COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE EVALUATION Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 1316/2013 and (EU) 2015/1017 as regards the extension of the duration of the European Fund for Strategic Investments as well as the introduction of technical enhancements for that Fund and the European Investment Advisory Hub
Date: 2016-09-14
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU growth strategy, European Investment Bank, financing, fund (EU), investment, operation of the Institutions, small and medium-sized enterprises

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   EN 

   EUROPEAN COMMISSION  Brussels, 14.9.2016  SWD(2016) 298 final   COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE EVALUATION Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 1316/2013 and (EU) 2015/1017 as regards the extension of the duration of the European Fund for Strategic Investments as well as the introduction of technical enhancements for that Fund and the European Investment Advisory Hub {COM(2016) 597 final} {SWD(2016) 297 final}  
 
 
1.  The  European  Fund  for  Strategic  Investments  (EFSI)  was  set  up  with  the  aim  of  kick-
starting  investments in  the Union through the mobilization of private finance.  The EFSI 
builds  on  a  EUR  16  billion  guarantee  from  the  EU  budget  (the  "EU  Guarantee"), 
complemented  by  an  allocation  of  EUR  5  billion  of  the  EIB’s  own  resources.  The 
guarantee  aims  to  increase  the  volume  of  higher  risk  projects  supported  by  the  EIB 
Group's financing and investment operations and, as a result, to tackle the market failures 
and  sub-optimal  investment  situations  which  hinders investment  in  Europe.  The  EFSI  is 
established  within  the  EIB,  which  manages  it  under  the  rules  set  out  in  the  EFSI 
Regulation1  and  in  the  EFSI  Agreement2.  The  Guarantee  Fund  under  EFSI  constitutes  a 
liquidity cushion intended to provide an appropriate safety margin and to avoid exposing 
the Union budget to sudden guarantee calls. The Guarantee Fund has to be maintained at a 
certain  percentage  (the  “Target  Rate”)  of  the  total  amount  of  the  EU  guaranteed 
obligations, currently 50%. 

2.  The  EFSI  Regulation  provides  that  the  Commission  shall  evaluate  the  use  of  the  EU 
Guarantee  and  the  functioning  of  the  Guarantee  Fund  by  5  January  2017.  Based  on  the 
successful  delivery  of  the  EFSI  so  far,  the  Commission  has  decided  to  propose  an 
extension  of  the  EU  Guarantee  to  the  EIB  beyond  2018  to  mobilise  an  even  greater 
amount of investments.  As a result, the evaluation is being presented to accompany that 
legislative proposal. 

3.  The  present  report  provides  an  overview  of  the  use  of  the  EU  Guarantee  and  the 
functioning of  the  Guarantee  Fund during its  first  year  of  activity  until  30  June  2016  in 
terms of effectiveness, efficiency and relevance and evaluates whether the current setting 
and parameters could be reviewed to optimise the use of the EU Guarantee. In particular, 
the  evaluation  includes  an  analysis  of  the  risk  profile  of  the  current  and  future  EFSI 
Guaranteed Operations and of the adequacy of the target rate and level of the Guarantee 
Fund. 

4.  Under the Infrastructure and Innovation Window, the EFSI Board of Directors approved 
77 operations, for a total approved amount of EUR 11 billion in EFSI financing. EUR 4.7 
billion  have  already  been  signed  and  are  expected  to  support  an  estimated  amount  of 
investments of EUR 58 billion. Under the SME Window, the EU Guarantee has been used 
for two guarantee sub-windows and aimed at frontloading guarantee operations under the 
COSME  and  InnovFin  financial  instruments.  As  of  30  June  2016,  186  operations  (71 
equity projects – financed from EIB’s EUR 2.5 billion contribution to the SME Window, 
43  COSME  and  72  InnovFin  guarantee  operations)  had  been  approved  under  the  SME 
Window. Those operations total EUR 3.4 billion in EFSI financing (EUR 3.3 billion had 
been  signed  by  end-June  2016)  and  will  support  an  estimated  amount  of  investments  of 
EUR 48.4 billion. It is expected that around 180,000 SMEs and mid-caps will benefit from 
those operations. 

1 Regulation (EU) No 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the 
European Fund for Strategic Investments, the European Investment Advisory Hub and the European Project 
Investment Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013 – the European Fund 
for Strategic Investments, OJ L 169, 1.7.2015, p. 1. 
2 Agreement on the Management of the EFSI and on the granting of the EU Guarantee between the EU and the 
EIB of 22 July 2015. 

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5.  In  terms  of  effectiveness,  under  the  Infrastructure  and  Innovation  Window  the  EU 
Guarantee  allowed  the  EIB  to  expand  the  volume  and  the  risk  profile  of  its  operations, 
although  some  adjustments  to  the  original  set  up  were  needed  in  order  to  develop  new 
models of cooperation with national promotional banks or financial intermediaries as well 
as to facilitate the deployment of risk-sharing instruments and subordinated financing. The 
SME Window has seen a very strong uptake, exceeding expectations and demonstrating a 
high market demand for the products available under the SME Window. After one year, 
EFSI-supported operations already amount to about 65% of the target (EUR 75 billion) to 
be reached under the SME Window over three years. So far, there have been no calls due 
to defaults or value adjustments of EIB and EIF operations. 

6.  In  terms  of  efficiency,  for  the  Infrastructure  and  Innovation  Window,  the  availability  of 
the  EU  Guarantee  proved  to  be  an  efficient  tool  to  considerably  increase  the  volume  of 
riskier operations by the EIB. The reliance on EIB rules and procedures allowed a swift 
start of the EFSI. For the SME Window, the availability of the EU Guarantee was the only 
way to frontload guarantee activities under COSME and InnovFin. A gradual conversion 
of the EFSI frontloading into a topping up of COSME and InnovFin products is expected 
to  take  place before the end of 2016. Very  fast implementation  was possible because  of 
reliance  on  existing  products  developed  by  the  Commission  and  the  EIF  and  on  well 
tested EIF rules and procedures.  

7.  The EU Guarantee enabled the EIB to undertake riskier activities and allowed the EIF to 
enhance its intervention in support of SMEs and mid-caps. Even so, it is not designed to 
support first-loss pieces in investment platforms addressing serious market failures, as the 
pricing  of  such  interventions  would  need  to  respect  EIB  or  market-based  pricing.  The 
resulting prices would probably be too high for the platforms to be financially viable. As a 
result, the use of the EU budget (e.g. European Structural and Investment Funds, COSME, 
InnovFin  and  Connecting  Europe  Facility)  and,  in  some  limited  cases,  of  the  national 
budget, has been necessary to cover the riskiest tranches. In addition, the EU Guarantee 
was  not  designed  to  cover  the  potential  impact  of  currency  fluctuations.  The  EIB  has 
therefore  been  less  able  to  deliver  long-term  fixed  rate  financing  in  certain  non-euro 
countries  with  less  developed  financial  markets.  The  risk  assessment  of  the  different 
products  supported  by  the  EU  Guarantee  shows  that  overall  the  current  budget  foreseen 
for provisioning the Guarantee Fund, together with recoveries, revenues and reflows from 
equity-type operations, should be able to shield the Union budget from calls under the EU 
Guarantee. The findings suggest that, considering the overall portfolio, the risk of losses – 
net of revenues – exceeding the amounts budgeted for the replenishment of the Guarantee 
Fund  (EUR  8  billion)  would  remain  acceptable  if  the  target  provisioning  rate  of  the 
Guarantee Fund were adjusted. 

8.  The legislative proposal issued by the Commission provides for some adaptations of the 
EFSI Regulation aimed at increasing the effectiveness, efficiency and relevance of the EU 
Guarantee, such as an adjustment of the target provisioning rate, a stronger focus on risk-
sharing instruments and subordinated financing and enabling the EU Guarantee to cover 
the potential impact of currency fluctuations. 

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