1. EPRC Financial instruments in the EU: national perspectives and experiences Fiona Wishlade, European Policies Research Centre, University of Strathclyde Seminar om kapitalvirkemidler, Kommunal- og Moderniseringsdepartementet, 9 May 2015

2. EPRC What are the different domestic approaches to financial instruments? How do member states implement EU Cohesion policy FI? What can we say about effectiveness and what lessons emerge? 2 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

3. EPRC Domestic FI differ widely… But comparison difficult –Historical contexts –Institutional structures and remits –Extent of public sector influence –Geographical scope –Lack of transparency and relevance of available information on scale 3 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

4. EPRC Development banks and economic/political change… Pre-industrial revolution (FR IT) Post-war reconstruction (DE AT) Post-Franco (ES) Post-communist reconstruction (BG CZ PL…) Post-crisis (IE MT UK) But development banks not everywhere (DK FI EE LV SE)… Sometimes funds, agencies, public admin…and remits differ… 4 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

5. EPRC Remits of entities involved in FI differ… Direct support for wide range of public and private investments (infrastructure, businesses, housing…) Indirect lending only (2 nd tier lenders) to commercial banks Narrow range of business- focussed instruments (eg for growth SMEs, environment) National, regional or local (sometimes transnational…) 5 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

6. EPRC Loans: most widely used – e.g. AT DE BE IT FR… often administered regionally, even if available nationwide… may be through promotional banks or development agencies Guarantees: v important in IT, also UK, BE. Typically administered in liaison with commercial banks, or applied for by them Equity: examples in UK FI and SE. Least used. Several models - small specialised agencies, on a co-investment fund basis or by private sectors fund managers 6 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Types of domestic FI (for business) differ

7. EPRC Few clear patterns and trends – sometimes significant differences within countries Difficult to identify budgets and spend – though scale varies widely Institutional structures and responsibilities vary widely, but often complex or unclear Domestic context affects scale and implementation of Cohesion policy FIs by Member States… 7 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Domestic FI landscape is fragmented and opaque…

8. EPRC 8 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Scale of FI in EU Cohesion policy varies widely… All ex LU IE used FI in 2007-13 Country size Scale of EU funds Domestic policy choices (inc scale of domestic FIs)

9. EPRC Implementation varies also… Mainly context- driven… Procured or entrusted… ‘New’ structures or ‘blocks’ of finance in existing institutions National or regional 2014-20 – additional option of EU level funds 9 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

10. EPRC Loans to enterprises predominate (2007-13) 10 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

11. EPRC LoansGuaranteesEquityMixedOtherNot classifiedTotal BE8 1 9 CZ1 1 2 DE16 173 36 DK2 1 3 ES51 3 9 FR6215163 22118 HU80172745 169 IT2432782982 LT1545 24 PL12957115 202 PT 3366 45 UK19 245 48 Total36112614081831747 11 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Forms of FI for enterprises

12. Cohesion policy FI investment in enterprises 2007-13 NumberValue (€m)Average value (€) Loans80,4084,51056,089 Guarantees88,4321,96522,220 Equity/VC3,8611,772458,948 Other9,49322323,491 Total182,1948,47046,489 But averages conceal wide differences…. 12 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

13. EPRC Almost 900 funds for enterprises (c half in holding funds) [120 in FR, 1 in FI] Fund size – from €10,000 [HU] to €550 million [IT] Administration – single fund managers / banking network - national /regional /sub-regional ‘New’ FIs / simple complements to existing schemes Loans predominate; guarantee funds fewer but larger; equity typically more focussed and regional Terms from market rates /pari passu and no State aid to subsidised (typically GBER or de minimis, but some notified) Wide variation in management costs (if info available) 13 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Huge variations in scale, form and implementation…

14. EPRC 14 Fiona Wishlade, European Policies Research Centre, University of Strathclyde … and absorption varies widely…

15. EPRC 15 Absorption of FI for urban development Fiona Wishlade, European Policies Research Centre, University of Strathclyde

16. EPRC 16 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Absorption of FI for energy efficiency

17. EPRC Limited or poor assessment of finance gap Impact of the crisis on demand for finance Slow implementation / capacity issues Perverse incentives to overcapitalise 17 Fiona Wishlade, European Policies Research Centre, University of Strathclyde Why has absorption been so poor (in some cases)?

18. EPRC Experience with Cohesion FIs 2007-13 Setting-up Often significant delays; steep learning curve Major regulatory and administrative challenges Implementation Uptake variable; scale of funds not always linked to demand Difficult to engage private sector Monitoring Number / type of implementing bodies complicates monitoring Information quality poor (eg job creation, investment, fees) 18 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

19. EPRC Some evidence of wider benefits of Cohesion FI in 2007-13… Cushioned impact of crisis in many countries Improved access to finance for SMEs ‘learning’ or experimental phase, with benefits for future policy design FI helped to ‘grow’ the financial markets (business angels, regional financial markets) in some countries 19 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

20. EPRC …but limited evidence on… Scale of returns, exits, defaults, legacy funds Associated investment or outputs (jobs, R&D…) Value for money in relation to management fees and costs Too early for ‘results’ – but often insufficient data 20 Fiona Wishlade, European Policies Research Centre, University of Strathclyde

21. EPRC More than disbursing funds – other instruments, ‘investible’ propositions Policy context No ‘one size fits all’; adapt to context Tailor-made Understanding motivations of key stakeholders; calibrating incentives Co-ordination Need to adapt to changing circumstances… crisis, non-performance… Flexibility …but guard against ‘objective drift’ Focus Need for mastery of wide range of rules and tools; importance of experience Capacity Some key lessons from FI policy practice

22. EPRC Thank you! For more information: Fiona.wishlade@strath.ac.uk 22 Fiona Wishlade, European Policies Research Centre, University of Strathclyde