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

Transcription

1 Financial Instruments supported by the European Structural and Investment (ESI) Funds in EU Finance Day for SMEs, 5 February 2014, Dublin Dr. Wolfgang Streitenberger, Conseiller-Adviser, DG Regional and Urban European Commission

2 Contents FIs in Regional state of play FIs uptake in Member States Key challenges Proposed framework for FIs in Background & objectives Key novelties Next steps in developing and finalising the framework Off the shelf instruments & the SME initiative 2

3 Financial instruments in Regional ERDF support through financial instruments exists in the last three programming periods (since 1994) In and FIs were used only in limited extension (few MSs, limited resources) In major expansion of FIs in number, variety, scope and amounts paid to them (data as at the end of 2012): More than 800 FIs for enterprises set-up, with both models of implementation: with or without a holding fund; More than EUR 10 billion of programme funding delivered through FIs (5% ERDF) under more than 170 Operational Programmes; EUR 8,3 billion of OP contributions available in the specific loan, guarantee, equity/venture capital funds for investments in enterprises, out of which EUR 6,6 billion of ERDF. 3

4 Investments made by FIs for enterprises (at year end 2012) EUR 4.5 billion of SFs & national resources already disbursed to enterprises, mainly through loan and guarantee products More than of SMEs and micro-enterprises supported At least of jobs created through FIs; 4

5 Financial instruments and Ireland No financial instruments so far used in Ireland ERDF programmes, but revolving grant support provided to Ireland City/County Enterprise Boards. Feasibility Study conducted in 2012/2013 identifying a number of urban development projects; Subject to completion of ex-ante assessment and fulfilment of match funding/state Aid requirements, financial instruments for urban development projects may be deployed in ERDF programmes; Investment under innovation and resource efficiency banners also appears possible ( total funding envelope, including around 150 m of ERDF and national public& private resources); Move from grants to the revolving financial instruments represents a fundamental departure from previous programmes' practice. 5

6 Financial instruments (1) EUROPEAN COUNCIL 24/25 OCTOBER 2013 CONCLUSIONS: The programming negotiations of the European Structural and Investment Funds (ESIF) should be used to: Significantly increase the overall EU support to leverage-based financial instruments for SMEs in , while at least doubling support in countries where conditions remain tight. These instruments should be designed in a way which limits market fragmentation, ensures high leverage effects and quick uptake by the SMEs. This will help concentrate the funds adequately and expand the volume of new loans to SMEs. 6

7 Financial instruments (2) NEW LEGAL FRAMEWORK (Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013) To increase the use of financial instruments in , the new regulations: offer greater flexibility to EU Member States and regions in terms of target sectors and implementation structures; provide a stable implementation framework, founded on a clear and detailed set of rules, building on existing guidance and experiences on the ground; capture synergies between financial instruments and other forms of support, such as grants; and ensure compatibility with financial instruments set up and implemented at EU level under direct management rules. 7

8 Financial instruments : Key novelties (1) Wider scope: Expansion to all thematic objectives & priorities foreseen by OPs of ERDF, ESF, Cohesion Fund, EAFRD, EMFF More implementation options for managing authorities: FIs at national, regional, transnational or cross-border level (shared management: tailor made / off-the-shelf) Contribution to EU level FIs under central management (ring-fencing) Ex-ante assessment to be carried out before launch of FI operation under the ESIF Better combination of FIs & other forms of support; Phased contributions to financial instruments; More detailed rules concerning e.g. eligible expenditure at closure, (re-)use of interest/other gains and ESIF attributable resources returned during the programming period, the use of interest/other gains and ESIF attributable resources returned after closure (legacy) Regional 8

9 Regulation more in line with market practiceconcrete example Equitybased instruments + microcredit Capitalized management cost and fees to be paid for a period of 6 years after the end of the eligibility period will be considered as eligible expenditure. Eligibility of follow-on investments, 4 years after the end of the eligibility period if the conditions below are respected: Equitybased instruments Funding agreement (MA or FoF/FI) signed before ; 55% of the programme resources are invested before ; Follow-on investment capped to 20% of the eligible expenditure (less the capital resources and gain). 9

10 Financial instruments : Key novelties (2) IMPLEMENTATION OPTIONS 1) Traditional implementation: MA sets up a FI at national, regional, transnational or cross-border level Taylor made instruments (cf ) Standardised off-the-shelf instruments, quick roll-out 2) MA can contribute OP allocations to EU level instrument (COSME, HORIZON ) 3) MA can implement loans or guarantees directly (or through intermediate body) without formal set-up of a fund Regional 10

11 Implementation option: MA contributing OP allocations to EU level instrument OP allocation ring-fenced and to be invested in the OP area MA ultimately responsible for this operation but can rely on structures designed by the Commission in cooperation with the EIB Group Audit differently rely on framework audit contracts negotiated by the Commission 11

12 "Off-the-shelf" financial instruments (1) OBJECTIVES Help managing authorities to deliver faster and safer financial means to the final recipients; Alignment and complementarity with the EU level instruments (no overlapping but complementary); Combining public and private resources, seek for leverage EU (and/or public) contributions; Switch from grant dependency to a more sustainable way of project finance. 12

13 "Off-the-shelf" financial instruments (2) Not mandatory PRINCIPLES Managing authority can decide either to select directly financial intermediaries or to pass through a fund of funds manager (not total outsourcing but working hand in hand) Flexible: keep adaptability to the needs of various type of regions Focus on the most commonly used type of instruments Compatibility with the state aid rules (no need for notifications) No crowding out / overlap with existing financial instruments Implementation of the instruments according to market practice 13

14 Three "off-the-shelf" financial instruments for SMEs: 1. Loan for SME's based on a portfolio risk sharing loan model (Risk Sharing Loan). 2. Guarantee for SMEs (partial first loss portfolio, capped guarantee). 3. Equity Investment Fund for SMEs and start-up companies based on a co-investment model. Two "off-the-shelf" financial instruments for energy efficiency/renewable energies and urban development: 1. Renovation Loan based on a Risk sharing loan model (RS Loan). 2. Urban Development Fund (under progress). 14

15 1. Loan for SME's - Portfolio Risk Sharing Loan (1) Aim of the instrument: combining public and private resources to finance SMEs at better/preferential conditions (new loans); Risk-sharing: up to 75% / 25%, i.e. the financial intermediary contributes with its own private funds a minimum of 25% (at market conditions); State aid: state-aid free at the level of the financial intermediary 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. 15

16 1. Loan for SMEs - Portfolio Risk Sharing Loan (2) Purpose of the loan: financing tangible & intangible investments as well as the working capital linked to the investment financed; Target: Eligible SMEs (according to EU recommendation); Excluded: SME in difficulty, delinquent/default, etc.; Loan maturity: between 1 year and 10 years (including grace period); Loan amount: up to EUR 1m; Advantage for the SMEs: access to finance at preferential conditions (interest rate reductions). 16

17 2. Guarantee for SMEs - Capped Portfolio Guarantee (1) Aim of the instrument: 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 retained by the financial intermediary in no case less than 20%); Cap rate to be determined in the ex ante risk assessment (maximum 25%); Multiplier: equal or higher than 5x; State aid: state-aid free at the level of the financial intermediary compliant with de minimis rule at the level of SMEs 17

18 2. Guarantee for SMEs - Capped Portfolio Guarantee (2) Duration: typically 4 years after the signature of the funding agreement between the managing authorities and the financial intermediary; Purpose of the loan guaranteed: financing tangible & intangible investments as well as the working capital link to the investment financed; Target: Eligible SMEs (according to EU recommendation), Excluded: SME in difficulty, de minimis exclusions, delinquent/default, etc. Loan maturity: between 1 year and 10 years (including grace period); Loan amount: up to EUR 1.5 million; Advantage for the SMEs: access to finance at preferential conditions (interest rate and collateral reductions). 18

19 3. Equity Investment Fund for SMEs and start-up companies -Co-investment Facility (1) Aim of the instrument: combining public and private resources; Programme contribution for the instrument: typically between EUR 10 million and EUR 50 million; Duration the funds: typically 10 years after the signature of the funding agreement between the managing authorities and the financial intermediary; Investment period into SMEs: up to 31 December 2023; Type of investment: equity; Investment amount: max EUR 15 million/sme (including follow-on investments); 19

20 3. Equity Investment Fund for SMEs and start-up companies -Co-investment Facility (2) Target: Eligible SMEs (according to EU recommendation) SMEs prior to their first commercial sale <7 years following their first commercial sale follow on investment under certain conditions. Public and private contribution: depending on the type of investment target, the private contribution (matching the contribution programme) shall be of a min. 10%/40%/60% of the overall amount invested into an SME; State aid: compatible with the General Block Exemption Regulation (GBER) Excluded: SME in difficulty, de-minimis exclusions, delinquent/default, etc.; Advantage for the SMEs: supporting SMEs growth in a very difficult funding environment. Regional 20

21 4. Loan for energy efficiency and renewable energies in the residential building sector - Renovation Loan (1) Aim of the instrument: combining public and private resources to finance private owners at preferential conditions to invest in renewable efficiency or energy assets; Risk-sharing: 85%/15%, i.e. the financial intermediary shall contribute with its own private fund for a minimum of 15% (at market conditions); 21

22 4. Loan for energy efficiency and renewable energies in the residential building sector -Renovation Loan (2) Purpose of the loan: renewable energy or efficiency measures (e.g. replacement or refitting of the heating, improvement of insulation, replacement of windows and entrance doors, roof insulation, etc.); Target: natural, legal persons acting on behalf of owners, owning premises (apartment or individual household), social housing companies, etc. Loan maturity: up to 20 years (including grace period); Loan amount: up to EUR /owner; Advantage for owners: access to finance at preferential conditions (interest rate and collateral reductions) 22

23 SME Initiative: objective Increase the volume of lending to SMEs in the EU; Pooling resources: European Structural Investment Funds (ESIF) + COSME and Horizon 2020; Combine and fully utilise the EIB and EIF and possibly National Promotional Banks' capacities; Providing Capital Relief to EU bank to make them more robust and to incentivize them to extend additional loans to SMEs; Act fast and achieve significant impact to stimulate SME financing and economic growth: 23

24 SME Initiative: main features Legal basis: Article 39 of the CPR; Ex-ante assessment carried out by the EIB and Commission; EU level instrument: indirectly managed by the Commission, but EIB for the implementation; Setting up a single dedicated OP at MS level; Voluntary contribution (ERDF EAFRD) from MS; Significant participation is needed: up to 7% of ERDF EAFRD per MS and capped to EUR 8.5 billion from ESIF; Contributions from EU's COSME (EUR 178 million) and Horizon 2020 (EUR 178 million); Possible contributions from national promotional banks and/or private investors; Various financial instruments proposed using securitisation techniques; Two, not mutually exclusive options: (1) Uncapped Guarantee Instrument; (2) Joint securitisation instrument for new and existing loans; 24

25 Financial Instruments TO CONCLUDE 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 ESIF programmes 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) 25

26 Additional information on financial instruments Commission Staff Working Document - Financial Instruments in Cohesion ancial/financial_instruments_2012_en.pdf Factsheet: Financial Instruments in Cohesion cial_instruments_en.pdf Panorama Autumn 2012: Using financial instruments to leverage support for regional policy 43/mag43_en.pdf Financial Instruments: A Stock-taking Exercise in Preparation for the Programming Period king_final.pdf Regional 26

27 Thank you for your attention! 27