU guarantee are managed and monitored by the EIB in accordance with the EIB's own rules and procedures, including appropriate audit, control and monitoring measures. Furthermore, the EIB Board of Directors, where the Commission is represented by a Director and an alternate Director, approves each EIB financing operation and monitors that the EIB is managed in accordance with its Statute and with the general directives laid down by the Board of Governors.
The Tripartite agreement between the Commission, the Court of Auditors and the EIB sets out the rules under which the Court of Auditors is to carry out its audits of the EIB financing operations under the EU guarantee.
Regular reports are prepared under Decision 466/2014/EU. The Commission annually reports on the implementation of the mandate by the EIB to the European Parliament and to the Council.
Reporting on results will be based on an appropriate aggregation of indicators across the entire portfolio where it is possible, or across a given sector. In the context of the Results Measurement Framework, those indicators will be measured throughout the project cycle at appraisal level and during monitoring until the project is fully implemented. The indicators are to be measured as soon as the first development outcomes are available - typically up to three years after project completion. They will, to the extent possible, also be used for final report under Decision 466/2014/EU.
Furthermore, the EIB provides the Commission with statistical, financial and accounting data on each of the financing operations covered by the EU guarantee as necessary to fulfil its reporting duties or requests by the Court of Auditors as well as with an auditor’s certificate on the outstanding of the financing operations covered.
• Detailed explanation of the specific provisions of the proposal
Currently, the Guarantee Fund is endowed by the following: i one annual payment from the general budget of the Union, (2) interest on Guarantee Fund resources invested, and (3) amounts recovered from defaulting debtors. The risk premium revenues generated under the new private sector lending mandate of the EIB will represent a fourth source of income for the Guarantee Fund. It is proposed to modify Article 2 of Regulation (EC, Euratom) No 480/2009 accordingly.
Until now, the assets of the Guarantee Fund have been managed by the EIB. The Commission has a strong experience managing similar financial operations. It is well prepared to manage the Guarantee Fund independently which would represent an effort to streamline and consolidate the asset management activities of the Commission, building on existing structures and a good track record. The Commission is already entrusted to manage the Guarantee Fund for the EFSI. Thus, the management of the assets of the Guarantee Fund should be transferred to the European Commission.
It is proposed to modify Article 7 of Regulation (EC, Euratom) No 480/2009 accordingly.