COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Decision of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union
Date: 2013-05-23
Institutions: European Commission
Subjects: EIB loan, EU budget, aid programme, budgetary reserve (EU), credit guarantee, financial aid, investment abroad

EUROPEAN 
COMMISSION 

Brussels, 23.5.2013  
SWD(2013) 178 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Decision of the European Parliament and of the Council 

on granting an EU guarantee to the European Investment Bank against losses under 
financing operations supporting investment projects outside the Union 

{COM(2013) 293 final} 
{SWD(2013) 179 final} 

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COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Decision of the European Parliament and of the Council 

on granting an EU guarantee to the European Investment Bank against losses under 
financing operations supporting investment projects outside the Union 

The European Investment Bank (EIB) undertakes operations outside the EU in support of EU 
external policies partially with an EU budgetary guarantee allocated in the framework of each 
Multi-annual  Financial  Framework  (MFF).  Since  more  than  30  years,  the  EU  has  been 
providing a budgetary guarantee to the EIB, limited to certain ceilings and other conditions, 
covering  risks  of  a  sovereign  and  political  nature  in  connection  with  its  loan  and  loan 
guarantee operations carried out outside the EU in support of EU external policy objectives. 
Over  the  years,  this  guarantee  has  been  granted  through  a  series  of  Decisions.  The  overall 
scope and general conditions of the EU guarantee coverage for EIB external operations are set 
out  currently  in  Decision  1080/2011/EU  (the  "current  Decision").  The  latter  expires  on  31 
December 2013.  

The need for an EU budget guarantee stems from EIB's obligation under its Statute to ensure 
adequate security for all its lending operations and, more broadly, from the need to safeguard 
the EIB creditworthiness in order not to compromise its task of contributing to the balanced 
and steady development of EU Member States. The EU guarantee has been the key instrument 
ensuring  the  compatibility  between  the  EIB's  highly  leveraged  financial  structure,  the 
significantly  higher  inherent  risk  of  lending  to  third  countries,  the  need  to  avoid  a 
deterioration of the Bank's AAA rating whilst limiting the EIB capital consumption. The EIB 
does not remunerate the EU for this guarantee. 

EIB operations should be carried out in eligible countries (as defined in the current Decision) 
in  support  of  any  of  the  following  objectives:  (i)  local  private  sector  development,  in 
particular support to SMEs; (ii) development of social and economic infrastructure, including 
transport,  energy,  environmental 
information  and  communication 
infrastructure  and 
technology; and (iii) climate change mitigation and adaptation. 

The geographical coverage of the EU guarantee is divided into regions: Pre-Accession region, 
Neighbourhood and Partnership Countries, ALA region (Asia and Latin America) and South 
Africa. 

The current Decision establishes a general ceiling of EUR 27.484 bn and a Climate Change 
envelope  of  EUR  2bn  for  the  period  2007-2013.  The  general  ceiling  is  broken  down  into 
regional  ceilings,  while  the  climate  change  envelope  is  global  and  does  not  present  any 
regional pre-allocation.  

Article 16 of the current Decision states that the Commission shall present a new proposal for 
the  next  financial  framework  (2014-2020).  The  current  Decision  also  further  requests  the 
Commission  to  examine  various  issues  when  developing  this  proposal.  In  doing  so,  the 
Commission took into account the budgetary mechanism underpinning the EU guarantee, as 
this has implications on some of the options analysed in the Impact Assessment (IA). 

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A Guarantee Fund (GF) aims to shield the EU budget against shocks due to possible default 
mainly  from  the  EIB  external  financing  operations  and  other  external  actions.  The  GF  is 
endowed by one annual payment from the EU budget. The provisioning mechanism of the GF 
which aims at maintaining the GF at a level of 9% of outstanding loan disbursements creates 
therefore de facto a limit in the size of the EU budget guarantee. Based on expected patterns 
of disbursements and reimbursements of operations covered by the GF, the amount foreseen 
in  the  technical  input  from  the  European  Commission  to  the  negotiation  of  the  individual 
programmes  implementing  the  next  Multiannual  Financial  Framework  sent  by  the 
Commission  on  27  March  2013  (which  foresees  EUR  1.193  billion  for  the  2014-2020 
Financial  Framework  in  current  prices  for  the  provisioning  of  the  GF)  would  allow  for  an 
fixed mandate ceiling of around EUR 25 billion. 

The  regional  ceilings  were  increased  by  Decision  1080/2011/EU  compared  to  the  previous 
Decision1. The legislator clearly stated in the recitals of the Decision that these increases were 
temporary and exceptional with the view to deal with the Arab Spring and account for EIB 
increased  support  to  EU  partners  in  the  2009-10  crisis  context.  This  shows  the  legislator's 
intention to maintain the overall regional balance that was negotiated with difficulty in 2009 
and  was  the  outcome  of  a  delicate  policy  compromise.  Hence,  it  is  assumed  that  the  2009 
regional balance should form the basis for the new legislative proposal. 

1. 

PROBLEM DEFINITION 

The  context  in  which  the  EIB  operates  has  significantly  evolved  and  the  new  legislative 
proposal for the EU guarantee under the next MFF has been drafted in a fundamentally more 
difficult context than the one prevailing a few years ago. In particular, the financial crisis had 
a  significant  impact  on  the  funding  conditions  of  EIB  and  entailed  possible  threats  to  the 
EIB's AAA rating. Against this backdrop, the Corporate Operational Plan (COP) 2012-2014 
endorsed  end  2011  envisaged  a  significant  reduction  in  lending  volumes  back  to  pre-crisis 
levels  in  particular  in  the  external  field.  While  the  recent  endorsement  of  an  EIB  capital 
increase would allow increasing EIB lending inside EU, EIB external activity should not be 
affected. 

This  strategic  shift  has  been  incorporated  in  the  reflections  on  the  proposal  for  a  new  EU 
guarantee, together with other elements such as inter alia the current economic and financial 
context which is having an impact on the quality of the external lending portfolio, EIB risk 
absorption  capacity  and  the  extension  of  the  European  Bank  of  Reconstruction  and 
Development  (EBRD)  geographical  scope  to  the  Mediterranean  region  where  it  could 
eventually reach an annual business activity of up to EUR 2.5 bn (which would be more than 
total combined EIB financing in the region – with the EU guarantee and at EIB's own risk). 

In this context, the IA report highlights four main problems: 

• 

• 

• 

• 

1 

The risk of sub-optimal use of the EU guarantee. 

The impossibility for EIB to finance all type of microfinance operations with the 
EU guarantee. 

The insufficient level of funding for climate action and the difficulty for EIB to 
increase its lending in this area. 

Unclear EIB positioning as a key delivery tool of EU external financial support. 

Decision 633/2009/EC 

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2. 

ANALYSIS OF SUBSIDIARITY AND JUSTIFICATION FOR EU ACTION. 

The  proposal  falls  under  the  exclusive  competence  of  the  EU.  The  subsidiarity  principle 
therefore does not apply. 

The specific legal bases for EU action in granting an EU guarantee to the EIB against losses 
under loans and loan guarantees for projects outside the EU are Articles 209 and 212 of the 
Treaty on the functioning of the EU. The EIB is established under Article 309 of the Treaty 
and its Statute is laid down in a Protocol annexed to the Treaties.  

3. 

OBJECTIVES  OF  THE  NEW  EU  GUARANTEE  TO  EIB  EXTERNAL  FINANCING 
OPERATIONS: 

The  general  objective  of  EIB  activity  outside  the  EU  under  the  EU  guarantee  should  be  to 
support  the  Union's  external  policies  by  financing  relevant  projects  in  partner  countries 
through the combination of EU budgetary funds (via the provisioning of the Guarantee Fund 
for external action which backs the EU guarantee) with EIB own resources. 

Through  its  financing  operations  outside  the  EU  under  the  EU  guarantee,  the  EIB  should 
support  the  economic,  social  and  environmental  sustainable  development  of  EU  partner 
countries,  and  their  partnership  with  the  EU.  Moreover,  EIB  financing  operations  under  the 
mandate shall be consistent with the wider Union regional policy framework. 

Other  specific  objectives  of  the  new  mandate  should  include  to:  (i)  better  exploit  EIB 
expertise  and  resources,  and  (ii)  improve  the  effectiveness  of  the  EU  guarantee  whilst 
preserving a sound budgetary cover. 

In this context, the operational objectives of the new EU guarantee should be to: 

• 

• 

• 

• 

Focus the geographical scope of the EU guarantee on beneficiaries where its use 
would display the highest value added (objective 1). 

Explicitly extend the EU guarantee to  all  microfinance  operations (objective 2) 
to reach out the poorest. 

Reinforce  the  climate  change  dimension  of  the  EU  guarantee  in  order  to 
incentivise EIB operations in this key sector of EU external action (objective 3). 

Increase  the  impact  of  EIB  financing  through  better  alignment  with  EU  policies 
and coherence and synergies with EU instruments (objective 4) to more satisfactorily 
mirror policy developments in a timely manner. 

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Problems 

Specific objectives 

Operational objectives 

The risk of sub-optimal use of EU 
guarantee 

Focus on most value added countries/ 
operations (objective 1) 

Better exploit EIB expertise and resources 
(objective a) 

The impossibility for EIB to finance all type 
of microfinance operations with the EU 
guarantee 

Explicitly extend the EU guarantee to all 
microfinance operations (objective 2) 

The insufficient level of funding for climate 
action and the difficulty for EIB to increase 
its lending in this area 

Improve the financial effectiveness of the 
EU guarantee whilst preserving a sound 
budgetary cover (objective b) 

Reinforce the climate change dimension 
(objective 3) 

Unclear EIB positioning as a key delivery 
tool for EU external financial support  

Increase the impact / policy coherence  
(objective 4) 

4. 

POLICY OPTIONS 

In light of the problem identified and in order to achieve the specific policy and operational 
objectives, the Commission considered the following options for the future EU guarantee to 
EIB external financing operations: 

Option 0: no new decision – this option was not analysed in detail. 

Option 1: no change (as specified in Decision 1080/2011/EU but extended until 31/12/2020) 
– base line scenario. 

Option 2: amend the existing guarantee. This option has been developed according to three 
sub-options. Each of the three sub-options has been defined as an articulated combination of 4 
types of amendments with the view to address the 4 operational objectives on the basis of the 
mutual interaction and spillover of the modifications of each parameter. The main features of 
each sub-option are presented in the table below: 

Main  differences  between  the  retained  policy  options  compared  to  the  "baseline  -  no 
change" policy option 

to 

the 

Option CLOSE 

Option MICRO  Option FOCUS 

Responses 
operational 
objectives 

(i) focus on most value 
added countries/ 
operations 

Exclusion of 
ALA and South 
Africa 

No change 

Focus on less 
creditworthy 
beneficiaries (in a 
dynamic way) 

(ii) provide explicit 
guarantee for all 
microfinance 
operations 

All microfinance 
operations 
specifically 
eligible but no 
commercial risk 

Pre-allocated 
envelope of EUR 
2bn for 
microfinance 
operations with 

No change 

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borne by the EU 
guarantee 

comprehensive 
EU guarantee 

(iii) reinforce the 
climate change 
dimension 

(iv) Increase the 
impact / policy 
coherence  

Increase of the 
pre-allocated 
envelope for 
climate change 
operations to 
EUR 4bn 

Drafting of 
annual country 
strategy papers 

Setting up of 
regional targets 
and absorption of 
the pre-allocated 
envelope into the 
general ceiling 

Update of 
technical 
operational 
regional 
guidelines in line 
with MIP of EU 
external financial 
instruments 

Overall lending 
volume target + 
tracking GHG 
emission 
reduction 

Update of 
technical 
operational 
regional 
guidelines in line 
with MIP of EU 
external financial 
instruments 

Option  3:  provide  the  guarantee  to  other  financial  institutions.  This  option  was  not 
analysed in detail. 

5. 

ASSESSMENT OF IMPACTS  

It  should  be  noted  that  it  is  not  possible  to  provide  throughout  quantitative  estimates  of  the 
impacts of each option as the latter will depend on the implementation of the Decision by the 
EIB. Indeed, the regional ceilings are indicative; they do not represent target volumes. While 
the implementation of the Decision heavily depends on EIB governing bodies decision and on 
the absorption capacity of the beneficiaries, at project level, EIB activity will also particularly 
depend  on  the  identification  of  sound  and  bankable  projects,  grants-loans  blending 
opportunities, level of indebtedness of the beneficiary countries, risk analysis, economic and 
political  context,  quality  of  project  preparation,  capacity  of  the  project  promoters,  etc. 
Nevertheless, a qualitative analysis on main impacts of each option has been carried out while 
references to data and figures have been provided where possible. 

The main impacts have been defined in relation to the operational and specific objectives of 
the new EU guarantee. The main impact assessed were (i) support priority policy areas of the 
EU,  including  enlargement,  neighbourhood  and  the  development  of  third  countries  and 
political  impact,  (ii)  coherence  and  complementarity  with  EU  external  financial  instruments 
and need for co-financing, (iii) leverage of EIB experience and expertise, (iv) social impact, 
support to SMEs, local private sector development and microfinance in partner countries, (v) 
support  to  EU  climate  action  and  environmental  impact  (vi)  impact  on  the  Guarantee  Fund 
and  on  EU  budget,  (vii)  impact  on  EIB  credit  risk  stance/rating  and  resources.  It  should  be 
noted that the last two criteria (Impact on the GF and on EU Budget and Impact on EIB credit 
risk  stance  and  resources)  are  probably  the  most  important  ones  as  they  de-facto  set  the 
boundaries within which the Decision can be implemented. 

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Specific Objectives 

Criteria 

Operational Objectives

Objective a – better 
exploit EIB expertise 
and resources 

Objective b – 
improve financial 
effectiveness 
whilst preserving 
a sound 
budgetary cover

Social impact, support 
SMEs, local private 
sector development and 
microfinance

Support EU climate 
action and 
environmental impact 

Coherence and 
complementarity with 
EU external financial 
instruments and need 
of co-financing

Support EU priority 
policy areas and 
political impact 

Leverage of EIB 
experience and 
expertise 

Impact on EIB credit 
stance and resources

Impact on GF and EU 
budget 

Objective 2 – explicitly 
extend the EU guarantee 
to all microfinance 
operations 

Objective 3 –
reinforce climate 
change dimension 

Objective 4 –
increase the impact / 
policy coherence

Objective 1 – focus 
on most value added 
operations 

On the basis of the analysis, the report provides an assessment of the impact of each option in 
terms  of  effectiveness,  efficiency  and  coherence  in  comparison  with  the  baseline  scenario. 
The  different  options  have  been  qualitatively  assessed  based  on  the  Commission  Services' 
qualitative appreciations of the likely impact. 

From  the  Commission's  side,  the  administrative  cost  of  implementing  the  options  analysed 
should be equivalent to that of implementing the baseline scenario. 

The  assessment  showed  that,  combined  together,  the  likely  impacts  of  option  CLOSE  and 
MICRO  would  not  be  significantly  higher  than  the  status  quo.  On  the  other  hand,  option 
FOCUS would bring more positive impacts and ranked better than the other options analysed, 
in  particular  in  terms  of  budgetary  impact  and  coherence  and  complementarity  with  EU 
policies and instruments. 

Support priority policy areas of the EU, 
including  enlargement,  neighbourhood 
and  the  development  of  third  countries 
and political impact 

Coherence  and  complementarity  with 
EU  external  financial  instruments  and 
need for co-financing 

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CLOSE  MICRO 

FOCUS 

Efv: - 
Efc: 0 
C: + 

Efv: 0 
Efc: - 
C: + 

Efv: - 
Efc: - 
C: + 

Efv: - 
Efc: - 
C:- 

Efv: + 
Efc: + 
C: + 

Efv: + 
Efc: 0 
C: + 

BASE 
LINE 

0 

0 

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Leverage  of  EIB  experience  and 
expertise 

Social  impact,  support  to  SMEs,  local 
and 
development 
private 
microfinance in partner countries 

sector 

Support  EU 
environmental impact 

climate 

action 

and 

Impact  on  the  Guarantee  Fund  and  on 
EU budget 

Impact  on  EIB  credit  risk  stance/rating 
and resources 

Overall average impact 

0 

0 

0 

0 

0 

0 

Efv: - 
Efc: + 
C: + 
Efv: - 
Efc: 0 
C: - 

Efv: + 
Efc: - 
C: 0 
Efv: - 
Efc: - 
C: - 
Efv: 0 
Efc: + 
C: n.a. 

- 

"+": 6 

"0": 5 

Efv: 0 
Efc: - 
C: - 
Efv: + 
Efc: - 
C: 0 

Efv: + 
Efc: 0 
C: + 
Efv: - 
Efc: - 
C: - 
Efv: 0 
Efc: - 
C: n.a. 

Efv: + 
Efc: + 
C: + 
Efv: + 
Efc: 0 
C: 0 

Efv: + 
Efc: + 
C: + 
Efv: 0 
Efc: 0 
C: 0. 
Efv: 0 
Efc: 0 
C: n.a. 

- 

+ 

"+":4 

"+": 10 

"0": 4 

"0": 10 

"-": 9 

"-": 12 

"-":0 

6. 

COMPARISON OF THE OPTIONS 

On the basis of qualitative ratings provided, option FOCUS emerged clearly as the preferred 
option. It should be noted that under the option, the objective 3 would not be achieved as the 
assessment  has  shown  that  the  EU  budgetary  guarantee  is  not  the  appropriate  instrument  to 
cover EIB financing of all type of microfinance operations in the regions covered by the EU 
guarantee.  

No stakeholder expressed any opposition to the option retained. Notably, option FOCUS is in 
line with the opinion expressed by most of those consulted. In particular, the NGOs consulted, 
the MEPs and the Member States as well as the Steering Committee of Wise Persons (set up 
at the time of the mid-term review of the current Decision) pointed out to the need to clarify 
when the value added of EIB financing under the EU guarantee was the highest and to find 
ways to incentivise the EIB to focus the use of the guarantee on those situations. The NGOs 
consulted  questioned  the  need  to  expand  the  scope  of  the  EU  guarantee  to  all  type  of 
microfinance operations given the existence of several other actors in the field, while this was 
a  request  from  some  MEPs.  In  addition,  the  NGOs  consulted  were  requesting  for  a 
mechanism for EIB to track carbon emission of EIB financing operations. 

7. 

MONITORING AND EVALUATION 

In the new legislative proposal, monitoring and evaluation arrangements will be reinforced in 
comparison  to  the  current  situation.  In  particular,  the  operational  monitoring  indicators 
recently developed by the EIB (REsults Measurement framework - REM), will be maintained 
and further reinforced. 

Moreover, progress towards the specific objectives will be monitored through core indicators 
covering the following areas: i) amount signed by region, ii) amount disbursed by region, iii) 

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progress in achieving a balanced distribution of activity by country, iv) breakdown of activity 
across the various objectives, v) volume of climate change lending, financing and impact on 
absolute  and  relative  GHG  emission  reductions,  vi)  number  of  projects  assessed  against 
climate risk, vii) number and amount of operations blended with EU grants, and viii) number 
and amount of operations co-financed with other IFIs. 

In addition, a more detailed set of performance indicators will be drawn from the three-pillar 
methodology developed by the EIB under the REM framework. The latter serves to show how 
EIB loans generate outputs, which enable outcomes and, over time lead to impacts, which are 
in line with the Bank’s mandate objectives.  

As regard the financing for projects that promote climate action, eligibility for climate change 
operations would be clarified against agreed criteria building on - and if needed tightening - 
existing EIB definitions to track climate change expenditure. The EIB will explore reinforced 
methodologies to include carbon and to improve climate resilience of its investments, as well 
as climate risk in project appraisal. In parallel the EIB should keep developing methodologies 
to  assess  climate  risk  in  order  to  reinforce  the  climate  resilience  for  all  relevant  operations, 
and  integrate  carbon  pricing  in  economic  cost  benefit  analysis.  Restrictive  eligibility  and 
criteria for carbon-intensive projects should also be improved in relevant sector policies. 

Moreover,  regular  reports  will  be  envisaged  in  the  legislative  act  as  in  Decision 
1080/2011/EU. The Commission will annually report on the implementation of the mandate 
by the EIB to the European Parliament and the Council. This report will also be published on 
the Commission's website.  

Finally,  a  mid-term  evaluation  will  be  carried  out  after  three  years  from  the  start  of  the 
mandate. 

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