This document is an excerpt from the EUR-Lex website
Document 52013SC0178
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union
/* SWD/2013/0178 final */
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union /* SWD/2013/0178 final */
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the
European Parliament and of the Council on granting an EU guarantee to the
European Investment Bank against losses under financing operations supporting
investment projects outside the Union The European
Investment Bank (EIB) undertakes operations outside the EU in support of EU
external policies partially with an EU budgetary guarantee allocated in the
framework of each Multi-annual Financial Framework (MFF). Since more than 30
years, the EU has been providing a budgetary guarantee to the EIB, limited to
certain ceilings and other conditions, covering risks of a sovereign and
political nature in connection with its loan and loan guarantee operations
carried out outside the EU in support of EU external policy objectives. Over
the years, this guarantee has been granted through a series of Decisions. The
overall scope and general conditions of the EU guarantee coverage for EIB external
operations are set out currently in Decision 1080/2011/EU (the "current Decision").
The latter expires on 31 December 2013. The need for an EU
budget guarantee stems from EIB's obligation under its Statute to ensure
adequate security for all its lending operations and, more broadly, from the
need to safeguard the EIB creditworthiness in order not to compromise its task of
contributing to the balanced and steady development of EU Member States. The EU
guarantee has been the key instrument ensuring the compatibility between the
EIB's highly leveraged financial structure, the significantly higher inherent
risk of lending to third countries, the need to avoid a deterioration of the
Bank's AAA rating whilst limiting the EIB capital consumption. The EIB does not remunerate the EU for this guarantee. EIB operations should be carried out in
eligible countries (as defined in the current Decision) in support of any of
the following objectives: (i) local private sector development, in particular
support to SMEs; (ii) development of social and economic infrastructure,
including transport, energy, environmental infrastructure and information and
communication technology; and (iii) climate change mitigation and adaptation. The geographical
coverage of the EU guarantee is divided into regions: Pre-Accession region,
Neighbourhood and Partnership Countries, ALA region (Asia and Latin America)
and South Africa. The current Decision
establishes a general ceiling of EUR 27.484 bn and a Climate Change envelope of
EUR 2bn for the period 2007-2013. The general ceiling is broken down into
regional ceilings, while the climate change envelope is global and does not
present any regional pre-allocation. Article 16 of the current
Decision states that the Commission shall present a new proposal for the next
financial framework (2014-2020). The current Decision also further requests the
Commission to examine various issues when developing this proposal. In doing
so, the Commission took into account the budgetary mechanism underpinning the
EU guarantee, as this has implications on some of the options analysed in the Impact
Assessment (IA). A Guarantee Fund
(GF) aims to shield the EU budget against shocks due to possible default mainly
from the EIB external financing operations and other external actions. The GF
is endowed by one annual payment from the EU budget. The provisioning mechanism
of the GF which aims at maintaining the GF at a level of 9% of outstanding loan
disbursements creates therefore de facto a limit in the size of the EU budget
guarantee. Based on expected patterns of disbursements and reimbursements of operations
covered by the GF, the amount foreseen in the technical input from the European
Commission to the negotiation of the individual programmes implementing the next
Multiannual Financial Framework sent by the Commission on 27 March 2013 (which
foresees EUR 1.193 billion for the 2014-2020 Financial Framework in current
prices for the provisioning of the GF) would allow for an fixed mandate ceiling
of around EUR 25 billion. The regional
ceilings were increased by Decision 1080/2011/EU compared to the previous
Decision[1]. The legislator clearly stated in the recitals of the Decision that
these increases were temporary and exceptional with the view to deal with the
Arab Spring and account for EIB increased support to EU partners in the 2009-10
crisis context. This shows the legislator's intention to maintain the overall
regional balance that was negotiated with difficulty in 2009 and was the
outcome of a delicate policy compromise. Hence, it is assumed that the 2009
regional balance should form the basis for the new legislative proposal. 1. Problem definition The context in which
the EIB operates has significantly evolved and the new legislative proposal for
the EU guarantee under the next MFF has been drafted in a fundamentally more
difficult context than the one prevailing a few years ago. In particular, the
financial crisis had a significant impact on the funding conditions of EIB and entailed
possible threats to the EIB's AAA rating. Against this backdrop, the Corporate
Operational Plan (COP) 2012-2014 endorsed end 2011 envisaged a significant
reduction in lending volumes back to pre-crisis levels in particular in the
external field. While the recent endorsement of an EIB capital increase would
allow increasing EIB lending inside EU, EIB external activity should not be
affected. This
strategic shift has been incorporated in the reflections on the proposal for a
new EU guarantee, together with other elements such as inter alia the current
economic and financial context which is having an impact on the quality of the
external lending portfolio, EIB risk absorption capacity and the extension of the
European Bank of Reconstruction and Development (EBRD) geographical scope to the
Mediterranean region where it could eventually reach an annual business
activity of up to EUR 2.5 bn (which would be more than total combined EIB
financing in the region – with the EU guarantee and at EIB's own risk). In this context, the
IA report highlights four main problems: ·
The risk of sub-optimal use of the EU
guarantee. ·
The impossibility for EIB to finance all type
of microfinance operations with the EU guarantee. ·
The insufficient level of funding for climate
action and the difficulty for EIB to increase its lending in this area. ·
Unclear EIB positioning as a key delivery
tool of EU external financial support. 2. Analysis
of subsidiarity and justification for EU action. The proposal falls
under the exclusive competence of the EU. The subsidiarity principle therefore
does not apply. The specific legal
bases for EU action in granting an EU guarantee to the EIB against losses under
loans and loan guarantees for projects outside the EU are Articles 209 and 212
of the Treaty on the functioning of the EU. The EIB is established under
Article 309 of the Treaty and its Statute is laid down in a Protocol annexed to
the Treaties. 3. objectives
of the new EU guarantee to EIB external financing operations: The general objective
of EIB activity outside the EU under the EU guarantee should be to support the
Union's external policies by financing relevant projects in partner countries
through the combination of EU budgetary funds (via the provisioning of the Guarantee
Fund for external action which backs the EU guarantee) with EIB own resources. Through its
financing operations outside the EU under the EU guarantee, the EIB should
support the economic, social and environmental sustainable development of EU
partner countries, and their partnership with the EU. Moreover, EIB financing
operations under the mandate shall be consistent with the wider Union regional
policy framework. Other specific objectives of the new mandate should include to: (i) better exploit EIB expertise and resources, and (ii) improve the
effectiveness of the EU guarantee whilst preserving a sound budgetary cover. In this context, the
operational objectives of the new EU guarantee should be to: ·
Focus the geographical scope of the EU
guarantee on beneficiaries where its use would display the highest value added (objective 1). ·
Explicitly extend the EU guarantee to all microfinance
operations (objective 2) to reach out the poorest. ·
Reinforce the climate change dimension of the
EU guarantee in order to incentivise EIB operations in this key sector of EU external
action (objective 3). ·
Increase the impact of EIB financing through better alignment with EU policies and coherence and
synergies with EU instruments (objective 4) to more satisfactorily mirror
policy developments in a timely manner. 4. Policy
options In light of the
problem identified and in order to achieve the specific policy and operational
objectives, the Commission considered the following options for the future EU
guarantee to EIB external financing operations: Option 0: no new decision – this option was not analysed in detail. Option 1: no change (as specified in Decision 1080/2011/EU but
extended until 31/12/2020) – base line scenario. Option 2: amend the existing guarantee. This option has been
developed according to three sub-options. Each of the three sub-options has
been defined as an articulated combination of 4 types of amendments with the
view to address the 4 operational objectives on the basis of the mutual
interaction and spillover of the modifications of each parameter. The main features
of each sub-option are presented in the table below: Main differences
between the retained policy options compared to the "baseline - no
change" policy option Responses to the operational objectives || Option CLOSE || Option MICRO || Option FOCUS (i) focus on most value added countries/ operations || Exclusion of ALA and South Africa || No change || Focus on less creditworthy beneficiaries (in a dynamic way) (ii) provide explicit guarantee for all microfinance operations || All microfinance operations specifically eligible but no commercial risk borne by the EU guarantee || Pre-allocated envelope of EUR 2bn for microfinance operations with comprehensive EU guarantee || No change (iii) reinforce the climate change dimension || Increase of the pre-allocated envelope for climate change operations to EUR 4bn || Setting up of regional targets and absorption of the pre-allocated envelope into the general ceiling || Overall lending volume target + tracking GHG emission reduction (iv) Increase the impact / policy coherence || Drafting of annual country strategy papers || Update of technical operational regional guidelines in line with MIP of EU external financial instruments || Update of technical operational regional guidelines in line with MIP of EU external financial instruments Option 3: provide the guarantee to other financial institutions. This
option was not analysed in detail. 5. Assessment
of impacts It should be noted that it is not possible to provide throughout quantitative
estimates of the impacts of each option as the latter will depend on the
implementation of the Decision by the EIB. Indeed, the regional ceilings are
indicative; they do not represent target volumes. While the implementation of
the Decision heavily depends on EIB governing bodies decision and on the
absorption capacity of the beneficiaries, at project level, EIB activity will
also particularly depend on the identification of sound and bankable projects,
grants-loans blending opportunities, level of indebtedness of the beneficiary
countries, risk analysis, economic and political context, quality of project
preparation, capacity of the project promoters, etc. Nevertheless, a
qualitative analysis on main impacts of each option has been carried out while
references to data and figures have been provided where possible. The main impacts have been defined in
relation to the operational and specific objectives of the new EU guarantee.
The main impact assessed were (i) support priority policy areas of the EU,
including enlargement, neighbourhood and the development of third countries and
political impact, (ii) coherence and complementarity with EU external financial
instruments and need for co-financing, (iii) leverage of EIB experience and
expertise, (iv) social impact, support to SMEs, local private sector
development and microfinance in partner countries, (v) support to EU climate
action and environmental impact (vi) impact on the Guarantee Fund and on EU
budget, (vii) impact on EIB credit risk stance/rating and resources. It should be noted that the last two criteria (Impact on the GF
and on EU Budget and Impact on EIB credit risk stance and resources) are
probably the most important ones as they de-facto set the boundaries within
which the Decision can be implemented. On the basis of the analysis, the report
provides an assessment of the impact of each option in terms of effectiveness,
efficiency and coherence in comparison with the baseline scenario. The
different options have been qualitatively assessed based on the Commission
Services' qualitative appreciations of the likely impact. From the Commission's side, the
administrative cost of implementing the options analysed should be equivalent
to that of implementing the baseline scenario. The assessment
showed that, combined together, the likely impacts of option CLOSE and MICRO would
not be significantly higher than the status quo. On the other hand, option FOCUS
would bring more positive impacts and ranked better than the other options
analysed, in particular in terms of budgetary impact and coherence and
complementarity with EU policies and instruments. || BASE LINE || CLOSE || MICRO || FOCUS Support priority policy areas of the EU, including enlargement, neighbourhood and the development of third countries and political impact || 0 || Efv: - Efc: 0 C: + || Efv: - Efc: - C: + || Efv: + Efc: + C: + Coherence and complementarity with EU external financial instruments and need for co-financing || 0 || Efv: 0 Efc: - C: + || Efv: - Efc: - C:- || Efv: + Efc: 0 C: + Leverage of EIB experience and expertise || 0 || Efv: - Efc: + C: + || Efv: 0 Efc: - C: - || Efv: + Efc: + C: + Social impact, support to SMEs, local private sector development and microfinance in partner countries || 0 || Efv: - Efc: 0 C: - || Efv: + Efc: - C: 0 || Efv: + Efc: 0 C: 0 Support EU climate action and environmental impact || 0 || Efv: + Efc: - C: 0 || Efv: + Efc: 0 C: + || Efv: + Efc: + C: + Impact on the Guarantee Fund and on EU budget || 0 || Efv: - Efc: - C: - || Efv: - Efc: - C: - || Efv: 0 Efc: 0 C: 0. Impact on EIB credit risk stance/rating and resources || 0 || Efv: 0 Efc: + C: n.a. || Efv: 0 Efc: - C: n.a. || Efv: 0 Efc: 0 C: n.a. Overall average impact || 0 || - "+": 6 "0": 5 "-": 9 || - "+":4 "0": 4 "-": 12 || + "+": 10 "0": 10 "-":0 6. Comparison
of the options On the basis of qualitative
ratings provided, option FOCUS emerged clearly as the preferred option. It
should be noted that under the option, the objective 3 would not be achieved as
the assessment has shown that the EU budgetary guarantee is not the appropriate
instrument to cover EIB financing of all type of microfinance operations in the
regions covered by the EU guarantee. No stakeholder
expressed any opposition to the option retained. Notably, option FOCUS is in
line with the opinion expressed by most of those consulted. In particular, the
NGOs consulted, the MEPs and the Member States as well as the Steering
Committee of Wise Persons (set up at the time of the mid-term review of the
current Decision) pointed out to the need to clarify when the value added of
EIB financing under the EU guarantee was the highest and to find ways to
incentivise the EIB to focus the use of the guarantee on those situations. The
NGOs consulted questioned the need to expand the scope of the EU guarantee to
all type of microfinance operations given the existence of several other actors
in the field, while this was a request from some MEPs. In addition, the NGOs
consulted were requesting for a mechanism for EIB to track carbon emission of
EIB financing operations. 7. Monitoring
and evaluation In the new
legislative proposal, monitoring and evaluation arrangements will be reinforced
in comparison to the current situation. In particular, the operational
monitoring indicators recently developed by the EIB (REsults Measurement
framework - REM), will be maintained and further reinforced. Moreover, progress
towards the specific objectives will be monitored through core indicators
covering the following areas: i) amount signed by region, ii) amount disbursed
by region, iii) progress in achieving a balanced distribution of activity by
country, iv) breakdown of activity across the various objectives, v) volume of
climate change lending, financing and impact on absolute and relative GHG
emission reductions, vi) number of projects assessed against climate risk, vii)
number and amount of operations blended with EU grants, and viii) number and
amount of operations co-financed with other IFIs. In addition, a more
detailed set of performance indicators will be drawn from the three-pillar
methodology developed by the EIB under the REM framework. The latter serves to
show how EIB loans generate outputs, which enable outcomes and, over time lead
to impacts, which are in line with the Bank’s mandate objectives. As regard the financing
for projects that promote climate action, eligibility for climate change
operations would be clarified against agreed criteria building on - and if needed
tightening - existing EIB definitions to track climate change expenditure. The
EIB will explore reinforced methodologies to include carbon and to improve
climate resilience of its investments, as well as climate risk in project
appraisal. In parallel the EIB should keep developing methodologies to assess
climate risk in order to reinforce the climate resilience for all relevant
operations, and integrate carbon pricing in economic cost benefit analysis.
Restrictive eligibility and criteria for carbon-intensive projects should also
be improved in relevant sector policies. Moreover, regular
reports will be envisaged in the legislative act as in Decision 1080/2011/EU.
The Commission will annually report on the implementation of the mandate by the
EIB to the European Parliament and the Council. This report will also be
published on the Commission's website. Finally, a mid-term
evaluation will be carried out after three years from the start of the mandate. [1] Decision 633/2009/EC