# Commission Implementing Regulation (EU) No 964/2014Show full title

Commission Implementing Regulation (EU) No 964/2014 of 11 September 2014 laying down rules for the application of Regulation            (EU) No 1303/2013 of the European Parliament and of the Council as regards standard terms and conditions for financial instruments         

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# Commission Implementing Regulation (EU) No 964/2014                     

# of 11 September 2014

# laying down rules for the application of Regulation (EU) No 1303/2013 of the European Parliament and of the Council as regards                        standard terms and conditions for financial instruments                     

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down                           common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural                           Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European                           Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing                           Council Regulation (EC) No 1083/2006(1), and in particular the second subparagraph of Article 38(3) thereof,                        

Whereas:

(1)To facilitate the use of financial instruments set up at national, regional, transnational or cross-border level and managed                              by or under the responsibility of the managing authority in accordance with Article 38(3)(a) of Regulation (EU) No 1303/2013,                              rules on standard terms and conditions for certain financial instruments should be established. Those standard terms and conditions                              would make those instruments ready to use — the so-called off-the-shelf financial instruments.

(2)To facilitate the use of financial instruments, the standard terms and conditions need to ensure compliance with state aid                              rules and facilitate the delivery of Union financial support of final recipients through a combination of financial instruments                              and grants.

(3)The standard terms and conditions should not allow a finance provider, such as a public or private investor or a lender, a                              manager of the financial instrument, or a final recipient to receive any state aid which is incompatible with the internal                              market. The standard terms and conditions should take into account the relevant *de minimis* Regulations such as Commission Regulation (EU) No 1407/2013(2) and Commission Regulation (EU) No 1408/2013(3), Commission Regulation (EU) No 651/2014(4), Commission Regulation (EU) No 702/2014(5), the Guidelines on State aid to promote risk finance investments(6) and the Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020(7).

(4)Given that the State aid rules do not apply to agricultural activities supported under the European Agricultural Fund for                              Rural Development, compliance with the standard terms and conditions should be voluntary. For other activities receiving support                              from the European Agricultural Fund for Rural Development, general State aid rules apply and therefore, the standard terms                              and conditions should be mandatory.

(5)It is possible that undertakings in the fisheries sector, particularly small and medium-sized enterprises (SMEs), may benefit                              from financial instruments financed by a European Structural and Investment Fund. When such a benefit is funded by another                              European Structural and Investment Fund than the European Maritime and Fisheries Fund, the total amount of the aid granted                              through the financial instruments to all undertakings in the fisheries and aquaculture sector over three years should be below                              a cap of the annual fishery, aquaculture and processing turnover by Member State specified in Commission Regulation (EU) No                              717/2014(8). In addition Regulation (EU) No 702/2014 and the Guidelines for the examination of State aid to fisheries and aquaculture(9) should to be taken into account.

(6)The standard terms and conditions should also include a minimum set of governance requirements to ensure proper management                              of the financial instruments in order to provide for more detailed rules than those included in the Regulation (EU) No 1303/2013.

(7)In order to support SMEs growth in a difficult funding environment, a portfolio risk sharing loan (‘RS loan’) is an appropriate                              financial instrument. The RS loan provides new loans to SMEs with easier access to finance by providing financial intermediaries                              with funding contribution and credit risk sharing and thereby offering SMEs with more funds at preferential conditions in                              terms of interest rate reduction and/or collateral reduction.

(8)Financing through the RS loan may be a particularly effective way of supporting SMEs in a context of limited availability                              of funding or relatively little risk appetite of the financial intermediaries for certain sectors or type of SMEs. In this                              context, the standard terms and conditions are an effective way to address such market failure.

(9)In order to provide an incentive to financial intermediaries to increase lending to SMEs covered by Union funded guarantees,                              a capped portfolio guarantee is an appropriate financial instrument.

(10)The capped portfolio guarantee should address the existing gap in the debt market for SMEs supporting new loans by providing                              credit risk protection (in the form of a first loss portfolio capped guarantee) with the aim to reduce the particular difficulties                              that SMEs face in accessing finance because of the lack of sufficient collateral in combination with the relatively high credit                              risk they represent. In order to achieve the expected impact, the Union contribution to the capped portfolio guarantee should,                              however, not replace equivalent guarantees received by the respective financial institutions for the same purpose under existing                              Union, national and regional financial instruments. In this context, the standard terms and conditions are an effective way                              to address such market failure.

(11)In order to incentivize the energy saving potential arising from the renovation of residential buildings, a renovation loan                              is an appropriate financial instrument.

(12)The renovation loan should target long term subsidised loan conditions and upfront technical support and funding of residential                              building owners to prepare and implement building renovation projects. It also assumes a financing market in which banking                              intermediaries are essentially the only source of funding, but where this funding is either too little (due to the risk appetite                              of the intermediary), too short term, too costly or otherwise inappropriate for the long term payback nature of the projects                              being financed. This, together with an inefficient system of identifying and procuring the works on behalf of multiple apartment                              owners without excluding the possibility to support individuals, constitutes a market failure. In this context, the standard                              terms and conditions are an effective way to address such market failure.

(13)The measures provided for in this Regulation are in accordance with the opinion of the Coordination Committee for the European                              Structural and Investment Funds,

HAS ADOPTED THIS REGULATION:

## Article 1U.K.Subject matter

This Regulation lays down rules concerning the standard terms and conditions for the following financial instruments:

a portfolio risk sharing loan (RS Loan);

a capped portfolio guarantee;

a renovation loan.

## Article 2U.K.Additional terms and conditions

Managing authorities may include other terms and conditions in addition to those to be included in the funding agreement in                     accordance with the terms and conditions for the selected financial instrument set out in this Regulation.                  

## Article 3U.K.Compliance with State aid rules under the standard terms and conditions

1.In case of financial instruments combined with grants for technical support to final recipients benefiting from one of the                        instruments, such grants shall not exceed 5 % of the ESI Funds contribution to the instrument and be subject to the conclusions                        of the *ex-ante* assessment justifying such grants referred to in Article 37 of Regulation (EU) No 1303/2013.                  

2.The body implementing the financial instrument (hereinafter ‘the financial intermediary’) shall manage the grant for technical                        support. The technical support shall not cover the activities which are covered by management cost and fees received to manage                        the financial instrument. The expenditure covered by the technical support may not constitute part of the investment to be                        financed by the loan under the relevant financial instrument.                  

## Article 4U.K.Governance under the standard terms and conditions

1.The managing authority or, if applicable, the fund of funds manager shall be represented in the supervisory committee or a                        similar type of governance structure of the financial instrument.                  

2.The managing authority shall not participate directly in individual investment decisions. In the case of a fund of funds,                        the managing authority shall exercise only its supervisory role at the level of the fund of funds without interfering in individual                        decisions by the fund of funds.                  

3.The financial instrument shall have a governance structure that allows for decisions concerning credit and risk diversification                        to be made transparently in line with relevant market practice.                  

4.The fund of funds manager and the financial intermediary shall have a governance structure that ensures impartiality and independence                        of the fund of funds manager or of the financial intermediary.                  

## Article 5U.K.Funding agreement under the standard terms and conditions

1.The managing authority shall conclude in writing a funding agreement for contributions from programmes to financial instrument,                        which shall contain the terms and conditions in accordance with Annex I.                  

2.The funding agreement shall contain as annexes:                  

(a)the *ex-ante* assessment required under Article 37 of Regulation (EU) No 1303/2013 justifying the financial instrument;                  

(b)the business plan of the financial instrument including the investment strategy and a description of the investment, guarantee                        or lending policy;                  

(c)the description of the instrument which must be aligned with the detailed standard terms and conditions of the instrument                        and which must fix the financial parameters of the financial instruments;                  

(d)the monitoring and reporting templates.                  

## Article 6U.K.RS Loan

1.The RS Loan shall take the form of a loan fund to be set up by a financial intermediary with contribution from the programme                        and contribution of at least 25 % of the loan fund from the financial intermediary. The loan fund shall finance a portfolio                        of newly originated loans, to the exclusion of the refinancing of existing loans.                  

2.The RS Loan shall comply with the terms and conditions set out in Annex II.                  

## Article 7U.K.Capped Portfolio Guarantee

1.The Capped Portfolio Guarantee shall provide credit risk coverage on a loan by loan basis up to a guarantee rate of maximum                        80 %, for the creation of a portfolio of new loans to the small and medium-sized enterprises up to a maximum loss amount fixed                        by the guarantee cap rate which shall not exceed 25 % of the risk exposure at portfolio level.                  

2.The Capped Portfolio Guarantee shall comply with the terms and conditions set out in Annex III.                  

## Article 8U.K.Renovation Loan

1.The Renovation Loan shall take the form of a loan fund to be set up by a financial intermediary with contribution from the                        programme and contribution of at least 15 % of the loan fund from the financial intermediary. The loan fund shall finance                        a portfolio of newly originated loans, to the exclusion of the refinancing of existing loans.                  

2.Final recipients may be natural or legal persons or independent professionals, owning premises as well as administrators or                        other legal bodies acting on behalf and for the benefit of owners, implementing energy efficiency or renewable energies measures                        that are eligible under Regulation (EU) No 1303/2013 and programme support.                  

3.The Renovation Loan shall comply with the terms and conditions set out in Annex IV.                  

# Article 9U.K.

This Regulation shall enter into force on the twentieth day following that of its publication in the *Official Journal of the European Union*.                  

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 11 September 2014.

*For the Commission*                            

*The President*                            

José Manuel Barroso                            

## ANNEX IU.K.Annotated table of content of a funding agreement between a managing authority and a financial intermediary

### 1.PREAMBLEU.K.

Name of the Country/Region

Identification of the Management Authority

Common Code for Identification (CCI) No of programme

Title of the related programme

Relevant section of the programme referring to the financial instrument

Name of the ESIF

Identification of the priority axis

Regions where the financial instrument shall be implemented (NUTS level or other)

Amount allocated to the financial instrument by the managing authority

Amount from ESIF

Amount from national public (programme public contribution)

Amount from national private (programme private contribution)

Amount from national public and private outside programme contribution

Expected starting date of the financial instrument

Completion date of the financial instrument

Contact information for communications between the parties

*Purpose of the agreement*                   

### 2.DEFINITIONSU.K.

### 3.SCOPE AND OBJECTIVEU.K.

The description of the financial instrument, including its investment strategy or policy, the type of support to be provided.

### 4.POLICY OBJECTIVES AND *EX-ANTE* ASSESSMENTU.K.

The criteria for eligibility for financial intermediaries if applicable as well as additional operational requirements transposing                     the policy objectives of the instrument, financial products to be offered, final recipients targeted, and envisaged combination                     with grants.                  

### 5.FINAL RECIPIENTSU.K.

Identification and eligibility of the final recipients (target group) of the financial instrument.

### 6.FINANCIAL ADVANTAGE AND STATE AIDU.K.

Evaluation of the financial advantage by the programme public contribution and alignment with the State aid rules.

### 7.INVESTMENT, GUARANTEE OR LENDING POLICYU.K.

Provisions regarding investment, guarantee or lending policy especially regarding portfolio diversification (risk, sector,                     geographical zones, size) and existing portfolio of the financial intermediary.                  

### 8.ACTIVITIES AND OPERATIONSU.K.

Business plan or equivalent documents for the financial instrument to be implemented, including the expected leverage effect                     referred to in Article 37(2)(c) of Regulation (EU) No 1303/2013.                  

Definition of eligible activities

A clear definition of the activities assigned and the limits thereof, concerning in particular the modification of activities                     and the portfolio management (losses and default and recovery process).                  

### 9.TARGET RESULTSU.K.

Definition of the activities, results and impact indicators associated with base line measurements and expected targets.

The target results the financial instrument is expected to achieve as contribution to the specific objectives and results                     of the relevant priority or measure. List of indicators in accordance with the operational programme and Article 46 of Regulation                     (EU) No 1303/2013.                  

### 10.ROLE AND LIABILITY OF THE FINANCIAL INTERMEDIARY: RISK AND REVENUE SHARINGU.K.

Identifications and Provisions on the liability of the financial intermediary and of other entities involved in the implementation                     of the financial instrument.                  

Explanation of risk valuation and risk and profit sharing of the different parties.

Provisions in line with Article 6 of Commission Delegated Regulation (EU) No 480/2014(10) concerning role, liabilities and responsibility of bodies implementing financial instruments.                  

### 11.MANAGEMENT AND AUDIT OF THE FINANCIAL INSTRUMENTU.K.

Relevant provisions in line with Article 9 of Delegated Regulation (EU) No 480/2014 concerning management and control of financial                     instruments.                  

Provisions on the audit requirements, such as minimum requirements for documentation to be kept at the level of the financial                     intermediary (and at the level of the fund of funds), and requirements in relation to the maintenance of separate records                     for the different forms of support in compliance with Article 37(7) and (8) of Regulation (EU) No 1303/2013 (where applicable),                     including provisions and requirements regarding access to documents by audit authorities of the Member State, Commission auditors                     and the European Court of Auditors in order to ensure a clear audit trail in accordance with Article 40 of Regulation (EU)                     No 1303/2013.                  

Provisions in order for the audit authority to comply with guidance in relation with audit methodology, check list and availability                     of documents.                  

### 12.PROGRAMME CONTRIBUTIONU.K.

Provisions in line with Article 38(10) of Regulation (EU) No 1303/2013 concerning the modalities of transfer and management                     of programme contributions.                  

Where appropriate, provisions on a framework of conditions for the contributions from the European Regional Development Fund,                     the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural development and the Future Maritime                     and Fisheries Fund.                  

### 13.PAYMENTSU.K.

Requirements and procedures for managing payments in tranches, respecting the ceilings of Article 41 of Regulation (EU) No                     1303/2013 and for the forecast of deal flows.                  

Conditions for a possible withdrawal of the programme public contribution to the financial instrument.

Rules concerning which supporting documents are required to justify the payments from the managing authority to the financial                     intermediary.                  

Conditions under which payments from the managing authority to the financial intermediary must be suspended or interrupted.

### 14.ACCOUNT MANAGEMENTU.K.

Details of the accounts. including if applicable requirements for fiduciary/separate accounting as set out in Article 38(6)                     of Regulation (EU) No 1303/2013.                  

Provisions explaining how the account of the financial instrument is managed. Including conditions governing the use of bank                     accounts: counterparty risks (if applicable), acceptable treasury operations, responsibilities of parties concerned, remedial                     actions in the event of excessive balances on fiduciary accounts, record keeping and reporting.                  

### 15.ADMINISTRATIVE COSTSU.K.

Provisions on the remuneration of the financial intermediary on the calculation and payment of management costs and fees to                     the financial intermediary and in accordance with Articles 12 and 13 of Delegated Regulation (EU) No 480/2014.                  

The provision must include the maximum rate applicable and the reference amounts for the calculation.

### 16.DURATION AND ELIGIBILITY OF EXPENDITURE AT CLOSUREU.K.

The date for the entry into force of the agreement.

The dates defining the implementing period of the financial instrument and the eligibility period.

Provisions on the possibility of extension, and termination of the programme public contribution to the financial intermediary                     for the financial instrument, including the conditions for early termination or withdrawal of programme contributions, exit                     strategies and the winding-up of financial instruments (including the fund of funds where applicable).                  

Provisions regarding the eligible expenditure at closure of the programme in accordance with Article 42 of Regulation (EU)                     No 1303/2013.                  

### 17.RE-UTILISATION OF RESOURCES PAID BY THE MANAGING AUTHORITY (INCLUDING INTEREST YIELDED)U.K.

Provisions on the re-utilisation of resources paid by the managing authority.

Requirements and procedures for managing interest and other gains attributable to support from ESIF in accordance with Article                     43 of Regulation (EU) No 1303/2013.                  

Provisions regarding the re-use of resources attributable to the support of the ESI Funds until the end of the eligibility                     period in compliance with Article 44 of Regulation (EU) No 1303/2013.                  

Provisions regarding the use of resources attributable to the support of the ESI Funds following the end of the eligibility                     period in compliance with Article 45 of Regulation (EU) No 1303/2013.                  

### 18.CAPITALISATION OF INTEREST RATE SUBSIDIES, GUARANTEE FEE SUBSIDIES (IF APPLICABLE)U.K.

Provisions in line with Article 11 of the Delegated Regulation (EU) No 480/2014 referred to in Article 42(1) of Regulation                     (EU) No 1303/2013 concerning capitalisation of annual instalments for interest rate subsidies and guarantee fee subsidies.                  

### 19.GOVERNANCE OF THE FINANCIAL INSTRUMENTU.K.

Provisions describing an appropriate governance structure of the financial instrument to ensure that decisions concerning                     loans/guarantees/investments, divestments and risk diversification are implemented in accordance with the applicable legal                     requirements and market standards.                  

Provisions on the investment board of the financial instrument (role, independence, criteria).

### 20.CONFLICTS OF INTERESTU.K.

Clear procedures need to be established to deal with conflicts of interest.

### 21.REPORTING AND MONITORINGU.K.

Provisions for monitoring of the implementation of investments and of deal flows including reporting by the financial intermediary                     to the fund of funds and/or the managing authority to ensure compliance with Article 46 of Regulation (EU) No 1303/2013 and                     State aid rules.                  

Rules on reporting to the managing authority on how the tasks are performed, reporting on results and irregularities and corrective                     measures taken.                  

### 22.EVALUATIONU.K.

Conditions and arrangements for the evaluation of the financial instrument.

### 23.VISIBILITY AND TRANSPARENCYU.K.

Provisions on visibility of the funding provided by the union in line with the Annex XII to Regulation (EU) No 1303/2013.

Provisions guaranteeing access to information for final recipients.

### 24.EXCLUSIVITYU.K.

Provisions establishing under which conditions the fund of funds manager or the financial intermediary is allowed to start                     a new investment vehicle.                  

### 25.SETTLEMENT OF DISPUTESU.K.

Provisions on the settlement of disputes.

### 26.CONFIDENTIALITYU.K.

Provisions defining what elements of the financial instrument are covered by confidentiality clauses. Otherwise all other                     information is considered public.                  

Confidentiality obligations entered into as part of this agreement shall not prevent proper reporting to the investors, including                     those providing public funds.                  

### 27.AMENDMENT OF THE AGREEMENT AND TRANSFER OF RIGHTS AND OBLIGATIONSU.K.

Provisions defining the scope and conditions for possible amendment and termination of the agreement.

Provisions forbidding the financial intermediary to transfer any right or obligation without the prior authorisation of the                     managing authority.                  

*ANNEX A*

:

the *ex-ante* assessment required under Article 37 of Regulation (EU) No 1303/2013 justifying the financial instrument.                     

*ANNEX B*

:

the business plan of the financial instrument including the investment strategy and a description of the investment, guarantee                        or lending policy.                     

*ANNEX C*

:

the description of the instrument which must be aligned with the detailed standard terms and conditions of the instrument                        and which must fix the financial parameters of the financial instruments.                     

*ANNEX D*

:

the monitoring and reporting templates.

## ANNEX IIU.K.Loan for SMEs based on a portfolio Risk Sharing loan model (RS loan)

### **Schematic representation of the RS loan principle**U.K.

## ANNEX IIIU.K.Capped Portfolio Guarantee for SME's (Capped Guarantee)

### **Schematic representation of the Capped Guarantee**U.K.

Relation between stakeholders and Capped Guarantee portfolio coverage

## ANNEX IVU.K.Loan for energy efficiency and renewable energies in the residential building sector (Renovation loan)

### **Schematic representation of the Renovation loan principle**U.K.

1

OJ L 347, 20.12.2013, p. 320.                           

2

Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the                              Functioning of the European Union to *de minimis* aid (OJ L 352, 24.12.2013, p. 1).                           

3

Commission Regulation (EU) No 1408/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the                              Functioning of the European Union to *de minimis* aid in the agriculture sector (OJ L 352, 24.12.2013, p. 9).                           

4

Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market                              in application of Articles 107 and 108 of the Treaty (OJ L 187, 26.6.2014, p. 1).                           

5

Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry                              sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the                              Functioning of the European Union (OJ L 193, 1.7.2014, p. 1).                           

6

Guidelines on State aid to promote risk finance investments (OJ C 19, 22.1.2014, p. 4).                           

7

Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (OJ C 204, 1.7.2014, p. 1).                           

8

Commission Regulation (EU) No 717/2014 on the application of Articles 107 and 108 of the Treaty on the Functioning of the                              European Union to *de minimis* aid in fishery and aquaculture sector (OJ L 190, 28.6.2014, p. 45).                           

9

Guidelines for the examination of State aid to fisheries and aquaculture (OJ C 84, 3.4.2008, p. 10).                           

10

Commission Delegated Regulation (EU) No 480/2014 of 3 March 2014 supplementing Regulation (EU) No 1303/2013 of the European                              Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social                              Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund                              and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund                              and the European Maritime and Fisheries Fund (OJ L 138, 13.5.2014, p. 5).