1. Financial Instruments under the ESI Funds - ESF: Outlook 2014-2020
ESF Informal Technical Working Group Meeting
24-25 September 2013
Vilnius (Lithuania)
Andrea Da Pozzo
EMPL E1

2. FEIs Implementation (2007-2013)
Art. 44 of Regulation 1083/2006 enables FEIs support in three thematic areas:
Art. 44 (a): Enterprises, including SMEs & micro enterprises
Art. 44 (b): Sustainable urban development
Art. 44 (c): Energy efficiency & Renewable energy in the building sector, including existing housing
Overall FEIs Implementation progress in EU Member States (31/12/2012):
Dead line for reporting AIR data 30/06 => 15/07/2013
940 FEIs (including 70 holding funds and 870 specific funds)
175 operational programmes
25 Member States except Ireland, Luxembourg and Croatia
OPs contributions (SF + national contributions) paid to FEIs: € 12.6 bn
Structural Funds contributions paid to FEIs: € 8.36 bn

3. FEIs Implementation (2007-2013)
Break down by thematic area
FEIs for enterprises: € 10,47 billion of SF & national resources paid to 864 FEIs (Holding Funds and specific funds) across 25 Member States
€ 549,18 m from ESF
FEIs for sustainable urban development: € 1.64 billion of SF and national resources paid to 56 FEIs (Holding Funds and specific funds) across 11 Member States
FEIs for energy efficiency and renewable energies: € 444 million of SF and national resources paid to 20 FEIs (Holding Funds and specific funds) across 8 Member States

4. FEIs Implementation (2007-2013)
FEIs reported as set-up in Member States in the reporting exercises 2011 and 2012

5. FEIs Implementation (2007-2013)
FEIs supported from the ESF Ops, set-up at the end of 2012 1 2 3 4 5 6 N°
Member State
N° of FEIs
out of which HF
out of which specific funds with a HF
out of which specific funds without a HF DE DK EE IT 13 9 LT LV 7 PL 10
Total 33 26

6. FEIs Implementation (2007-2013)
Amounts of ESF OP contributions paid to the FEIs for enterprises and invested in final recipients at the end of 2012 (€ m) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 N°
Member State
N° of FEIs*
out of which HF
out of which specific funds with a HF
out of which specific funds without a HF
OP contributions paid to FEIs**
out of which Structural Funds
OP contributions paid to specific funds***
OP contributions remaining in HFs
OP contributions paid to final recipients
OP contributions remaining in specific funds
in absolute amounts
in % DE
141.20
88.40
0.00
96.36
68%
23.36
44.84 DK
6.51
3.26
100%
3.33 EE
6.01
4.45
74%
1.56 IT
327.03
105.31
312.03
100.55
15.00
53.15
17%
7.80
258.88 LT
14.48
6.73
7.75
6.31
94%
5.68
0.42 LV
32.81
17.31
17.25
53%
9.13
15.56 PL
21.14
17.98
13.92
11.84
7.22 0%
Total 33 26
549.18
252.75
519.21
234.10
29.97
184.03
35%
53.75
335.18
* including: holding funds and specific funds implemented with and without a holding fund;
** paid to holding funds and directly to specific funds implemented without a holding fund;
*** paid to specific funds implemented with and without a holding fund.
(*) information reported by the MAs and aggregated at the level of MS leads to the anomalous results.

7. ESF FEIs implementation (2007-2013)
Managing Authority
Phase 1
Structural Funds
and national
co-financing
€ m
Holding Fund (HF)
€ m
Structural Funds
and national
co-financing
Specific fund managed
by financial intermediary
€ m
Phase 2
Structural Funds
and national
co-financing
Financial products*
* in the form of equity, loans, guarantees or other forms of repayable investments
Phase 3
€ m

8. FEIs in Cohesion Policy (2007-2013)
Design & Implementation Challenges
Delays in delivering funds to final recipients: FEIs represent a new approach to Cohesion Policy support, requiring new skills, partnerships and capacities
Limited availability of reporting & monitoring data
Over allocation of resources to financial instruments
Shortcomings in the financial or market gap assessment: rationale for FEIs setting out?
Potential for achieving better leverage effects
Legal and administrative framework not detailed enough from the outset (COCOF Guidance, audit methodology)

9. Common Provisions Regulation (CPR) - Key changes

10. Financial instruments (2014-2020): Introduction
Background:
Increased importance of FIs in implementing EU budget resources in future (Budget review, 5th Cohesion Report, MFF)
EU Central Level (Direct Management): "EU Debt and Equity Platforms" to serve as standardised rules for FIs using EU budget
Cohesion Policy (Shared Management): Strengthening and expansion of financial instruments in the context of Cohesion Policy
Legislative framework
provide a clear set of rules, based on existing experience, guidance
facilitate wider and more flexible use (e.g. capture synergies with grants, wider thematic scope, more implementation options),
ensure better targeting, budgeting and monitoring of FIs,
achieve compatibility with financial instruments at EU level.

11. FIs (2014-2020): Key changes I Wider scope:
Common provisions cover all five ESI Funds: ESF, ERDF, Cohesion Fund, EAFRD and EMFF
Expansion to all thematic objectives & priorities foreseen by ESI Funds OPs
More implementation options for managing authorities:
Contribution to national or regional EU level FIs under shared management
Tailor-made instruments (already existing or newly created)
Standardised "off-the-shelf" instruments for quick a roll-out
Contribution to EU level FIs under central management (ring- fencing)

12. FIs ( ): Key changes II
Ex-ante assessment to be carried out before launch of FIs operations under the ESI Funds
Better combination of FIs & other forms of support:
In Financial Instruments: Grant component may cover financing (e.g. state aid compliant subsidy element) or technical assistance for the benefit of the final recipient
At the level of final recipients: Combination is now possible also with assistance from other programmes supported by the EU budget
MAs may undertake implementation tasks directly for FIs consisting solely of loans and guarantees
Incentives regarding EU co-financing rates:
EU-level instruments: Up to 100% of the paid support may come from ERDF, ESF and CF; separate priority axis to be foreseen
Instruments implemented at national/regional level: ERDF, ESF, CF co-financing rate to increase by 10% if an entire priority axis is implemented through financial instruments

13. FIs (2014-2020): Key changes III
Phased contributions to FIs
MAs shall pay programme contributions in at least 4 tranches
Subsequent payments from MAs to FIs to be made on the basis of FIs investment rate in relation to programme contributions received
More detailed rules concerning
Eligible expenditure at closure,
The (re-)use of interest/other gains and ESIF resources returned during the programming period,
Use of interest/other gains and ESIF resources returned after closure (legacy)
Annual reporting by MAs
MAs to report to COM on FIs operations annually (annex to the annual implementation report); reporting items should be aligned with requirements of the Financial Regulation
COM to publish annual summary report on the basis of data received

14. FIs (2014-2020): Key changes IV ESF Policy-Based Guarantee
What is a PBG ?
Financial instrument based on Title IV of CPR and Art. 15 and new articles 15 bis, 15bis(a), 15bis(b) of ESF Regulation
Enhancing access to capital markets for national/regional authorities
Application always submitted by MS, not Regions
To raise financing for implementation of structural reform within the ESF scope which consists of multiple improvements in public sector functioning
Use of PBG is subject to Commission approval
Investments without direct financial payback
PBG is an amount paid under ESF Ops into a ring-fenced account where it is:
Blocked as partial credit guarantee
Turned into a first loss piece
PBG DELETED

15. FIs (2014-2020): Key changes V New Art. 15 of ESF Regulation
Results of 19/09/2013 ESF trilogue
Proposed agreement on art.15 ESF Regulation
1. Pursuant to Article 32 of Regulation (EU) No […], the ESF may support actions and policies falling within its scope through financial instruments, including micro-credits and guarantee funds.
Proposed agreement on corresponding recital:
The Member States and regions should be encouraged to leverage the ESF through financial instruments in order to support for example students, job creation, mobility of workers, social inclusion and social entrepreneurship.

16. FIs (2014-2020): Key changes VI Results of 48th Trilogue on CPR
- Article 32(4) will also refer to certain infrastructure investments in rural areas. The limit for reorganisation of debt portfolio is 20% of the programme support to the investment. - Article 33.7 on the modalities of the transfer and management of programme contributions, the procedure under implementing act was agreed. - Article 34(2)(a) the modified text on recital 25(bis) and the paragraph 3 as proposed by the Commission for the trilogue (in the revised COM TO DO) was agreed.

17. FIs (2014-2020): Key changes VII Results of 48th Trilogue on CPR
- Article 35(5) the first part where the COM proposed a revised text on withdrawal of payments was agreed. Concerning the second part on the implementing act and uniform conditions, the text by EP was agreed.
- Article 36(2) the deadline was extended to 6 years.
- Article 36(2)bis some changes were agreed, namely: the deadline was extended to , the percentage of invested amount went down to 55%, the period for investment beyond the eligibility period was extended to 4 years and the maximum amount paid into escrow account was raised to 20%.

18. FIs (2014-2020): Key changes VIII Results of 48th Trilogue on CPR
- Article 36(4) the deadline of 4 months for the adoption of DA was deleted. - Article 36(5) the procedure under DA for the rules for calculating management costs and fess was agreed. - Article 39.1 the deadline of 8 years was agreed.

19. Thank you for your attention!
DG Employment, Social Affairs & Inclusion
Unit E1