Special Report No 1/2009#Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols
Date: 2009-01-22
Institutions: European Court of Auditors
Subjects: EU aid, EU financial instrument, EU financing, EU programme, Union for the Mediterranean, cooperation policy, economic reform, opinion of the Court of Auditors, project management, social development

EUROPEAN COURT 
OF AUDITORS

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BANKING MEASURES IN THE 
MEDITERRANEAN AREA IN THE CONTEXT 
OF THE MEDA PROGRAMME 
AND THE PREVIOUS PROTOCOLS

EN

 
 
 
Special Report No 1  

 2009

BANKING MEASURES 
IN THE MEDITERRANEAN 
AREA IN THE CONTEXT 
OF THE MEDA PROGRAMME 
AND THE PREVIOUS PROTOCOLS

(pursuant to Article 248(4), second subparagraph, EC)

EUROPEAN COURT OF AUDITORS

2

EUROPEAN COURT OF AUDITORS
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Special Report No 1  

 2009

More information on the European Union is available on the Internet (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 2009

ISBN 978-92-9207-183-7

doi: 10.2865/15525

© European Communities, 2009

Reproduction is authorised provided the source is acknowledged.

Printed in Belgium

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

CONTENTS

3

Paragraph 

IVI 

112 

18 

912 

1343 

1326 
1316 
1720 
2122 
2326 

2743 
2731 
3234 
3543 

4449 

4446 

4749 

GLOSSARY

 SUMMARY

INTRODUCTION

BACKGROUND

AUDIT SCOPE AND APPROACH

OBSERVATIONS

MONITORING AND COORDINATION OF THE PROJECT
MONITORING BY THE COMMISSION
MONITORING BY THE EIB
COORDINATION BETWEEN THE EIB AND THE COMMISSION
ENVIRONMENTAL MONITORING

ACHIEVEMENT OF THE PROJECTS’ OBJECTIVES
FEMIP TECHNICAL ASSISTANCE
INTEREST RATE SUBSIDIES
RISK CAPITAL OPERATIONS

CONCLUSIONS AND RECOMMENDATIONS

 MONITORING OF THE PROJECTS

ACHIEVEMENT OF OBJECTIVES

REPLY OF THE COMMISSION

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

 
 
Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

GLOSSARY

5

Beneficiary: Middle-sized companies, investment funds, microfinance institutions.

EIB: European Investment Bank, Luxembourg.

Environmental impact: (and social when relevant) of the projects evaluated, specifically 
considers two categories:
(a)  compliance with guidelines, including EU and or national as well as the EIB guidelines, 

and

(b)  environmental performance, including the relationship between ex-ante expectations 
and ex-post findings, and the extent to which residual impacts are broadly similar, 
worse or even better than anticipated.

FEMIP: Facility for Euro-Mediterranean investment and partnership. Since October 2002, 
all EIB’s operations in the Mediterranean region have been brought together under FEMIP, 
which was set up following a decision of the European Council taken in Barcelona.

FEMIP operations: Primarily involve three types of products: loans (possibly associated 
with interest subsidies in the case of environmental projects), risk capital (equity and 
quasi-equity) and technical assistance.

Financial  intermediary:  When  the  EIB  does  not  directly  finance  FEMIP  projects,  it 
may do so indirectly via credit lines in favour of commercial banks or other financial 
intermediaries.

Interest rate subsidies (interest rebates): Interest rate subsidies are grants provided 
from the EU budget for loans issued by the EIB under a lending mandate to diminish 
financial costs of projects. From 1992 (in practice 1996) interest rebates are provided 
only for loans concerning environmental projects.

MEDA: This acronym stands for: “MEsures D’Accompagnement” — accompanying measures. 
The principal financial instrument of the European Union Euro-Mediterranean partnership. 
The programme offers technical support and guarantee finance through the EIB.

RCO: Risk capital operations. They started in the 90s and may be divided into two cat-
egories: long-term loans with a duration of 10 to 20 years and equity financing loans, 
the latter being performance-dependent. Some 70 % of the loans for risk capital in the 
Mediterranean region go to Morocco, Tunisia, and Egypt.

SME: Small and medium-sized enterprises.

Sustainability: private equity operations are designed to support profitable ventures 
creating value added and jobs. The achievement of an expected return commensurate 
with the risk taken is a sine qua non for each investment decision by the EIB. The assess-
ment of project sustainability varies substantially from case to case, depending on cir-
cumstances, and takes into account the issues identified in the ex ante due-diligence 
carried out by the Bank.

Technical assistance: Technical assistance (TA) activities in the Mediterranean coun-
tries are financed from the FEMIP technical assistance support fund, set up in 2003. TA 
is entirely financed from the EU budget to improve the quality and development impact 
of FEMIP operations by:
– 
– 

 strengthening the capacity of Mediterranean partner countries and promoters; and
 financing upstream studies and activities focusing directly or indirectly on strength-
ening private sector growth.

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SUMMARY

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

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SUMMARY

I.
Cooperation between the EU and non-mem-
b e r   M e d i t e r r a n e a n   c o u n t r i e s   s t a r t e d   s o m e 
3 0   y e a r s   a g o   a n d   h a s   g r a d u a l l y   d e v e l o p e d 
over  the  years.  The  framework  for  financial 
a n d   t e c h n i c a l   m e a s u r e s   ( M E D A )   a i m i n g   t o 
a c c o m p a n y   t h e   r e f o r m   o f   e c o n o m i c   a n d 
social structures in the partner countries in 
the context of the Euro-Mediterranean part-
nership covered the period 1996–2006.

II.
Three types of banking measures are financed 
under the MEDA regulations or the previous 
p r o t o c o l s   f r o m   t h e   E U   b u d g e t   a n d   i m p l e -
m e n t e d   b y   t h e   E u r o p e a n   I n v e s t m e n t   B a n k 
(EIB): technical assistance through the FEMIP 
Support Fund, interest rate subsidies for cer-
tain EIB loans and risk capital operations.

III.
T h e   C o u r t   a u d i t e d   t h e   b a n k i n g   m e a s u r e s 
u n d e r   t h e   M E D A   p r o g r a m m e   a n d   t h e   p r e -
v i o u s   p r o t o c o l s   t o   d e t e r m i n e   w h e t h e r   t h e 
o n g o i n g   p r o j e c t s   w e r e   b e i n g   a d e q u a t e l y 
m o n i t o r e d   b y   t h e   C o m m i s s i o n   a n d   t h e   E I B 
and whether the projects had achieved their 
objectives.

IV.
R e g a r d i n g   t h e   m o n i t o r i n g   b y   t h e   C o m m i s -
sion and the EIB, the Court found that:

 —

 —

 —

 —

t h e   C o m m i s s i o n   r e l i e d   e n t i r e l y   o n   t h e 
w o r k   p e r f o r m e d   b y   t h e   E I B   a n d   d i d   n o t 
carry out any monitoring of its own;
until 2005, the level of monitoring by the 
EIB was not adequate;
there was a lack of coordination between 
the EIB’s activities and the Commission’s, 
especially at the local level;
n o t   e n o u g h   e m p h a s i s   w a s   p u t   o n   e n v i -
ronmental monitoring.

V.
Regarding the achievement of project objec-
tives, the Court found that technical assist-
a n c e   p r o j e c t s   h a d   b r o a d l y   a c h i e v e d   t h e i r 
o b j e c t i v e s .   F o r   i n t e r e s t   r a t e   s u b s i d i e s   a n d 
r i s k   c a p i t a l   o p e r a t i o n s   p r o j e c t s ,   t h e   s i t u a -
tion was more diverse as they only partially 
achieved their objectives.

VI.
With  the  end  of  the  MEDA  programme  and 
t h e   s t a r t   o f   t h e   n e w   E u r o p e a n   n e i g h b o u r -
h o o d   a n d   p a r t n e r s h i p   i n s t r u m e n t   ( E N P I ) 
that was launched in 2007, the Commission 
should:

 —

 —

 —

 —

 —

s e t   u p   a   t a i l o r - m a d e   e v a l u a t i o n   a n d 
m o n i t o r i n g   p r o g r a m m e   f o r   b a n k i n g 
measures;
ensure the effective coordination of the 
assistance work undertaken by the Com-
munity, the EIB and other international/
l o c a l   p a r t n e r s   i n   o r d e r   t o   i n c r e a s e   t h e 
c o n s i s t e n c y   a n d   c o m p l e m e n t a r i t y   o f 
their actions;
n e g o t i a t e   a d e q u a t e   m a n a g e m e n t   c o n -
ventions  that  ensure  appropriate  moni-
toring, cover the environmental aspects 
and safeguard the Community’s financial 
interests;
e n s u r e   t h a t   m o n i t o r i n g   b y   t h e   E I B   p r o -
v i d e s   t h a t   a l l   p r o j e c t s   a r e   a d e q u a t e l y 
e x e c u t e d   a n d   t h a t   t h e   f i n a n c i a l   a n d 
reporting  obligations  of  the  intermedi-
airies/promoters are met;
f o r   r i s k   c a p i t a l   o p e r a t i o n s ,   d e f i n e   a n 
overall strategy at the Commission level 
a n d   c h o o s e   t h e   b e s t   i m p l e m e n t a t i o n 
process, involving either direct manage-
m e n t   o r   m a n a g e m e n t   b y   i n t e r n a t i o n a l /
local partners.

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

INTRODUCTION

8

BACKGROUND

After several years of cooperation between the Community and its Medi-
terranean partners 1 by means of bilateral protocols on financial and 
t e c h n i c a l   c o o p e r a t i o n ,   C o u n c i l   R e g u l a t i o n   ( E C )   1 4 8 8 / 9 6 2  p r o v i d e d 
a   n e w   f r a m e w o r k   f o r   f i n a n c i a l   a n d   t e c h n i c a l   m e a s u r e s   ( M E D A ) .   I t s 
aim was to accompany the reform of economic and social structures 
i n   t h e   p a r t n e r   c o u n t r i e s   i n   t h e   c o n t e x t   o f   t h e   E u r o - M e d i t e r r a n e a n 
partnership  covering  the  1996–99  period  (MEDA  I).  It  was  amended 
by Council Regulation (EC) 2698/2000 3 covering the 2000–06 period 
(MEDA II). 

1  The partner countries in 

1995 were: Morocco, Algeria, 

Tunisia, Egypt, Israel, Jordan, the 

Palestinian Authority, Lebanon, 

Syria, Turkey, Cyprus, and Malta. 

Cyprus and Malta have become 

EU Member States and Turkey is 

receiving special pre-accession 

assistance. 

The purpose of the MEDA regulations was to contribute to initiatives 
o f   j o i n t   i n t e r e s t   i n   t h e   t h r e e   s e c t o r s   o f   t h e   E u r o - M e d i t e r r a n e a n 
partnership:

3  OJ L 311, 12.12.2000, p. 1. 

4  OJ C 200, 24.8.2006, p. 1. 

2  OJ L 189, 30.7.1996, p. 1. 

 —

the reinforcement of political stability and democracy;

 —

the creation of a Euro-Mediterranean free-trade area; and

 —

the development of economic and social cooperation, taking due 
account of the human and cultural dimensions.

The measures directly managed by the Commission took the form of 
g r a n t s   t o   f i n a n c e   o r   c o - f i n a n c e   a c t i v i t i e s ,   p r o j e c t s   o r   p r o g r a m m e s 
which  contribute  to  the  realisation  of  the  objectives  defined  in  the 
MEDA regulations. These measures were examined in the Court’s Spe-
cial Report No 5/2006 4.

Besides the EU financial support for Mediterranean partner countries 
d i r e c t l y   m a n a g e d   b y   t h e   C o m m i s s i o n ,   t h e   M E D A   r e g u l a t i o n s   a l s o 
e n v i s a g e d   t h r e e   t y p e s   o f   b a n k i n g   m e a s u r e s   w h i c h   a r e   m a n a g e d 
b y   t h e   E u r o p e a n   I n v e s t m e n t   B a n k   ( E I B )   u n d e r   a   m a n d a t e   f r o m   t h e 
Commission:

 —

technical assistance.

 —

interest rate subsidies for environmental loans granted by the EIB 
from its own resources.

 —

risk capital operations.

1. 

2. 

3. 

4. 

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

 
 
 
 
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5. 

For technical assistance, two framework agreements 5 were signed in 
2003 and complemented by annual implementation agreements 6. The 
management of interest rate subsidies and risk capital operations is 
regulated  by  a  convention  signed  in  1992  between  the  Commission 
and the EIB 7. 

5  One framework agreement 

provided financial support for the 

2003–06 period for MED countries. 

The second agreement covered the 

2003–04 period for Turkey. 

6.  Major findings concerning the legality, regularity and reliability of the 
accounts  of  the  above-mentioned  banking  measures  were  included 
in Chapter 11, “Financial instruments and banking activities”, of the 
Court’s Annual Report concerning the financial year 2006 8.

7. 

The financial reference amounts for the implementation of the MEDA 
p r o g r a m m e   w e r e   3   4 2 4 , 5   m i l l i o n   e u r o   f o r   t h e   1 9 9 6 – 9 9   p e r i o d   a n d 
5 350 million euro for the period 2000–06. The total amounts financed 
from the EU budget concerning banking measures were as follows:

6  Article 8 establishes the 

modalities of information and 

control. 

7  Audit and control modalities are 

established by Article 6. 

8  Paragraphs 11.7 to 11.18 

(OJ C 273, 15.11.2007). 

T A B L E   1

FINANCIAL IMPORTANCE OF BANKING MEASURES 
MANAGED BY THE EIB ON BEHALF OF THE COMMISSION 
UNDER THE MEDA PROGRAMME AND THE COOPERATION 
AGREEMENTS FOR MEDITERRANEAN PARTNERS

Risk capital operations 

Total amount committed 
for all ongoing-operations 
(MEDA only)

Net value at end 2007 
of all ongoing-operations 
(MEDA only)

(million euro)

31.12.2006

31.12.2007

380,1
(289,4)

213,5
(144,9)

388,4
(309,1)

218,0
(159,0)

Interest rate subsidies

Total loan amounts

2 867,77

2 867,77

Total amount of interest 
rebates

Technical assistance

Budgetary appropriations

Total amount paid 
by the budget 

Source: Commission and European Investment Bank.

479,5

105,0

50,0

487,67

105,0

50,0

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8. 

9. 

10. 

11. 

Since October 2002, all EIB operations in the Mediterranean region have 
b e e n   b r o u g h t   t o g e t h e r   u n d e r   t h e   f a c i l i t y   f o r   E u r o - M e d i t e r r a n e a n 
i n v e s t m e n t   a n d   p a r t n e r s h i p   ( F E M I P ) ,   w h i c h   w a s   s e t   u p   f o l l o w i n g   a 
decision of the European Council in Barcelona. The objective was to 
provide a new impetus to the economic development of the Mediter-
ranean region by improving financial and economic cooperation.

AUDIT SCOPE AND APPROACH

In the period from September 2006 to November 2007 the Court carried 
out a performance audit of the banking measures financed under the 
M E D A   p r o g r a m m e   a n d   t h e   p r e v i o u s   p r o t o c o l s ,   o n   t h e   b a s i s   o f   t h e 
following two questions.

(a) 

Are the projects adequately monitored by the Commission and the 
EIB  by  means  of  proper  control  procedures,  ensuring  that  there 
is  feed-back  in  the  event  of  obstacles  affecting  the  execution  of 
the projects?

(b) 

Are the projects achieving their objectives?

The audit was based on a review of the approval, implementation, moni-
toring and reporting systems in place at the Commission and the EIB. 
T h e   a u d i t   a l s o   i n c l u d e d   a   r e v i e w   o f   r e l e v a n t   r e p o r t s   i s s u e d   b y   t h e 
Commission, the EIB or external consultants.

At the project level, a detailed desk review was conducted on:

 —

30 technical assistance projects, selected from the 2003–06 period 
and  representing  a  coverage  of  32  %  in  terms  of  the  number  of 
projects;

 —

30 loans with interest rate subsidies, selected from the 1988–2006 
period and representing a coverage of 25 % in terms of the number 
of projects; and

 —

3 0   o n g o i n g   r i s k   c a p i t a l   o p e r a t i o n s ,   i n c l u d i n g   o n e   o p e r a t i o n 
directly managed by the Commission, selected from the 1989–2006 
period and representing a coverage of 82 % in terms of net value 
as defined in the 2006 Communities’ balance sheet.

12. 

This audit was completed by on-the-spot visits to Egypt, Tunisia and 
Morocco.  During  these  visits,  meetings  were  held  with  representa-
t i v e s   o f   l o c a l   E C   d e l e g a t i o n s ,   E I B   o f f i c e s ,   l o c a l   a u t h o r i t i e s ,   p r o j e c t 
promoters, financial intermediaries and final beneficiaries.

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OBSERVATIONS

11

MONITORING AND COORDINATION OF THE PROJECTS

MONITORING BY THE COMMISSION

13. 

For delegated management, the Commission is supposed to implement 
a  form  of  monitoring  that  is  complementary  to  the  monitoring  per-
formed by the EIB. The Commission should notably ensure:

 —

that the banking measures financed under the MEDA programme 
are adequately managed by the EIB; and

 —

that information is received by the Commission from the EIB, both 
at the central and local level, so that it can fulfil its duties.

14. 

The Court noted that the Commission did not define its own monitoring 
and evaluation strategy for banking measures managed by the EIB. It 
relied  entirely  on  the  EIB  for  the  financial  and  operational  manage-
ment of these measures. The management convention for risk capital 
operations  and  interest  rate  subsidies  signed  in  1992  is  vague  and 
does not set out clear management rules and procedures.

T E X T B O X   1

EXAMPLE OF SUCCESSFUL DIRECT MANAGEMENT BY THE COMMISSION THROUGH 
THE LOCAL EC DELEGATION WITH THE SUPPORT OF EXPERTS

Support programme for the Moroccan guarantee institutions — Morocco

Th  is programme is administered locally by the EC Delegation, with the support of an external expert. 

Th  e objectives of the programme are:

 —

to develop the fi nancial and technical capacities of the guarantee institutions and the banks requesting the 
guarantees;

 —

to increase the fi nancing of enterprises by providing counter-guarantees.

Aft er some delay at the outset linked to the establishment of the technical assistance team, this project was closely 
monitored by the local EC Delegation, making it possible for appropriate action to be taken wherever necessary.

As the result of the good Commission direct management, the fi nancial environments for local SMEs improved 
and the capacity building powers of the local guarantee institutions and banks were enhanced.

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15. 

For the directly managed operations, the Commission should implement 
a form of monitoring designed to ensure:

 —

that weaknesses in the management of the operations are quickly 
identified; and

 —

that corrective action is taken.

16. 

17. 

For individual support projects/programmes which the Commission admin-
istered directly, the Commission undertook systematic and effective 
monitoring and evaluation through its local EC delegations.

MONITORING BY THE EIB

In general, an effective monitoring has to cover all stages of a project 
t o   e n s u r e   t h e   q u a l i t y   o f   t h e   p r o j e c t   d e s i g n ,   i t s   r e l e v a n c e ,   t h e   e f f i -
ciency and timeliness of its implementation and the achievement of 
the foreseen objectives. It should be performed on a regular basis to 
ensure  that  the  required  information  is  provided  and  that  the  legal 
and contractual obligations are met.

T E X T B O X   2

EXAMPLE OF IMPACT ON THE COMMUNITY’S FINANCIAL INTERESTS

Global risk capital operations — Morocco

Th  ese global risk capital operations were characterised by the channelling of funds to SMEs through local fi nancial 
intermediaries via a centralised intermediary.

For several years the EIB did not ensure suffi  cient follow-up of these operations and did not ensure that the vari-
ous actors fulfi lled their contractual obligations. For example some fi nal benefi ciaries did not pay the interest on 
their loans for more than 10 years. 

Th  e EIB had no complete fi nancial overview of the amounts due but unpaid from the centralised intermediary, 
fi nancial intermediaries and fi nal benefi ciaries. In addition the valuation of the participations is uncertain and 
has not been subject to any write-down. Out of an original value of 31,6 million euro, the value remaining was 
assessed to be only 10,5 million euro as per EIB valuation.

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18. 

19. 

Due to their specific nature, banking measures represented an area of 
h i g h   r i s k ,   e s p e c i a l l y   a s   t h e y   w e r e   b a s e d   o n   a s s u m p t i o n s   a s   t o   t h e 
capacity of the intermediary/promoter to meet predefined objectives. 
Furthermore these activities were highly dependent on external fac-
t o r s .   A g a i n s t   t h i s   b a c k g r o u n d ,   m o n i t o r i n g ,   c o n t r o l s   a n d   r e p o r t i n g 
were key success factors. 

During the early years of the programme, and until 2005, the EIB did 
n o t   i m p l e m e n t   a d e q u a t e   m o n i t o r i n g   a n d   c o n t r o l s .   I n   a d d i t i o n   t h e 
reporting  flow  from  the  intermediaries/promoters  was  insufficient. 
This  mainly  affected  the  monitoring  of  projects  and  the  implemen-
tation  of  corrective  action  for  projects  that  were  not  meeting  their 
objectives or intermediaries/promoters who were not meeting their 
c o n t r a c t u a l   o b l i g a t i o n s .   T h i s   l a c k   o f   a d e q u a t e   m o n i t o r i n g   a f f e c t e d 
the Community’s financial interests, notably due to late recovery or 
non-recovery of funds and the waiving of some contract clauses, for 
example regarding penalties for late payment.

T E X T B O X   3

EXAMPLE OF WEAK EIB MONITORING COMBINED WITH A LACK OF REPORTING 
FROM THE INTERMEDIARY

Risk capital investment company — Tunisia

Th  is fi nancial intermediary was a risk capital partner under the “Development of the private sector II” and “Support 
private sector” projects and fi nanced 29 projects in various sectors for a total amount of over 7,5 million euro. It 
also participated in two Tunisian privatisations for a total amount of 6,7 million euro.

Th  e intermediary did not systematically forward information allowing the EIB to follow the evolution of its par-
ticipations within the contractual deadlines. It did not always inform the EIB of events that substantially aff ected 
the investments, although it was contractually obliged to do so. 

Reimbursements and remunerations for an amount of 2,2 million euro dating back to the 1999–2004 period were 
not paid by the intermediary. When this was discovered by the EIB in 2004, an amount of 743 544 euro was paid 
and a specifi c protocol was established in 2005 to regularise the situation before the end of 2006 at the latest. Aft er 
the signature of the protocol, payment defaults were still noted during the audit of subsequent amounts due. Th  is 
situation was only settled at the end of 2007.

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20. 

21. 

22. 

Since 2005, when the department responsible was reorganised, the EIB 
has implemented a more structured monitoring approach, including 
enhanced controls and reporting, notably with the establishment of 
individual  follow-up  sheets.  However,  shortcomings  resulting  from 
the  past  are  being  addressed  but  still  need  to  be  resolved.  This  was 
n o t a b l y   t h e   c a s e   f o r   t h e   g l o b a l   r i s k   c a p i t a l   o p e r a t i o n s   g r a n t e d   t o 
financial intermediaries in Egypt, Morocco and Tunisia, for which an 
information gap still existed.

COORDINATION BETWEEN THE EIB AND THE COMMISSION

According to Article 4(1) of the MEDA regulation, the Commission is 
required to ensure the effective coordination of the assistance efforts 
undertaken  by  the  Community,  including  the  European  Investment 
Bank,  and  individual  Member  States,  in  order  to  increase  the  coher-
ence and complementarity of their cooperation programme.

The Commission, and especially two of the EC delegations in the partner 
countries visited by the Court, were not sufficiently informed of EIB 
projects  and  was  therefore  not  able  to  monitor  or  follow  them.  Fur-
thermore, even when information had been transmitted by the EIB to 
the  Commission’s  central  offices  in  Brussels,  it  had  not  always  been 
shared  with  the  delegations  visited  by  the  Court.  The  audits  on  the 
spot did, however, show that the establishment of EIB representative 
offices had facilitated communication between the Commission and 
the EIB at the local level. This was especially noted in Morocco, with 
the organisation of regular meetings.

ENVIRONMENTAL MONITORING

23.  When delegated management is applied and especially in the case of 
projects  with  potential  environmental  impact,  environmental  com-
pliance has to be monitored to ensure that environmental rules and 
requirements are being respected. Environmental assessments should 
identify possible environmental effects and propose measures to miti-
gate  them.  Regular  environmental  monitoring  should  be  conducted 
t o   e n s u r e   t h a t   m i t i g a t i n g   m e a s u r e s   a r e   t a k e n   a n d   t h a t   s i g n i f i c a n t 
adverse environmental effects are avoided.

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The working procedures between the Commission and the EIB 9 specify 
that  “the  EIB  shall  satisfy  itself  that  projects  to  be  financed  comply 
with environmental rules and requirements”.

9  Memorandum of understanding 

between the EIB and the 

Commission services on 

environmental aspects of 2002. 

The EIB did not always receive sufficient evidence from financial inter-
mediaries/promoters regarding environmental compliance. This was 
the  case  for  two  projects  (nitrogen  fertilizers  and  pharmaceuticals) 
included  in  the  list  of  sectors  requiring  detailed  description  and  an 
analysis of the environmental measures.

The  environmental  monitoring  performed  by  the  EIB  was  limited  to 
d o c u m e n t a r y   c h e c k s ,   w h i c h   d i d   n o t   c o n s t i t u t e   a   c o m p r e h e n s i v e 
e n v i r o n m e n t a l   m o n i t o r i n g   e x e r c i s e .   F o r   i n t e r m e d i a t e d   o p e r a t i o n s , 
the  financing  contracts  and  the  practical  provisions  did  not  require 
environmental  monitoring  by  the  financial  intermediaries  after  the 
investment screening and approval phases.

ACHIEVEMENT OF THE PROJECTS’ OBJECTIVES

FEMIP TECHNICAL ASSISTANCE

Since 2003 the EU budget has financed technical assistance projects in 
the context of the “FEMIP support fund”, managed by the EIB.

The objectives of technical assistance were to improve the quality and 
development impact of FEMIP operations by: 

 —

s t r e n g t h e n i n g   t h e   c a p a c i t y   o f   M e d i t e r r a n e a n   p a r t n e r   c o u n t r i e s 
and promoters; 

 —

financing upstream studies and activities focusing on directly or 
indirectly strengthening private sector growth.

24. 

25. 

26. 

27. 

28. 

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29. 

30. 

31. 

The criteria used by the Court to assess the technical assistance were the 
appropriate planning and timeliness of the execution of the projects, 
as well as their effectiveness, efficiency and relevance.

10 The findings resulting from the 

work conducted by the consultants 

charged by the EIB for technical 

assistance studies. 

The objectives of technical assistance were largely achieved and the 
technical assistance projects allowed the partner countries, promot-
ers or private partners to upgrade their capacity building.

Six technical assistance projects out of the 30 reviewed did not achieve 
all  their  objectives  due  to  promoters  who  either  did  not  accept  the 
findings 10 of the related study, did not take a position on the issues 
raised, accepted the findings but did not take the necessary follow-up 
action or did not address the internal weaknesses in the promoters’ 
organisation or the needs for further training.

T E X T B O X   4

EXAMPLE OF A SUCCESSFUL COMBINATION OF TECHNICAL ASSISTANCE 
AND RISK CAPITAL OPERATION 

Specialised bank in Egypt

Th  is fi nancial intermediary was a risk capital partner under the “Competitive upgrading of Egyptian enterprises” 
and “Upgrading Egyptian enterprises II” projects and fi nanced six projects in various sectors for a total amount 
of over 7 million euro. It also benefi ted from technical assistance.

Th  is combination of a risk capital operation with technical assistance was successful as it helped the Egyptian 
fi nancial intermediary develop organisational adjustment, enhance its procedures and policies, develop a risk 
management function, upgrade its treasury and asset liability management. Furthermore, it helped the interme-
diary to develop its information system and adopt a more structured approach regarding risk capital operations, 
notably at the investment screening and monitoring levels.

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32. 

33. 

34. 

INTEREST RATE SUBSIDIES

The objective of interest rate subsidies was to support loans granted 
b y   t h e   E I B   f r o m   i t s   o w n   r e s o u r c e s   f o r   e n v i r o n m e n t a l   p r o j e c t s .   T h e 
p r o j e c t s   f i n a n c e d   s h o u l d   b e   s u s t a i n a b l e   i n   t h e   l o n g   r u n ,   d e l i v e r e d 
within a defined timeframe and provide the expected environmental 
benefits.

The criterion of sustainability was not satisfied in all projects. For eight 
out of 30 projects, mainly in the water sector, there was no evidence 
that they would be sustainable with the set tariffs. Although the EIB 
identified  these  situations  at  the  appraisal  stage  and  the  borrowers 
agreed in their loan contracts to remedy the situation, the obligation 
was not fully enforced or only led to a tariff study (instead of raising 
tariffs to the appropriate level to ensure sustainability). An external 
evaluation commissioned by the EIB also concluded that project sus-
tainability was a significant issue.

Projects benefiting from loans with interest rate subsidies were often 
subject  to  delays.  Significant  delays,  up  to  seven  years,  were  found 
in  11  out  of  30  projects  analysed.  A  significant  delay  in  the  execu-
t i o n   o f   a   p r o j e c t   e i t h e r   c a l l s   i n t o   q u e s t i o n   t h e   p r o j e c t ’ s   r e l e v a n c e 
for the EIB, the Commission and the partner country or has negative 
consequences for the environment (as illustrated in Textbox 5). 

T E X T B O X   5

EXAMPLE OF A LOAN WITH INTEREST RATE SUBSIDIES NOT ACHIEVING 
THE REQUIRED OBJECTIVES WITHIN THE DEFINED TIMEFRAME

Preventing further pollution of the Gulf of Gabès — Tunisia

Th  e initial project approved in 1999 aimed at creating a storage place together with a pumping station and pipelines 
to transfer phosphogypsum, instead of pouring it into the sea. Th  e total estimated cost was 107 million euro. Aft er 
several amendments, the new project structure presented in 2007 involved transferring the plant to a new site and 
setting up a pipeline network. Th  e updated estimated cost of the project was 235 million euro for the storage and 
the pipeline network, plus 165 million for the transfer of the plant.

Th  e project was subject to numerous delays. Consequently, dates for the start of operations and the end of work 
were put back several times. While both were initially set for October 2002, they are currently set for end 2009 and 
mid-2010 respectively. Th  e environmental impact of these delays is very signifi cant. Th  e current plant is generating 
between 5 and 8 million tons of phosphogypsum per year. If the project meets its current target, the delays will 
then have generated an additional quantity of pollution in the Gulf of Gabès of between 35 and 64 million tons 
of phosphogypsum.

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11 The difference between 

committed amount and net value 

is mainly due to amounts yet to 

be disbursed, as per contractual 

provisions. 

RISK CAPITAL OPERATIONS

35. 

The risk capital operations provided and managed by the EIB took, in 
particular, the form of:

 —

direct  investments:  acquisition  of  equity  or  quasi-equity  instru-
ments (subordinated loans) in private companies;

 —

p r i v a t e   e q u i t y   f u n d s :   p a r t i c i p a t i o n   i n   i n v e s t m e n t   f u n d s   t a k i n g 
participations in private companies or other investment funds;

 —

co-investments with pre-selected local intermediaries;

 —

loans on special conditions, notably to micro-finance institutions; 
and

 —

support to guarantee schemes.

36. 

The MEDA portfolio of risk capital operations represented a total commit-
ted amount of 309,1 million euro and a net value of 159 million euro 
a t   t h e   e n d   o f   2 0 0 7 1 1.   T h e   g e o g r a p h i c a l   s p r e a d   o f   t h e   p o r t f o l i o   i s 
presented in the graph.

G R A P H

GEOGRAPHICAL SPREAD OF MEDA RISK CAPITAL OPERATIONS

Gaza–West
Bank
4,7 %

Jordan
2,5 %

Lebanon
1,3 %

Turkey
4,7 %

Algeria
5,0 %

Tunisia
16,3 %

Regional
26,3 %

Morocco
21,3 %

Egypt
20,6 %

Source: European Investment Bank.

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37. 

The Court first assessed the global planning of the Risk Capital facility 
based  on  the  objectives  set  by  Article  6(4)  of  the  MEDA  regulation: 
“Risk capital shall be used, first and foremost, to make available own 
funds  to  undertakings  in  the  production  sector,  in  particular  those 
that can bring together natural or legal persons who are nationals of 
a Community Member State and of Mediterranean non-member coun-
tries or territories. Risk capital shall be used primarily to strengthen 
the private sector, and in particular to reinforce the financial sector 
i n   M E D A   c o u n t r i e s .   I t   s h a l l   a d d   v a l u e   c l e a r l y ,   b y   o f f e r i n g   f i n a n c i a l 
p r o d u c t s   a n d   t e r m s   t h a t   a r e   n o t   a v a i l a b l e   l o c a l l y ” .   A t   t h e   p r o j e c t 
l e v e l ,   t h e   f o l l o w i n g   a d d i t i o n a l   c r i t e r i a   w e r e   u s e d   t o   m e a s u r e   t h e 
a c h i e v e m e n t   o f   t h e   p r o j e c t   o b j e c t i v e s :   r e a c h i n g   t h e   t a r g e t   g r o u p , 
r e l e v a n c e ,   t i m e l i n e s s ,   s u s t a i n a b i l i t y ,   a s   w e l l   a s   f i n a n c i a l   a n d   n o n -
financial performance.

38. 

There was no defined strategy as to the type of projects and sectors to be 
supported, at either the level of the Commission or the EIB or at the 
level  of  the  financial  intermediaries.  For  several  projects,  there  was 
no evidence that EU participation was playing a significant role and 
that they would not have been realised without it (see Textbox 6). 

T E X T B O X   6

EXAMPLE OF EU PARTICIPATION NOT ADDING VALUE 
AND NOT ACHIEVING ITS OBJECTIVES

Technology investment fund — Regional

Th  e fund was established in 2000 in order to invest in information technology, soft ware, media, telecommunica-
tions and related industries established, or having signifi cant operations, in the Middle East. 

Th  e EU participation in the fund took place in 2001 when almost all the fund’s investments were committed. 
Furthermore, the fund deviated both from its investment target and from its investments restrictions. Th  ere was 
also insuffi  cient monitoring and controls by the fund over its investments.

As at mid-2007, out of a total of 25,6 million USD invested in the fund, 7,2 million USD were repaid to the investors 
in the context of its liquidation, whereas the residual value is only 3,1 million USD. Out of the EU participation of 
5,4 million USD, 1,52 million USD were repaid and the residual value was 0,66 million USD.

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39. 

40. 

The Commission did not set up controls in order to detect whether the 
same beneficiary was benefiting from different risk capital operations, 
either managed directly or through financial intermediaries. This was 
due  to  the  absence  of  a  central  database  at  Commission  level  of  all 
beneficiaries benefiting from risk capital operations.

At the start of the risk capital operations, the EIB focused its activities 
on providing global risk capital operations contracted with multiple 
f i n a n c i a l   i n t e r m e d i a r i e s ,   s o m e t i m e s   w i t h   a n   a d d i t i o n a l   i n t e r m e d i -
a t e   l e v e l ,   e i t h e r   p u b l i c   o r   p r i v a t e .   W h i l e   g l o b a l   r i s k   c a p i t a l   o p e r a -
tions  often  reach  a  large  number  of  beneficiaries,  they  are  difficult 
to  administer  and  require  intensive  monitoring.  In  the  past,  the  EIB 
did not ensure efficient use of global risk capital operations (see also 
Textbox 2). Several financial intermediaries and agents did not meet 
their  monitoring,  reporting  and  financial  requirements  or  were  act-
i n g   a s   p r o m o t e r s   i n s t e a d   o f   a s   i n d e p e n d e n t   i n t e r m e d i a r i e s   ( s e e 
Textbox 7).

T E X T B O X   7

EXAMPLE OF RISK CAPITAL OPERATION NOT ACHIEVING THE REQUIRED 
OBJECTIVES IN TIME

Investment company based in Egypt

Th  is fi nancial intermediary was a risk capital partner under the “Competitive upgrading of Egyptian enterprises” 
project and fi nanced three projects, all in the tourism sector, for a total amount of over 6,8 million euro.

Th  is risk capital partner was the direct promoter of the three projects and not an independent fi nancial intermediary. 
Th  e aims of the projects were to establish a new superior tourism destination in Egypt and build fi ve-star hotels. 

Th  e investment evaluation conducted by the intermediary was based on ambitious targets that were not achieved. 
Th  e projects also suff ered from under-capitalisation and delays of four to fi ve years in the construction of the hotels 
that were not reported in due time to the EIB.

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41. 

42. 

43. 

As indicated in paragraph 37, while initial risk capital operations focused 
on the aim of bringing together EU and Mediterranean beneficiaries, 
more recent projects mainly involved Mediterranean partners only.

12 Impairments should be based 

on definitive and provisional 

write-offs. However, only 

definitive write-offs are currently 

communicated by the EIB to the 

Commission.

The financial performance of the risk capital operations showed mixed 
results  and  often  depended  on  the  quality  of  the  financial  partners 
s e l e c t e d   b y   t h e   E I B .   T h e   r i s k   c a p i t a l   o p e r a t i o n s   a r e   s h o w n   i n   t h e 
accounts  at  historic  cost  less  any  provisions  for  impairments 12.  Fur-
t h e r m o r e ,   i t   w a s   d i f f i c u l t   f o r   t h e   C o u r t   t o   a s s e s s ,   w h e t h e r   t h e   r i s k 
capital operations had achieved their objectives as, most of the time, 
no indicators other than financial ones, were available.

Even if the achievement of the objectives set for risk capital operations 
was difficult to assess, the Court recognises the positive effect of EIB 
actions on regional integration and on the enhancement of corporate 
governance and business conducts in the partner countries.

T E X T B O X   8

EXAMPLE OF A SUCCESSFUL TRANSREGIONAL FUND MANAGEMENT

Specialised fund managers with operations in Algeria, Morocco and Tunisia

Th  is fund management company, which manages several investment funds across the Maghreb region, has devel-
oped a successful business model based on clear investment rules and procedures. Th  ese rules and procedures not 
only covered investment screening, monitoring and valuation, taking into consideration European and interna-
tional standards, but also led to coherent exit strategies and detailed reporting to shareholders. All this resulted 
in a positive fi nancial performance.

Th  is successful business model, combined with the dynamism of the local fund managers has further allowed an 
extension from Tunisia to Morocco and Algeria.

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CONCLUSIONS AND 
RECOMMENDATIONS

22

44. 

45. 

MONITORING OF THE PROJECTS

There was no monitoring of the projects under delegated management 
at Commission level. Monitoring by the EIB had been inadequate 
in  the  past  and  had  been  recently  upgraded  in  order  to  reach  a 
satisfactory level.

Regarding  the  Commission’s  management  of  the  banking  measures 
f i n a n c e d   u n d e r   t h e   M E D A   p r o g r a m m e ,   t h e   a b s e n c e   o f   a   m o n i t o r -
ing  and  evaluation  strategy  was  noted.  The  Commission  effectively 
monitored  the  programmes  that  it  administered  directly.  However, 
it  did  not  sufficiently  ensure  the  effective  coordination  of  Commu-
nity assistance with the EIB’s supporting measures. Furthermore, the 
transfer  of  the  responsibility  for  environmental  compliance  did  not 
l e a d   t o   a d e q u a t e   e n v i r o n m e n t a l   m o n i t o r i n g   ( s e e   p a r a g r a p h s   1 3   t o 
16 and 21 to 26).

R E C O M M E N D A T I O N S   O N   T H E   M O N I T O R I N G   B Y   T H E   C O M M I S S I O N

With  the  end  of  the  MEDA  programme  and  the  start  of  the  new  Euro-
pean  neighbourhood  and  partnership  instrument  that  was  launched 
in 2007, the Commission should:

(a) 

s e t   u p   a   t a i l o r - m a d e   e v a l u a t i o n   a n d   m o n i t o r i n g   p r o g r a m m e   f o r 
b a n k i n g   m e a s u r e s ,   t a k i n g   i n t o   c o n s i d e r a t i o n   t h e   i n p u t   r e c e i v e d 
from the partners responsible for the implementation of the bank-
ing measures in the Mediterranean partner countries;

(b) 

ensure the effective coordination of assistance by the Community, 
t h e   E I B   a n d   o t h e r   i n t e r n a t i o n a l / l o c a l   p a r t n e r s   o n   t h e   b a s i s   o f   a 
reciprocal  and  regular  exchange  of  information  (including  at  the 
local  level),  in  order  to  increase  the  consistency  and  complemen-
tarity of their activities;

(c) 

negotiate adequate management conventions ensuring appropriate 
monitoring, covering the environmental aspects and safeguarding 
the financial interests of the Community.

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46. 

The EIB’s management of banking measures suffered from insufficient 
m o n i t o r i n g   d u r i n g   t h e   f i r s t   y e a r s   o f   t h e   p r o g r a m m e .   T h i s   n o t   o n l y 
affected the achievements of the projects but also the Community’s 
financial interests, notably due to the late recovery or non-recovery 
of  funds  and  the  waiving  or  absence  of  some  contract  clauses.  The 
EIB  gradually  improved  its  monitoring  from  2005  onwards  in  order 
to reach a satisfactory level (see paragraphs 17 to 20).

R E C O M M E N D A T I O N   O N   T H E   M O N I T O R I N G   B Y   T H E   E I B

R e g a r d i n g   b a n k i n g   m e a s u r e s   m a n d a t e d   t o   t h e   E I B   o n   b e h a l f   o f   t h e 
C o m m i s s i o n ,   t h e   C o m m i s s i o n   s h o u l d   e n s u r e   t h a t   m o n i t o r i n g   b y   t h e 
E I B   p r o v i d e s   t h a t   a l l   p r o j e c t s   a r e   a d e q u a t e l y   e x e c u t e d   a n d   t h a t   t h e 
financial  and  reporting  obligations  of  the  intermediaries/promoters 
are met.

ACHIEVEMENT OF OBJECTIVES

47. 

The technical assistance projects achieved their targets while loans 
with  interest  rate  subsidies  and  risk  capital  operations  partially 
achieved their objectives.

48.  While  the  objectives  set  for  technical  assistance  were  fulfilled,  the 
s i t u a t i o n   r e g a r d i n g   i n t e r e s t   r a t e   s u b s i d i e s   a n d   r i s k   c a p i t a l   o p e r a -
t i o n s   w a s   m o r e   d i v e r s e .   S e v e r a l   l o a n s   w i t h   i n t e r e s t   r a t e   s u b s i d i e s 
f a i l e d   t o   m e e t   a t   l e a s t   o n e   o f   t h e   t h r e e   a c h i e v e m e n t   c r i t e r i a   ( s u s -
t a i n a b i l i t y ,   t i m e f r a m e   a n d   e x p e c t e d   e n v i r o n m e n t a l   b e n e f i t s )   ( s e e 
paragraphs 27 to 34).

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49. 

The overall achievements of the risk capital operations were difficult 
to assess. Regarding financial performance, the fair valuation of the 
risk capital portfolio available was not reflected in the Communities 
accounts.  Regarding  non-financial  performance,  specific  indicators 
were rarely available. In recent years the projects deviated from the 
target of bringing together Mediterranean and EU partners. However, 
the  overall  action  by  the  EIB,  in  coordination  with  one  of  the  other 
i n t e r n a t i o n a l   a n d   l o c a l   p l a y e r s ,   m a d e   i t   p o s s i b l e   t o   r a i s e   t h e   l e v e l 
of  corporate  governance  and  promote  developments  in  the  field  of 
private equity (see paragraphs 35 to 43).

R E C O M M E N D A T I O N   O N   T H E   A C H I E V E M E N T   O F   T H E   O B J E C T I V E S

For  risk  capital  operations,  the  Commission  should  define  an  overall 
strategy and choose the best implementation process, either through 
d i r e c t   m a n a g e m e n t   o r   t h r o u g h   m a n a g e m e n t   b y   i n t e r n a t i o n a l / l o c a l 
partners.

This report was adopted by the Court of Auditors in Luxembourg at its 
meeting of 21 and 22 January 2009.

For the Court of Auditors

Vítor Manuel da Silva Caldeira
President

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REPLY 
OF THE COMMISSION

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T h i r d   i n d e n t   —   F r e q u e n t   e x c h a n g e s   t a k e 
place between the Commission and the EIB. 
During the period of the MEDA programme as 
well as in the current period, the EIB contrib-
uted  to  the  national  indicative  programme 
documents and discussed individual opera-
t i o n s   w i t h   t h e   C o m m i s s i o n   a t   c o n c e p t i o n 
stage. Each RCO under ENPI needs individual 
a p p r o v a l   f r o m   t h e   C o m m i s s i o n .   M o r e o v e r , 
s i n c e   2 0 0 5   t h e   C o m m i s s i o n ,   i n c l u d i n g   t h e 
delegations,  received  regular  and  compre-
hensive RCO reports issued by the EIB.

Fourth indent — The Commission acknowl-
edges that in the past, more emphasis could 
have been put on environmental monitoring. 
However, standards have evolved rapidly in 
recent years.

D e p e n d i n g   o n   t h e   n a t u r e   o f   t h e   p r o j e c t , 
the environmental monitoring is performed 
t h r o u g h   d o c u m e n t a r y   c h e c k s   —   o f t e n   s u f -
f i c i e n t   t o   e n s u r e   c o n f o r m i t y   w i t h   t h e   E I B ’ s 
e n v i r o n m e n t a l   p o l i c y   o b j e c t i v e s   —   b u t 
also,  where  necessary,  on-site  visits  by  EIB 
representatives.

F o r   i n t e r m e d i a t e d   o p e r a t i o n s ,   a l t h o u g h 
environmental monitoring was not foreseen 
i n   t h e   f i n a n c i n g   c o n t r a c t s ,   i t   i s   p a r t   o f   a n 
overall  obligation  of  the  financial  interme-
d i a r y ,   w h i c h   i s   r e q u i r e d   t o   v e r i f y   t h e   b e n -
e f i c i a r y ’ s   c o m p l i a n c e   w i t h   a p p l i c a b l e   l a w s 
and regulations (being noted that standards 
a p p l i c a b l e   a t   t h e   t i m e   o f   s i g n a t u r e   o f   t h e 
o p e r a t i o n s   a u d i t e d   b y   C o u r t   a r e   d i f f e r e n t 
from  today’s)  and,  if  requested  to  do  so  by 
the EIB, implementation of appropriate miti-
gation measures.

SUMMARY
I. 
T h e   E U ’ s   M e d i t e r r a n e a n   p a r t n e r   c o u n t r i e s 
witnessed a major evolution in the nineties. 
T h e   p r i v a t e   s e c t o r   g a i n e d   i n   i m p o r t a n c e , 
u n d e r   t h e   i n f l u e n c e   o f   l a r g e   p r i v a t i s a t i o n 
programmes.  In  some  countries,  the  finan-
c i a l   s e c t o r   c o n v e r g e d   r a p i d l y   w i t h   E u r o -
pean models. Environmental standards also 
changed  drastically.  This  development  has 
b e e n   r e f l e c t e d   i n   M E D A   o p e r a t i o n s ,   w h i c h 
followed the standards of their time.

Political  interests  and  legislation  have  also 
evolved  during  the  last  15  years.  As  a  con-
sequence, programmes initiated in the early 
or mid-1990s cannot be assessed in the light 
of present criteria.

II. 
The sample selected by the Court stretches 
over a long period of time (1989–2006). For 
risk  capital  operations  (RCOs)  in  particular, 
the sample contained many early projects.

IV.
First indent — Beforehand, it was the EIB’s 
responsibility under the management agree-
ment  signed  between  the  Commission  and 
the EIB to monitor and follow-up the projects 
funded under budgetary resources. As from 
2 0 0 7 ,   u n d e r   t h e   E u r o p e a n   n e i g h b o u r h o o d 
policy (ENPI) budgetary resources, projects 
m a n a g e d   b y   t h e   E I B   a r e   i n c l u d e d   i n   t h e 
C o m m i s s i o n ’ s   r e s u l t s - o r i e n t e d   m o n i t o r i n g 
system.

S e c o n d   i n d e n t   —   I n   a g r e e m e n t   w i t h   t h e 
C o m m i s s i o n ,   t h e   E I B   c u r r e n t l y   a p p l i e s   t h e 
m o s t   a p p r o p r i a t e   s t a n d a r d s   i n   t e r m s   o f 
m o n i t o r i n g ,   a s   e v i d e n c e d   b y   t h e   d e t a i l e d , 
m u l t i p l e   a n d   r e g u l a r   r e p o r t s   p r o d u c e d   o n 
RCOs, which contain detailed information on 
each project financed under MEDA. Based on 
information received from the EIB, the Com-
mission recognises some past shortcomings 
w i t h   r e s p e c t   t o   t h e   p r o v i s i o n   o f   a d e q u a t e 
information contractually foreseen by some 
o f   t h e   f i n a n c i a l   i n t e r m e d i a r i e s .   H o w e v e r , 
s e v e r a l   o f   t h e s e   s h o r t c o m i n g s   h a d   a l r e a d y 
been identified by the EIB and are currently 
being remedied.

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INTRODUCTION
5. 
A   n e w   m a n a g e m e n t   a g r e e m e n t   i s   b e i n g 
finalised  and  will  be  signed  in  the  first  half 
of  2009.  It  will  cover  all  the  types  of  coop-
e r a t i o n   b e t w e e n   t h e   E C   a n d   t h e   E I B   i n   t h e 
field of external aid.

OBSERVATIONS
13. 
D e l e g a t e d   c o o p e r a t i o n   i s   u s e d   w h e n   i t   i s 
considered  that  certain  tasks  can  better  be 
managed by another institution/entity than 
t h e   C o m m i s s i o n ,   w h i c h   i s   t h e   c a s e   f o r   r i s k 
c a p i t a l   o p e r a t i o n s   a n d   i n t e r e s t   r a t e   s u b s i -
dies. This is the core business for the EIB as 
a banking institution.

14. and 15. 
In 1992 the risk capital operation and inter-
e s t   r a t e   s u b s i d i e s   a p p r o a c h   w a s   n e w   a n d 
there were no clear guidelines and applica-
ble rules about delegated cooperation and/
or  this  type  of  activities.  In  this  framework 
the management agreement established by 
the Commission provided for a “global” dele-
gation of tasks in which the Commission had 
to be kept informed and was to be consulted 
in case of major changes. Recently with the 
e n t r y   i n t o   f o r c e   o f   t h e   n e w   f i n a n c i a l   r e g u -
lation  in  2003  and  its  modification  in  2007, 
r u l e s ,   g u i d e l i n e s   a n d   t e m p l a t e s   h a v e   b e e n 
elaborated on delegated cooperation. A new 
m a n a g e m e n t   a g r e e m e n t   i s   b e i n g   f i n a l i s e d 
by  the  services  of  the  Commission  and  will 
b e   s i g n e d   a t   t h e   b e g i n n i n g   o f   2 0 0 9 .   I t   w i l l 
i n c l u d e   d e t a i l e d   r e q u i r e m e n t s   i n   t e r m s   o f 
reporting, monitoring, accounting, etc.

V. 
Regarding  interest  rate  subsidies  and  RCO, 
the  situation  was  indeed  more  diverse,  but 
overall  positive,  as  the  objectives  set  forth 
in the MEDA regulation (i.e., “to strengthen 
the private sector and to reinforce the finan-
c i a l   s e c t o r   o f   M E D A   c o u n t r i e s ” )   h a v e   b e e n 
achieved. These operations have had a posi-
tive impact in terms of jobs created and have 
contributed to the economic development of 
the Mediterranean partner countries.

VI.
First  indent  —  The  tailor-made  evaluation 
a n d   m o n i t o r i n g   p r o g r a m m e   r e q u e s t e d   a r e 
a l r e a d y   i n   p l a c e   i n   t h e   c o n t e x t   o f   E N P I .   I t 
complements the extensive monitoring pro-
gramme already put in place by the EIB.

S e c o n d   i n d e n t   —   T h e   c o o r d i n a t i o n   i s 
already  in  place,  with  the  EIB  contributing 
to  the  national  indicative  programmes  and 
f r e q u e n t   c o n t a c t s   w i t h   t h e   C o m m i s s i o n . 
Moreover,  the  EIB  has  signed  various  mem-
oranda of understanding with bilateral and 
multilateral  institutions  in  order  to  ensure 
closer  coordination  and  better  consistency 
a n d   c o m p l e m e n t a r i t y   o f   t h e i r   a c t i o n s   w i t h 
the ones implemented by other actors in the 
field.

Third indent — A new management agree-
ment is currently being negotiated between 
t h e   C o m m i s s i o n   a n d   t h e   E I B .   T h e   p o i n t s 
highlighted  by  the  Court  will  be  taken  into 
account.

F o u r t h   i n d e n t   —   T h e   c u r r e n t   m o n i t o r i n g 
p e r f o r m e d   b y   E I B   i s   a d e q u a t e   a n d   e n s u r e s 
that  financial  and  reporting  obligations  of 
the intermediaries/promoters are met.

F i f t h   i n d e n t   —   A   s t r a t e g y   f o r   r i s k   c a p i t a l 
o p e r a t i o n s   h a s   b e e n   d e f i n e d   w i t h i n   t h e 
ENPI.

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17. 
I n   g e n e r a l ,   E I B   p r a c t i c e s   a i m   t o   e n s u r e 
e f f e c t i v e   m o n i t o r i n g   c o v e r i n g   a l l   s t a g e s 
o f   a   p r o j e c t .   I t s   d e s i g n ,   i t s   r e l e v a n c e   t o 
E U   o b j e c t i v e s ,   i t s   e c o n o m i c   a n d   f i n a n c i a l 
return,  as  well  as  its  environmental  impact 
a r e   i s s u e s   t h a t   a r e   a s s e s s e d   d u r i n g   a   c o m -
plete appraisal carried out by EIB’s services. 
The  contractual  documentation  negotiated 
with the promoter reflects EIB’s recommen-
d a t i o n s   r e s u l t i n g   f r o m   i t s   d u e   d i l i g e n c e . 
A f t e r   t h e   s i g n i n g   o f   t h e   c o n t r a c t ,   t h e   E I B 
e n s u r e s   t h e   c o m p l i a n c e   o f   t h e   b o r r o w e r ’ s 
obligation and applies the most appropriate 
standards in terms of monitoring.

19. 
C u r r e n t l y ,   u p - t o - d a t e   m o n i t o r i n g   i n f o r m a -
t i o n   f r o m   i n t e r m e d i a r i e s   i s   a v a i l a b l e   f o r 
almost the totality of the portfolio, leaving 
a s i d e   3   o l d   M o r o c c a n   g l o b a l   l o a n s   s i g n e d 
before the MEDA programme between 1989 
a n d   1 9 9 4   a n d   f o r   w h i c h   s o m e   i n f o r m a t i o n 
gaps still exist.

B a s e d   o n   t h e   i n f o r m a t i o n   r e c e i v e d   f r o m 
t h e   E I B ,   t h e   C o m m i s s i o n   c o n s i d e r s   t h a t 
n o   n e g a t i v e   f i n a n c i a l   c o n s e q u e n c e s   h a v e 
been incurred. With the exception of minor 
amounts waived in order to facilitate a swift 
s e t t l e m e n t ,   a l l   a m o u n t s   d u e   h a v e   a l w a y s 
been  claimed  and  recovered  (in  the  case  of 
o l d   M o r o c c a n   g l o b a l   l o a n s ,   a r e   s t i l l   b e i n g 
r e c o v e r e d ) ,   w i t h   l a t e   p a y m e n t   p e n a l t i e s 
a d d e d   o n   t o   t h e   r e g u l a r   a m o u n t s   o w e d , 
when applicable.

Textbox 2 — Example of impact 
on the Community’s financial interests
F i r s t   p a r a g r a p h   —   T h i s   c e n t r a l i s e d   i n t e r -
m e d i a r y   i s   a   m i n i s t r y   o f   t h e   K i n g d o m   o f 
Morocco.

Second paragraph — The Court refers to the 
old Moroccan global loans, signed between 
1989 and 1994, before the MEDA programme 
was in place. Such operations were the only 
practicable solution at the time, when there 
was no private equity firms present in MEDA 
countries, but they are no longer used. Past 
shortcomings with respect to the provision 
of adequate information contractually fore-
seen by some of the financial intermediaries 
in Morocco and by the ministry have indeed 
occurred in the case of these old operations. 
H o w e v e r ,   s e v e r a l   o f   t h e   s h o r t c o m i n g s   h a d 
been identified by the EIB prior to the start 
o f   t h e   a u d i t   b y   t h e   C o u r t   a n d   a r e   a l l   c u r -
r e n t l y   b e i n g   r e m e d i e d .   A l l   a m o u n t s   o w e d 
u n d e r   t h e   o l d   r i s k   c a p i t a l   g l o b a l   l o a n s   i n 
Morocco have already been claimed from the 
i n t e r m e d i a r i e s   a n d   f i n a l   b e n e f i c i a r i e s   a n d 
have been or are being collected.

T h i r d   p a r a g r a p h   —   T h e s e   o l d   M o r o c c a n 
operations, pre-dating the MEDA mandates, 
account for 7,5 % of total currently commit-
ted RCO amounts and are not representative 
o f   t h e   m o r e   r e c e n t   R C O s   s i g n e d   s i n c e   t h e 
start of the FEMIP, in 2002.

D a t a   h a v e   n o w   b e e n   p r o v i d e d   f o r   i n   m o s t 
c a s e s   b y   t h e   m i n i s t r y   r e g a r d i n g   t h e   f u n d s 
disbursed by the ministry to the local finan-
cial intermediaries and the reimbursements 
m a d e   b y   t h e s e   i n t e r m e d i a r i e s   t o   t h e   m i n -
i s t r y .   S o m e   i n f o r m a t i o n   g a p s   s t i l l   e x i s t , 
despite EIB’s continued efforts to fill them in. 
However, the situation keeps on improving. 
Write-offs have been made, where appropri-
ate, on a number of operations.

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20. 
S i n c e   2 0 0 5 ,   t h e   c o r r e c t i v e   a c t i o n s   r e l a t i n g 
to  shortcomings  identified  by  the  EIB  have 
been implemented. Some of them take time 
to result in a concrete effect.

The EIB makes sure that the reporting obliga-
tion imposed upon borrowers and financial 
intermediaries are complied with. Today, old 
Moroccan global loans set aside, satisfactory 
information is received for the large majority 
of the RCOs in the portfolio.

T h e   s h o r t c o m i n g s   r e s u l t i n g   f r o m   t h e   p a s t 
have been addressed, although some inter-
mediaries still need to improve their report-
ing in order to reach current standards.

Textbox 3 — Example of weak EIB 
monitoring combined with a lack 
of reporting from the intermediary
S e c o n d   p a r a g r a p h   —   T h e   C o m m i s s i o n 
s t r e s s e s   t h a t ,   i n   t h e   b a n k i n g   b u s i n e s s , 
e s p e c i a l l y   i n   e m e r g i n g   m a r k e t s ,   b r e a c h e s 
o f   c o n t r a c t u a l   o b l i g a t i o n s   ( i n c l u d i n g   p a y -
ment  default)  from  some  counterparts  may 
not be excluded.

Third paragraph — The intermediary’s lack 
of timely reporting and payment delays had 
been  identified  by  the  EIB  in  2004.  The  EIB 
had  sent  reminders  to  the  intermediary  on 
s e v e r a l   o c c a s i o n s ,   h a d   c o n v e n e d   m e e t i n g s 
i n   T u n i s   a n d   L u x e m b o u r g   a n d ,   f i n a l l y ,   h a d 
d r a f t e d   a   s e t t l e m e n t   a g r e e m e n t   ( protocole 
d’accord) which was signed by the interme-
diary in late 2005. Eventually, as a result of 
this active monitoring, all payments due by 
the intermediary have been paid back at the 
end of 2007.

22. 
T h e   C o m m i s s i o n   o f f i c e s   i n   B r u s s e l s   h a v e 
since reinforced the team working with EIB-
m a n a g e d   p r o j e c t s .   T h i s   h a s   a l r e a d y   l e d   t o 
better communication with delegations.

25. 
As a rule, when a project falls within the list 
of environmentally sensitive sectors, the EIB 
r e q u e s t s   a n d   g e t s   a   c o p y   o f   a l l   a u t h o r i s a -
tions and permits that need to be obtained 
by the promoter under the relevant legisla-
tion. In addition, investments made by finan-
c i a l   i n t e r m e d i a r i e s   i n   s e n s i t i v e   s e c t o r s   a r e 
screened by the EIB. Other sectors are per se 
excluded from the EIB financing.

26. 
D e p e n d i n g   o n   t h e   n a t u r e   o f   t h e   p r o j e c t , 
the environmental monitoring is performed 
t h r o u g h   d o c u m e n t a r y   c h e c k s   —   o f t e n   s u f -
ficient  to  ensure  compliance  with  the  EIB’s 
e n v i r o n m e n t a l   p o l i c y   o b j e c t i v e s   —   b u t 
also,  where  necessary,  on-site  visits  by  EIB 
representatives.

F o r   i n t e r m e d i a t e d   o p e r a t i o n s ,   e n v i r o n -
mental  monitoring  was  not  foreseen  in  the 
financing contracts, nevertheless it is part of 
an  overall  obligation  of  the  financial  inter-
mediary, which is required to verify the ben-
e f i c i a r y ’ s   c o m p l i a n c e   w i t h   a p p l i c a b l e   l a w s 
and regulations (being noted that standards 
a p p l i c a b l e   a t   t h e   t i m e   o f   s i g n a t u r e   o f   t h e 
o p e r a t i o n s   a u d i t e d   b y   C o u r t   a r e   d i f f e r e n t 
from  today’s)  and,  if  requested  to  do  so  by 
the EIB, implementation of appropriate miti-
gation measures.

31. 
T h e   o w n e r s h i p   o f   t h e   p r o m o t e r s   i s   c l e a r l y 
crucial for the success of lending and related 
t e c h n i c a l   a s s i s t a n c e   ( T A )   o p e r a t i o n s .   T h i s 
w a s   a l s o   r e c o n f i r m e d   b y   t h e   e x t e r n a l   m i d -
term evaluation of the FEMIP support fund in 
2006 concluding that the fund has been suc-
cessfully implemented. 24 out of 30 projects 
h a v e   a t t a i n e d   a l l   t h e i r   o b j e c t i v e s   a n d   t h e 
o t h e r   s i x   h a v e   r e a c h e d   t h e i r   o b j e c t i v e s   a t 
least partially. In the meantime, the EIB has 
taken additional measures to further improve 
the  performance  of  TA  activity,  such  as  the 
strengthening of the TA unit, increased on-
site presence of Bank staff at an early stage 
o f   t h e   p r o j e c t   c y c l e   a n d   i n t e r n a l   t r a i n i n g 
measures.

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33. 
All  projects  selected  within  the  sample  are 
u p   a n d   r u n n i n g   a n d   t h e   t a r i f f   l e v e l   i s   n o t 
t h e   o n l y   c o n d i t i o n   t o   t h e   s u s t a i n a b i l i t y   o f 
the project. Tariffs are fixed by governments 
a n d   t h e   E I B ’ s   c o u n t e r p a r t y   h a s   n o   c o n t r o l 
over tariffs levels. The EIB tries to influence 
t h e   m e c h a n i s m   o f   t a r i f f   i n c r e a s e   t h r o u g h 
conditionality  in  the  finance  contracts  and 
discussions  at  the  political  level.  However, 
i n   c o u n t r i e s   s u c h   a s   t h e   M e d i t e r r a n e a n 
p a r t n e r   c o u n t r i e s ,   t h e   l e v e l   o f   a c c e p t a n c e 
of increases in tariffs is much lower than in 
other  sectors.  The  water  sector,  more  than 
any  other,  therefore  needs  some  flexibility 
t o   e n s u r e   t h a t   p r o j e c t s   a r e   i m p l e m e n t e d 
i n   a c c o r d a n c e   w i t h   t h e   E I B s   r e q u i r e m e n t s 
despite some high external constraints.

34. 
The  execution  of  a  project  benefiting  from 
an interest rate subsidy mainly depends on 
the partner country’s utilisation of the loan. 
G i v e n   t h a t   t h e   p r o j e c t s   i m p l y   a   l o n g - t e r m 
indebtedness  for  the  countries,  delays  may 
occur because of changing political/budget-
ary priorities, notwithstanding the project’s 
r e l e v a n c e .   I n   n o n e   o f   t h e s e   c a s e s ,   t h e   r e l -
evance of the projects themselves has to be 
questioned. A delay in a project implemen-
tation postpones its environmental benefits 
b u t   d o e s   n o t   e n t a i l   b y   i t s e l f   n e g a t i v e   c o n -
s e q u e n c e s   f o r   t h e   e n v i r o n m e n t .   I n   f a c t ,   a 
postponement  can  be  preferable  in  case  of 
p r o j e c t s   t o   b e   i m p l e m e n t e d   i n   a   n o n - s u s -
tainable manner.

Textbox 5 — Example of a loan 
with interest rate subsidies not 
achieving the required objectives 
within the defined timeframe
Second paragraph — The phosphatic indus-
try holds a key position within the Tunisian 
economy  and  nowadays  represents  around 
17 % of GDP. The promoter of the project has 
been rejecting phosphogypsum since 1952. 
The driver for this project has always been to 
mitigate this significant source of pollution. 
The delays have been caused by exception-
a l l y   r a r e   g e o p h y s i c a l   p r o b l e m s   d i s c o v e r e d 
on the proposed landfill site. The problems 
e x p e r i e n c e d   h a v e   f o r c e d   t h e   p r o m o t e r   t o 
r e - d e s i g n   t h e   w h o l e   p r o j e c t .   W i t h o u t   t h e 
intervention by the EIB there would not have 
been such a project at all. Due to EIB persist-
e n c e ,   t h e   p r o m o t e r   h a s   n o w   b e e n   s h i f t i n g 
from  a  polluting  company  to  a  responsible 
c h e m i c a l   p r o d u c e r   w h o   i s   n o w   s e e k i n g   t o 
systematically monitor and minimise pollut-
ing effects according to best practice in the 
industry.

38. 
T h e   o b j e c t i v e   o f   M E D A   r i s k   c a p i t a l   o p e r a -
tions,  which  was  clearly  stated  as  from  the 
b e g i n n i n g ,   w a s   t o   f a v o u r   p r i v a t e   s e c t o r 
d e v e l o p m e n t   t h r o u g h   a   f o r m   o f   f i n a n c i a l 
intervention  that  was  not  readily  available 
at the time. Such was done by the EIB.

During  the  nine  on-site  visits  of  RCO  finan-
cial  intermediaries,  most  of  them  explicitly 
and  repeatedly  mentioned  that  the  financ-
i n g   o f   t h e i r   p r o j e c t   w o u l d   n o t   h a v e   b e e n 
possible without the European Community’s 
intervention.  Moreover,  some  beneficiaries 
emphasised  that  participation  in  the  Euro-
pean funds gave them visibility and notori-
ety, which attracted other investors.

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Textbox 6 — Example of EU participation 
not adding value and not achieving 
its objectives
Second paragraph — EU participation in the 
technology investment fund is an exception 
in the RCO portfolio. Amongst the 32 invest-
ments into funds under RCO, this fund is the 
only  case  of  such  a  late  entry  of  EIB  in  the 
course  of  the  fundraising  process.  Besides, 
at the time of EIB’s investment, the fund had 
plans  to  make  many  more  investments  but 
such  plans  were  abandoned,  following  the 
bursting of the Internet bubble.

Third  paragraph  —   T h e   p o o r   p e r f o r m a n c e 
o f   t h i s   f u n d   —   o n e   o f   t h e   w o r s t   f i n a n c i a l 
performances of the whole RCO portfolio — 
i s   m a i n l y   e x p l a i n e d   b y   t h e   b u r s t i n g   o f   t h e 
I n t e r n e t   b u b b l e   a n d   b y   t h e   s h a r p   d e v a l u -
a t i o n   o f   t h e   E g y p t i a n   p o u n d   i n   2 0 0 2 .   T h i s 
c a s e   i s   i s o l a t e d   i n   t h e   p o r t f o l i o .   B y   w a y   o f 
comparison,  MEDA  II  operations  under  RCO 
g l o b a l l y   y i e l d e d   a   p o s i t i v e   r e t u r n   o f   1 2   % 
( m u l t i p l e   o n   i n v e s t m e n t ) .   T h i s   r e t u r n   o u t -
paces the one of RCOs made under the pre-
vious mandate (MEDA I), at the moment still 
slightly negative with a multiple on invest-
m e n t   o f   0 , 9   t i m e s ,   b u t   s t e a d i l y   i n c r e a s i n g 
a n d   l i k e l y   t o   e x c e e d   t h e   b r e a k - e v e n   m a r k 
before the liquidation of these RCOs.

39. 
S e t t i n g   u p   c o s t l y   c o n t r o l   m e c h a n i s m s   t o 
monitor cases of cross beneficiaries between 
C o m m i s s i o n   p r o g r a m m e s   a n d   R C O   o p e r a -
t i o n s   h a s   b e e n   c o n s i d e r e d   u n e c o n o m i c a l 
and  unnecessary,  considering  the  very  few 
c a s e s   o f   s e p a r a t e   f i n a n c i n g   g r a n t e d   t o   a 
same beneficiary.

40. 
For many years now, the operational set-up 
of  so-called  global  loans,  which  during  the 
1 9 8 0 s   a n d   e a r l y   1 9 9 0 s   r e p r e s e n t e d   a   p i o -
n e e r i n g   w a y   o f   p r o v i d i n g   e q u i t y   f i n a n c i n g 
i n   t h e   r e g i o n ,   h a s   b e e n   r e p l a c e d   b y   m o r e 
current forms of intervention. Today, prob-
lems have been resolved and apart from the 
old (1989–94) Moroccan global loans, satis-
f a c t o r y   i n f o r m a t i o n   h a s   b e e n   r e c e i v e d   f o r 
almost of the RCOs in the portfolio.

Textbox 7 — Example of risk 
capital operation not achieving 
the required objectives
S e c o n d   p a r a g r a p h   —   T h e   o b j e c t i v e   o f   t h e 
RCO operation involving an investment com-
pany  based  in  Egypt  was  to  build  hotels  to 
create thousands of jobs in a key sector for 
t h e   E g y p t i a n   e c o n o m y .   T h e s e   o b j e c t i v e s 
have been achieved, albeit with delay.

T h i r d   p a r a g r a p h   —   D e l a y s   o f t e n   o c c u r r e d 
in the tourism sector in Egypt in the period 
considered, due to the particularly unstable 
global and local geopolitical situation (years 
2000–01).

41. 
The  key  objective  of  the  RCO  is  to  support 
t h e   d e v e l o p m e n t   o f   t h e   p r i v a t e   s e c t o r   i n 
the partner countries. However, neither the 
M E D A   r e g u l a t i o n   n o r   t h e   p r e c e d i n g   p r o t o -
c o l s   p r o v i d e   f o r   a n   o b l i g a t i o n   t o   s u p p o r t 
only  joint-ventures  between  European  and 
local partners.

42. 
T h e   E I B ,   i n   l i n e   w i t h   i t s   c u r r e n t   p o l i c i e s , 
monitors the financial and non-financial per-
formance  of  its  investments.  In  the  case  of 
intermediated investments, the monitoring 
is realised through reports provided by the 
intermediaries.  For  some  of  the  intermedi-
aries,  a  pragmatic  and  therefore  simplified 
reporting  framework  has  to  be  adopted  for 
each report.

Since  2006,  the  EIB  has  imposed  a  compre-
hensive set of non-financial indicators to its 
n e w   f u n d   o p e r a t i o n s ,   w h i c h   i t   d e v e l o p e d 
together with other international financing 
i n s t i t u t i o n s ;   i n   a d d i t i o n ,   t h e   E I B   h a s   a l s o 
i n c r e a s e d   t h e   u s e   o f   n o n - f i n a n c i a l   i n d i c a -
t o r s   t o   b e   u s e d   b y   o t h e r   i n t e r m e d i a r i e s 
under  global  authorisations.  The  review  of 
FEMIP portfolio of investment funds made by 
the  EIB  in  2006  explains  and  quantifies  the 
d e v e l o p m e n t a l   i m p a c t   o f   i t s   f u n d   a c t i v i t y , 
and  proves  the  EIB’s  attention  for  and  abil-
ity to deliver on non-financial performance 
indicators.

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33

Textbox 8 — Example of trans-regional 
fund management
S e c o n d   p a r a g r a p h   —   T h e   E I B ’ s   s u p p o r t 
through RCO has been a key element in the 
d e v e l o p m e n t   o f   t h i s   s u c c e s s f u l   f u n d   m a n -
agement company.

(b) 
Such  is  currently  done,  especially  with  the 
EIB through its contribution to the national 
i n d i c a t i v e   p l a n s   a n d   t h r o u g h   r e g u l a r 
e x c h a n g e s   b o t h   a t   h e a d q u a r t e r   a n d   l o c a l 
levels.

(c) 
A new management agreement between the 
E I B   a n d   t h e   C o m m i s s i o n   i s   c u r r e n t l y   b e i n g 
f i n a l i s e d   ( e x p e c t e d   f o r   t h e   f i r s t   q u a r t e r   o f 
2009).

46. 
B a s e d   o n   t h e   i n f o r m a t i o n   r e c e i v e d   f r o m 
t h e   E I B ,   t h e   C o m m i s s i o n   c o n s i d e r s   t h a t 
n o   n e g a t i v e   f i n a n c i a l   c o n s e q u e n c e s   h a v e 
been incurred. With the exception of minor 
amounts waived in order to facilitate a swift 
s e t t l e m e n t ,   a l l   a m o u n t s   d u e   h a v e   a l w a y s 
been  claimed  and  recovered  (in  the  case  of 
o l d   M o r o c c a n   G l o b a l   L o a n s ,   a r e   s t i l l   b e i n g 
r e c o v e r e d ) ,   w i t h   l a t e   p a y m e n t   p e n a l t i e s 
a d d e d   o n   t o   t h e   r e g u l a r   a m o u n t s   o w e d , 
when applicable.

RECOMMENDATION 
ON THE MONITORING BY THE EIB
T h e   E I B   c u r r e n t l y   h a s   a   c o m p l e t e   a n d   e f f i -
c i e n t   m o n i t o r i n g   r o u t i n e .   T h e   n e w   m a n -
a g e m e n t   a g r e e m e n t   s h a l l   f o r m a l i s e   t h e 
m e a s u r e s   t a k e n   c o n c e r n i n g   f i n a n c i a l   a n d 
reporting obligations of intermediaries and/
or promoters.

48. 
The Commission finds that most TA projects 
a r e   s u c c e s s f u l   i n   t e r m s   o f   t r a d i t i o n a l   p e r -
f o r m a n c e   e v a l u a t i o n   c r i t e r i a   ( e f f e c t i v e -
n e s s ,   e f f i c i e n c y ,   e c o n o m y ,   s u s t a i n a b i l i t y ) . 
The  Commission  underlines  that  there  was 
multiple evidence provided by the interme-
diaries and the final beneficiaries during on-
site visits of the positive effects of past RCO 
operations on private sector development.

CONCLUSIONS 
AND RECOMMENDATIONS
44. 
T h e   m a n a g e m e n t   d e l e g a t e d   t o   t h e   E I B 
includes a delegation of all monitoring and 
f o l l o w - u p   a c t i v i t i e s .   T h e   C o m m i s s i o n   h a s 
b e e n   k e p t   i n f o r m e d   a n d   c o n s u l t e d   w i t h 
respect to major changes made to a project 
financed by the EIB.

45. 
In addition to monitoring carried out by the 
EIB, under the new ENPI legal base, the Com-
mission’s external results-oriented monitor-
ing (headquarters and delegations) carry out 
a   m o n i t o r i n g   o f   p r o j e c t s   n o t   a d m i n i s t e r e d 
directly by the EC (but by the EIB). The Com-
m i s s i o n ’ s   m o n i t o r i n g   i s   c o m p l e m e n t a r y   t o 
the EIB’s. Environmental standards and leg-
i s l a t i o n   h a v e   e v o l v e d   t r e m e n d o u s l y   o v e r 
t i m e .   S t a n d a r d s   a p p l i c a b l e   a t   t h e   t i m e   o f 
signature  of  the  operations  audited  by  the 
C o u r t   a r e   d i f f e r e n t   f r o m   t o d a y ’ s   a n d   h a v e 
b e e n   r e s p e c t e d   a l t h o u g h   t h e   E I B ’ s   f i l e   d i d 
not  contain  the  relevant  documentation  in 
the two cases mentioned by the Court.

RECOMMENDATIONS 
ON THE MONITORING 
BY THE COMMISSION
(a) 
Under a delegation scheme as the one fore-
seen by the ENPI regulation, evaluation and 
m o n i t o r i n g   r e s p o n s i b i l i t y   s h o u l d   r e s t   p r i -
marily  with  the  EIB.  The  EIB  currently  has  a 
complete  and  efficient  monitoring  routine. 
B a n k i n g   m e a s u r e s   m a n a g e d   b y   t h e   E I B   a r e 
part of the evaluation and monitoring plans 
o f   t h e   C o m m i s s i o n   u n d e r   t h e   E N P I .   A s   a n 
example, an evaluation of the Commission’s 
aid delivery through development banks and 
the EIB has been commissioned.

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

34

49. 
T h e   f i n a n c i a l   p e r f o r m a n c e   o f   t h e   R C O   c a n 
only be assessed once the related investment 
has been exited and not in interim valuation 
reports.  Regarding  the  available  fair  valua-
t i o n   o f   t h e   r i s k   c a p i t a l   p o r t f o l i o ,   t h e   C o m -
mission is in discussion with the EIB so as to 
investigate  how  to  align  the  current  valua-
tion reports with the new reporting require-
m e n t s   b a s e d   o n   t h e   E C   a c c o u n t i n g   r u l e s , 
considering also the best cost-benefit solu-
tion. Regarding non-financial performance, 
t h e   E I B   a l r e a d y   p r o d u c e d   a   s p e c i a l   r e p o r t 
on  the  developmental  impact  of  a  majority 
o f   R C O   o p e r a t i o n s .   T h e   E I B   h a s   d e v e l o p e d 
n o n - f i n a n c i a l   p e r f o r m a n c e   i n d i c a t o r s   w i t h 
other  IFIs.  During  the  past  three  years,  the 
EIB  has  been  incorporating  such  indicators 
as  an  additional  reporting  obligation  in  all 
of its new contracts.

RECOMMENDATION 
ON THE ACHIEVEMENT 
OF THE OBJECTIVES
ENPI strategy for risk capital operations does 
indeed foresee flexibility so as to choose the 
best implementation process: this allows for 
direct management or management by inter-
national/local partners, as recommended by 
the Court.

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

35

European Court of Auditors

Special Report No 1/2009

Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

Luxembourg: Office for Official Publications of the European Communities

2009 — 34 pp. — 21 x 29.7 cm

ISBN 978-92-9207-183-7

doi: 10.2865/15525

Special Report No 1/2009 — Banking measures in the Mediterranean area in the context of the MEDA programme and the previous protocols

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IN THIS SPECIAL REPORT THE COURT AUDITED THE BANKING MEASURES 

UNDER THE  MEDA  PROGRAMME  AND THE  PREVIOUS  PROTOCOLS 

TO  DE TERMINE  WHE THER  THE  ONGOING  PROJEC TS  WERE  BEING 

ADEQUATELY MONITORED BY THE COMMISSION AND THE EIB AND 

WHETHER PROJECTS HAD ACHIEVED THEIR OBJECTIVES. THE COURT’S 

REPORT MAKES A SERIES OF RECOMMENDATIONS AIMED TO SET UP 

A TAILORMADE EVALUATION AND MONITORING PROGRAMME FOR 

BANKING  MEASURES.  THE  COURT  EMPHASISES  THE  NEED  FOR  A 

BETTER COORDINATION OF THE ASSISTANCE WORK UNDERTAKEN BY 

THE EIB, THE COMMISSION AND THE OTHER INTERNATIONAL/LOCAL 

PARTNERS. THIS COORDINATION SHOULD BE BASED ON APPROPRIATE 

NEGOTIATED MANAGEMENT CONVENTIONS WHICH WILL COVER THE 

ENVIRONMENTAL ASPECTS AND THE SAFEGUARD OF THE COMMUNITY’S 

FINANCIAL INTERESTS.

EUROPEAN COURT OF AUDITORS

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J
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A
B
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0
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ISBN 978-92-9207-183-7