COMMISSION STAFF WORKING DOCUMENT 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: 2016-09-22
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

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 22.9.2016  SWD(2016) 297 final/2   Corrigendum of SWD(2016)297 final of 14/9/2016 concerning only the correction of wrong numbering of sub-chapters. COMMISSION STAFF WORKING DOCUMENT 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(216) 298 final}  
 
 
Contents 
1. 

Introduction ..................................................................................................................................... 4 

1.1 

1.2 

1.3 

Background of the evaluation ................................................................................................. 4 

Scope of the evaluation ........................................................................................................... 4 

Evaluation questions ............................................................................................................... 5 

2. 

3. 

The EU Guarantee ........................................................................................................................... 5 

The use of the EU Guarantee .......................................................................................................... 6 

3.1 

Infrastructure and Innovation Window (IIW) .......................................................................... 7 

3.1.1 

IIW Debt sub-window ...................................................................................................... 9 

3.1.2 

IIW Equity sub-window.................................................................................................... 9 

3.2 

SME Window (SMEW) ........................................................................................................... 10 

4. 

The functioning of the EU Guarantee Fund under EFSI ................................................................ 10 

4.1 

4.2 

The provisioning mechanism of the Guarantee Fund ........................................................... 11 

Annual flows .......................................................................................................................... 11 

4.2.1 

Payments from the Union budget ................................................................................. 11 

4.2.2 

Revenues and interests ................................................................................................. 12 

4.2.3 

Guarantee calls in relation to defaulted operations ..................................................... 12 

4.2.4 

Recovered amounts ....................................................................................................... 12 

4.2.5 

Guarantee calls in relation to EIB funding costs ............................................................ 12 

Guarantee calls in relation to other EIB costs (recovery costs, recoverable 

4.2.6 
administrative costs) ..................................................................................................................... 12 

5.  Risk analysis and scenarios ............................................................................................................ 13 

5.1 

5.2 

5.3 

5.4 

IIW – Debt products .............................................................................................................. 13 

IIW – Equity instruments ....................................................................................................... 13 

SMEW – Debt products ......................................................................................................... 14 

SMEW – Equity products ....................................................................................................... 15 

6. 

Evaluation findings ........................................................................................................................ 16 

6.1 

Effectiveness .......................................................................................................................... 16 

6.2. 

Efficiency ............................................................................................................................... 17 

6.3. 

Relevance .............................................................................................................................. 18 

7.  Conclusions .................................................................................................................................... 19 

Appendix A – Information sources ........................................................................................................ 21 

Appendix B – Abbreviations .................................................................................................................. 22 

Appendix C – IIW – List of projects as of 30 June 2016 ......................................................................... 23 

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List of Figures 
Figure 1: IIW – EFSI-related investment for approved operations (by sector as of 30 June 2016)......... 7 
Figure 2: IIW EFSI-related investment for signed operations (by sector as of 30 June 2016) ................ 8 
Figure 3: IIW - Number of operations approved and signed (as of 30 June 2016) ................................. 8 
Figure 4: IIW - Number of operations signed (as of 30 June 2016) ......................................................... 8 

List of Tables 
Table 1: Payment schedule to the Guarantee Fund .............................................................................. 11 
Table 2: Payment schedule to the Guarantee Fund until the month of July 2016 ............................... 12 
Table 3: SMEW debt instrument - Risk assessment (Expected Loss) .................................................... 14 
Table 4: EFSI - Provisioning rate estimation .......................................................................................... 19 
Table 5: IIW - Debt sub-window projects .............................................................................................. 23 
Table 6: IIW - Equity sub-window projects ............................................................................................ 28 

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1.  Introduction 

1.1  Background of the evaluation  

In  2014  the  Commission  announced  the  Investment  Plan  for  Europe,  a  new  initiative  that  was 
established in 2015 to support investment in Europe after the financial and economic crisis. 

The  European  Fund  for  Strategic  Investments  (EFSI)  has  been  set  up,  together  with  the  European 
Investment Advisory Hub (EIAH) and the European Investment Project Portal (EIPP), under 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 Investments1 (the Regulation), with the aim of kick-starting investments 
in the Union through the mobilisation of private finance. The EFSI is established within the EIB, which 
manages it under the rules set out in the  Regulation and in the 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,  in 
accordance with Article 4 of the Regulation (the EFSI Agreement).2 

Article 18(1) of the Regulation provides that the EIB shall evaluate the functioning of the EFSI, while 
Article  18(2)  provides  that  the  Commission  shall  evaluate  the  use  of  the  EU  guarantee  and  the 
functioning  of  the  guarantee  fund  which  are  established  under  Articles  8  to  13  of  the  Regulation 
(respectively  'the  EU  Guarantee'  and  'the  Guarantee  Fund'),  both  by  5  January  2017.  The  latter 
evaluation is to be accompanied by an opinion of the Court of Auditors. 

Based  on  the  results  delivered  by  the  EFSI  so  far,  the  Commission  has  decided  to  propose  the 
extension  of  the  EU  Guarantee  to  the  EIB3.  The  timeline  should  avoid  any  interruptions  in  the 
financing going forward and ensure the continuity of the pipeline by providing a signal to potential 
promoters. As a result, the evaluation  foreseen in Article 18(2) is being  presented  now. In parallel, 
the  Commission  has  already  started  the  process  to  launch  the  independent  external  evaluation 
foreseen in Article 18(6) of the Regulation. 

The  comprehensive  measures  adopted  with  the  Investment  Plan  for  Europe  are  already  delivering 
tangible  results,  despite  the  fact  that  larger  infrastructure  investment  projects  display  sizeable 
macroeconomic effects over time.  As of 30 June 2016, on the basis of approved operations (under 
the Infrastructure and Innovation Window (IIW) and the SME Window (SMEW)) the aggregated EIB 
Group  investment  catalysed  through  the  EFSI  is  estimated  at  about  EUR  106.8  billion,  covering  26 
Member States across all general objectives set out in the Regulation.4 

1.2  Scope of the evaluation  

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, consequently, of the adequacy of 
the target rate and level of the Guarantee Fund.  

1 OJ L 169, 1.7.2015, p. 1. 

2 An amendment of the EFSI Agreement ("EFSI Amendment and Restatement Agreement") was signed between the EU and the EIB on 21 
July 2016. 

3 On 28 June 2016, the European Council concluded that "[t]he Investment Plan for Europe, in particular the EFSI, has already delivered 
concrete  results  and  is  a  major  step  to  help  mobilise  private  investment  while  making  smart  use  of  scarce  budgetary  resources.  The 
Commission  intends  to  soon  put  forward  proposals  on  the  future  of  the  EFSI,  which  should  be  examined  as  a  matter  of  urgency  by  the 
European Parliament and the Council" 

4 The cut-off date for this evaluation is 30 June 2016. 

4 

 
 
 
                                                            
EFSI  Guaranteed  Operations  must  also  satisfy  additionality  and  eligibility  criteria  (as  established 
respectively in Articles 5 and 6 of the Regulation). As foreseen in the Regulation, a parallel evaluation 
on  the  functioning  of  the  EFSI  is  currently  being  conducted  by  the  EIB.  While  the  present  report 
reviews  the  use  of  the EU Guarantee  and  functioning of  the  Guarantee Fund,  the evaluation to  be 
prepared  by  the  EIB  will  consider  the  coherence  of  EFSI  Guaranteed  Operations  with  the  above 
criteria  and  more  generally  the  extent  to  which  the  EFSI  is  meeting  the  objectives  set  out  in  the 
Regulation.  

The  Commission  and  the  EIB  have  coordinated  that  dual  evaluation  process  in  order  to  avoid 
overlaps to the extent possible and optimise the overall scope of the exercise. 

1.3  Evaluation questions 

The analysis focused on the following specific evaluation questions: 

Effectiveness: 

1.  To  what  extent  has  the  EU  Guarantee  been  effectively  used  to  fulfil  its  objectives  until  30  June 
2016? 

2.  To  what  extent  have  the  current  level  of  the  target  rate  of  the  Guarantee  Fund  and  the 
provisioning  mechanism  of  the  Guarantee  Fund  effectively  served  the  needs  that  the  Guarantee 
Fund was designed to address until 30 June 2016? 

Efficiency: 

1. Has the EU Guarantee been used efficiently to achieve its objectives?  

2.  Did  the  provisioning  mechanism  of  the  Guarantee  Fund  address  the  objectives  of  the  Fund  in  a 
timely and cost-efficient manner, in particular with regard to the budgetary process and discipline?  

3. Was the level of the EU budget resources foreseen for the Guarantee Fund appropriate to cover 
the EFSI Guaranteed Operations in an efficient manner, and what conclusions can be drawn for the 
future? 

Relevance: 

1. To what extent has the EU Guarantee been able to address the needs it was designed to address?  

2.  To  what  extent  have  the  objectives  of  the  Guarantee  Fund  been  pertinent  to  the  needs  it  was 
designed to address? How could the functioning mechanism of the Guarantee Fund be improved to 
address better the needs for coverage by the EU Guarantee? 

3. In relation to the Guarantee Fund's target rate (currently set at 50%), what is the right level of the 
target rate taking into account the risk profile of the Fund? 

2.  The EU Guarantee 

The EFSI initiative builds on a EUR 16 billion guarantee from the Union budget, complemented by an 
allocation of EUR 5 billion of EIB’s own resources5. The operational strategy is twofold: the guarantee 
aims to increase the volume of higher risk projects supported by EIB Group financing and investment 

5  As  foreseen  in  the  Regulation,  the  present  evaluation  only  looks  at  the  use  of  the  EU  Guarantee  and  not  at  the  risk-bearing  capacity 
granted by the EIB in the context of the EFSI. 

5 

 
 
 
                                                            
operations and as a result help addressing the market failures and sub-optimal investment situations 
which hinder investment in Europe6. 
The  Union  provides  an  irrevocable  and  unconditional  guarantee  to  the  EIB  for  financing  and 
investment  operations  under  the  EFSI.  Those  operations  are  carried  out  in  the  Union  or  involve 
entities  located  or  established  in  one  or  more  Member  States  and  extending  to  third  countries 
defined in the Regulation7. 
In  addition,  Article  10  of  the  Regulation  sets  out  the  instruments  eligible  for  coverage  by  the  EU 
Guarantee: 

- 

- 

- 

EIB  loans,  guarantees,  counter-guarantees,  capital  market  instruments,  any  other  form  of 
funding or credit enhancement instrument, equity or quasi-equity participations8, including in 
favour of national promotional banks or institutions, investment platforms or funds; 
EIB  funding  or  guarantees  to  the  EIF  enabling  it  to  undertake  loans,  guarantees,  counter-
guarantees,  any  other  form  of  credit  enhancement  instrument,  capital  market  instruments 
and equity or quasi-equity participations, including  in favour of  national promotional banks 
or institutions, investment platforms or funds; 
EIB guarantees to national promotional banks or institutions, investment platforms or funds 
under a counter- guarantee of the EU Guarantee. 

The amount of the EU Guarantee has been partitioned between the IIW – up to a maximum of EUR 
13.5 billion – and the SMEW – up to a maximum of EUR 2.5 billion – although the thresholds may be 
modified, as long as the cumulated amount of the ceilings do not exceed EUR 16 billion at any time, 
and the amount allocated to the SMEW does not exceed EUR 3 billion9. Given the particularly strong 
response to the SMEW, the EFSI Steering Board, composed of members of the Commission and the 
EIB, already decided to reinforce the latter through the reassignment of up to EUR 500 million from 
the IIW to the SMEW in July 2016. 

3.  The use of the EU Guarantee 

Under the EFSI Agreement, the Union grants the EU Guarantee which is a first demand guarantee of 
an  amount  capped  at  EUR  16  billion  for  potential  losses  which  the  EIB  Group  may  suffer  from  its 
investments (default of repayments or capital losses). The aggregate net payments from the Union 
general budget are also capped at the same level.  
The EU  Guarantee covers part of financing and investment operations signed by  the EIB  under the 
IIW and by the EIF under the SMEW. Part of the operations is carried out at the own risk of the EIB 
Group.  
The nature of the EU Guarantee is revolving, in that the available cover under the EU Guarantee may 
be made available to new operations following the amortisation of existing ones, provided that the 
EU  Guarantee  never  exceeds  EUR  16  billion  and  that  aggregate  net  payments  from  the  general 
budget of the Union under the EU Guarantee do not exceed EUR 16 billion. 

6 Article 5 of the Regulation: "Projects supported by the EFSI shall typically have a higher risk profile than projects supported by EIB normal 
operations  and  the  EFSI  portfolio  shall  have  overall  a  higher  risk  profile than  the  portfolio  of  investments  supported  by  the  EIB  under  its 
normal investment policies before the entry into force of this Regulation." 

7  Third  countries  falling  within  the  scope  of  the  European  Neighbourhood  Policy,  including  the  Strategic  Partnership,  the  enlargement 
policy, the European Economic Area or the European Free Trade Association, or to an overseas country or territory as set out in Annex II to 
the TFEU, whether or not there is a partner in those third countries or overseas countries or territories. 

8  Equity  investments  are  most  commonly  defined  as  acquisitions  of  direct  ownership  of  share  capital  in  a  business,  regardless  if  the 
company is simply a conduit for pooling of resources used for asset investments (i.e. a fund) or it is a company involved in  certain trade. 
Quasi-equity or Equity-type investments expose de facto the investor to the full risks of the underlying business but in their legal form they 
can be structured as loans, derivatives, or others. Regardless of their legal form, quasi-equity operations are treated as equity investments 
for the purpose of the EIB’s portfolio risk management and risk reporting. 

9 Article 11(1) and (3) of the Regulation. 

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The present section reviews the use10 of the EU Guarantee under the different activities supported 
by the EFSI. In particular, the EU Guarantee covers different financing instruments depending on the 
Window of operation (IIW or SMEW) and on the product type (debt or equity). 

3.1 

Infrastructure and Innovation Window (IIW) 

Under the IIW, the allocation of EIB operations to the debt or equity (-type) sub-window is based on 
the EIB's system of loan grading and the EIB's standard risk assessment. Under the IIW, the use of the 
EU Guarantee was limited to an amount equivalent to EUR 13.5 billion, broken down into two parts: 

I. 
II. 

up to EUR 11 billion as a first-loss piece under the Debt sub-window.  
up to EUR 2.5 billion for equity-type operations; 

As of 30 June 2016, under the IIW, the EIB Board of Directors approved 77 operations (see Figure 1 
and Figure 3) of which 40 operations were signed (see Figure 2 and Figure 4). As of end-June 2016, 
approved operations account for a total amount of EUR 11 billion in EFSI financing, of which EUR 4.7 
billion have been signed, and are expected to support an estimated amount of investments of EUR 
58 billion. 

In  terms  of  total  EFSI  investments,  energy  and  support  to  smaller  companies  are  the  two  main 
sectors for signed operations under IIW (see Figure 2).  

Figure 1: IIW – EFSI-related investment for approved operations (by sector as of 30 June 2016) 

Source: EIB and ECFIN calculations 

10 The term "use" refers to the way the guarantee is deployed under the different activities supported by the EFSI. For the sake of clarity, it 
is worth noting that there have been no guarantee calls on the Union budget during the period covered by this evaluation (only funding 
costs have been paid). 

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Figure 2: IIW EFSI-related investment for signed operations (by sector as of 30 June 2016) 

Source: EIB and ECFIN calculations 

Figure 3: IIW - Number of operations approved and signed (as of 30 June 2016) 

Source: EIB  

Figure 4: IIW - Number of operations signed (as of 30 June 2016) 

Source: EIB  

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IIW Debt sub-window 

3.1.1 
The IIW Debt Portfolio includes all signed and not cancelled debt-type operations. For each debt-type 
operation,  the  EIB  conducts  its  standard  risk  assessment,  involving  the  computation  of  the 
probability of default and the recovery rate, without taking into account the EU Guarantee (in order 
to  reflect  the  overall  risk  of  the  transaction11).  The  operations  supported  by  the  EU  Guarantee 
typically  have  a  higher  risk  profile  than  EIB  normal  operations  and  hence  fall  within  the  scope  of 
special activities12. Less risky transactions may be incorporated into the EFSI portfolio, provided that 
a  high  added-value  is  clearly  demonstrated  and  their  inclusion  is  consistent  with  the  criterion  of 
providing additionality. The risk profile of the portfolio is expected to  adjust during the investment 
period, upon addition of new operations, amortisations and realisations of effective losses. 
Under  the  IIW  debt  sub-window,  the  Union  budget  provides  a  100  %  first-loss  piece  guarantee  for 
the debt portfolio originated by the EIB under the EFSI. The first-loss piece is expected to represent 
around 25 % of the volume of the overall portfolio of operations financed by the EIB at the end of the 
investment period (approximately EUR 42 billion), whereas the residual risk is fully borne by the EIB. 
The  latter  reserves  the  right  to  determine  the  overall  portfolio  volume  depending  on  the  risk  and 
structure of the underlying operations, the size of the available EU Guarantee and the residual risk to 
be borne by the EIB, which should be maintained at an acceptable level. 
The  first-loss  piece  must  remain  available  in  full  until  the  time  that  the  aggregate  outstanding 
nominal exposure under the IIW Debt Portfolio has decreased to an amount lower than the available 
(after deduction of losses) first-loss piece. Thereafter, the first-loss piece will decrease in line with the 
reduction  of  the  aggregate  nominal  exposure.  The  payment  of  any  recovered  amounts  to  the  EFSI 
account will increase the first-loss piece by the same amount. 
The  EU  Guarantee  may  be  called  in  case  of  defaults  by  EIB  obligors  under  the  EFSI  or,  if  a 
restructuring  process  is  undertaken,  to  cover  so-called  "restructuring  losses"13  in  relation  to  debt-
type operations. 
EIB debt operations generate revenues established in accordance with EIB pricing methodology. Risk-
related revenues are shared between the Union and the EIB on a quarterly basis on the basis of the 
risk taken, in accordance with the risk- and revenue-sharing principles set out in the EFSI Agreement. 
As  of  30  June  2016,  59  debt-type operations  had  been approved  under  the  IIW.  All the operations 
have been considered by the EIB as special activities. Signed operations amount to EUR 4.5 billion. 

No guarantee calls were made by the EIB in relation to EIB debt type financing operations under the 
EFSI. 

IIW Equity sub-window 

3.1.2 
The  IIW  Equity  Portfolio  includes  all  signed  and  not  cancelled  equity-type  operations.  Under  the 
equity  framework,  the  EU  Guarantee  may  be  used  to  support  direct  investments  in  individual 
companies or projects (equity-type direct investments) or financing for funds or analogous portfolio 
risks (equity-type portfolio), as long as the EIB invests on a pari passu basis for its own risk as well.  
The EIB will perform its standard assessment and determine whether an operation bears equity-type 
risks or not, irrespective of its legal form and nomenclature. Equity-type investments are to be priced 
in line with the market, absent which market testing or benchmarking is to be used. 
Under the IIW equity sub-window, the EU Guarantee covers 100 % of the amounts financed by the 
EIB (as explained above, to the extent that the EIB finances at its own risk an equivalent amount) and 
the  EIB  funding  costs  associated  to  the  underlying  investment.  Given  the  nature  of  equity-type 

11 Annex II of the Regulation, point 6. 

12 Special activities are defined in Article 16 of the EIB Statute and in the Credit Risk policy guidelines of the EIB. 

13  Defined  in  the  EFSI  Agreement  as  the  difference  between  the  scheduled  payments  and  the  payments  which  the  EIB  receives  for  a 
particular period in relation to a restructuring event for a debt-type operation.   

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investments,  the  pari  passu  requirement  enshrined  in  the  EFSI  Agreement  and  the  requirement  to 
use EIB rules and procedures, the Commission and the EIB have agreed that the EU Guarantee should 
be  called  when  there  is  an  adjustment  in  value  of  the  underlying  portfolio  of  investment  as 
recognised in the accounts of the EIB. As a result, a reduction in value of the assets guaranteed by 
the Union does not have a negative impact on the accounts of the EIB (beyond the one due to the EIB 
pari passu investment). The amount of a call on the EU Guarantee due to a value adjustment is to be 
returned to the Guarantee Fund or the EFSI Account, should the value of the portfolio of investment 
improve. Following the amortisation/divestment period of the IIW Equity Portfolio, if the value of the 
portfolio  increases  compared  to  the  initial  investment,  the  resulting  revenues  will  be  attributed  to 
the Union. 
As of 30 June 2016, 18 equity-type operations had been approved. Signed operations amounted to 
EUR 267 million. 
No  guarantee  calls  were  made  by  the  EIB  in  relation  to  EIB  equity-type  financing operations  under 
the EFSI. The Union paid EIB funding costs in relation to disbursements made in 2015 (EUR 2 160). 

3.2  SME Window (SMEW) 

As  of  30  June  2016,  under  the  SMEW  the  EU  Guarantee  had  been  used  for  two  guarantee  sub-
windows  and  was  aimed  at  frontloading  guarantee  operations  under  the  COSME14  and  InnovFin15 
financial instruments. 
The EFSI has enhanced the COSME Loan Guarantee Facility (LGF)  - which guarantees loans to SMEs 
with a higher-risk profile – and the InnovFin – Horizon 2020 SME Guarantee (SMEG) facility - which 
guarantees  loans  to  innovative  and  research-intensive  SMEs  and  small  mid-caps.  Thanks  to  the 
guarantee provided by the EFSI, the EIF could sign transactions with financial intermediaries earlier 
than it could have done with the COSME and InnovFin budgets alone. 
The  frontloading  of  COSME  LGF  and  InnovFin  SMEG  budgets  in  the  period  2016-2020  amounts  to 
EUR 500 million and EUR 750 million, respectively. The frontloading entails a right for the EIF to draw 
from the EIB (under a guarantee granted to the EIF as set out in the EFSI Agreement and the back-to-
back EIB-EIF EFSI Agreement) any such amounts as may be needed to pay guarantee calls in excess of 
the amounts cumulatively received from the Commission under the annual EU budget appropriations 
of COSME LGF and InnovFin SMEG. The EIB in turn is covered by the EU Guarantee.  

As  of  30  June  2016,  186  operations  (71  equity  projects  –  financed  from  the  EIB’s  EUR  2.5  billion 
contribution  to  the  SMEW,  43  COSME  and  72  InnovFin  guarantee  operations)  had  been  approved 
under  the  SMEW.  Those  operations  total  EUR  3.4  billion  in  EFSI  financing,  of  which  EUR  3.3  billion 
had been signed by 30 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.  

4.  The functioning of the EU Guarantee Fund under EFSI 

The Guarantee Fund under the EFSI ("the Guarantee Fund') was established under Article 12 of the 
Regulation and it is funded from payments from the Union general budget and revenues originating 
from EFSI-guaranteed operations. The Guarantee Fund constitutes a liquidity cushion from which the 
EIB  is  to  be  paid  in  the  event  of  a  call  on  the  EU  Guarantee.  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%.  Thus,  the  liquidity  cushion  is  intended  to  provide  an  appropriate  safety 
margin  and  to  avoid  exposing  the  Union  budget  to  sudden  guarantee  calls,  which  would  entail 

14 Programme for the Competitiveness of Enterprises and small and medium-sized enterprises (COSME). 

15  "InnovFin  –  EU  Finance  for  Innovators",  launched  jointly  by  the  Commission  and  the  EIB  Group  with  funds  from  the  Horizon  2020 
programme and EIB Group own resources. 

10 

 
 
                                                            
spending cuts or budget amendments when honoured. Therefore, it contributes to the transparency 
and predictability of the budgetary framework. 
In  accordance  with  the  EFSI  Agreement,  calls  are  paid  by  the  Guarantee  Fund  if  their  amount  is  in 
excess of the funds at the disposal of the EIB on the EFSI Account. The EFSI Account, managed by the 
EIB,  has  been  established  for  the  purposes  of  collecting  the  Union  revenues  resulting  from  EFSI-
guaranteed  operations  and recovered  amounts  and,  to  the extent of  the available  balance,  for  the 
payment  of  calls  under  the  EU  Guarantee  and  for  the  payment  of  EIB  recoverable  administrative 
costs and recovery costs. 

4.1  The provisioning mechanism of the Guarantee Fund 

The Guarantee Fund is provisioned through: 

I. 

II. 
III. 

IV. 

Contributions  from  the  general  budget  of  the  Union;  the  budget  allocated  for  the  EFSI 
contributions amounts to EUR 8 billion; 
Returns (interests) on guarantee fund resources invested in the financial markets; 
Amounts  recovered  from  projects  for  which  the  EU  Guarantee  was  called  (i.e.  defaulting 
debtors); 
Revenues  and  any  other  payments  received  by  the  Union  in  accordance  with  the  EFSI 
Agreement (i.e. projects benefitting from EFSI support). 

The Guarantee Fund is provisioned progressively taking into account the increase in exposure borne 
by  the  EU  Guarantee  and  it  is  directly  managed  by  the  Commission;  its  resources  are  invested  in 
accordance with the principles of sound financial management and appropriate prudential rules. 
In  the  event  of  a  call  on  the  EU  Guarantee  during  the  initial  constitution  of  the  Guarantee  Fund, 
endowments  to  the  Guarantee  Fund  provided  by  the  four  sources  will  contribute  to  meeting  the 
target amount up to a total equal to the call. 
In  the  event  that  the  EU  Guarantee  is  fully  restored  up  to  its  maximum  initial  amount  of  EUR  16 
billion,  any  amount in the  Guarantee Fund in  excess  of  the target amount will be paid  back to  the 
general budget of the Union. 

4.2  Annual flows 

4.2.1  Payments from the Union budget 
The payment schedule of the budget item provisioning the Guarantee Fund is being revised to ensure 
a sound management of payment ceilings over the Multiannual Financial Framework (MFF) period. In 
its  draft  budget  2017,  the  Commission  proposes  to  frontload  EUR  500  million  from  2019  to  2017. 
Table 1 summarizes both the initial and revised payment profiles: 

Table 1: Payment schedule to the Guarantee Fund 

1350 

2015 

EUR  million/year 
Commitments 
Payments: 
Current profile 
Revised profile 
Revised cumulated 
Outstanding 
Commitments: 
1350 
Current profile 
Revised profile 
1350 
Source: Commission services 

2016 

2017 

2018 

2019 

2020 

2021 

2022 

Total 

2030 

2641 

1979 

500 
500 
500 

1800 
2300 
2800 

1600 
1600 
4400 

1750 
1250 
5650 

1750 
1750 
7400 

200 
200 
7600 

400 
400 
8000 

8000 

8000 
8000 

2880 
2880 

3721 
3221 

4100 
3600 

2350 
2350 

600 
600 

400 
400 

0 

The  2016  payment  appropriation  of  EUR  500  million  was  paid  to  the  Guarantee  Fund  in  periodic 
tranches according to the schedule set out in Table 2. 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2: Payment schedule to the Guarantee Fund until the month of July 2016 

EUR  million 
Payments: 
Source: Commission services 

April   May 
100 
140 

June 
140 

July 
120 

Total 
500 

As of 30 June 2016, an amount of EUR 380 million was paid and invested in bonds. 

4.2.2  Revenues and interests 
The value of the Guarantee Fund stood at EUR 382.5 mn at the end of June 2016. The performance 
of the Guarantee Fund between 9 April 2016 and 30 June 2016 was 1.28%. 
As of 30 June 2016, risk-sharing revenues attributable to the Union amounted to EUR 5.71 million, of 
which EUR 1.55 million has been paid to the EFSI Account in respect of revenues received by the EIB 
for  the  last  quarter  of  2015  and  the  first  quarter  of  2016,  whereas  EUR  4.16  million  represents 
accrued revenue corresponding to the second quarter of 2016. A negative interest of EUR 2 260 was 
debited to the EFSI Account during the same period. 
4.2.3  Guarantee calls in relation to defaulted operations 
As of 30 June 2016, no guarantee calls were made in relation to defaulted operations. 

No reversals have yet been made to the Guarantee Fund.  

4.2.4  Recovered amounts 
Following any call in relation to an EFSI-guaranteed operation under the IIW, the Union delegates to 
the EIB the administration and work-out of such EFSI-guaranteed operations so as to reduce losses or 
maximise  expected  recoveries,  including  an  eventual  appointment  of  external  consultants  and 
advisors.  In  relation  to  the  SMEW,  the  same  holds  true,  mutatis  mutandis,  for  the  EIF,  unless  the 
COSME Delegation Agreement or the H2020 Delegation Agreement determines otherwise. 
Whenever the Union has made a payment under the EU Guarantee and is subrogated to  the rights 
and remedies of the EIB, the EIB must without delay initiate recovery proceedings on behalf of the 
Union,  unless  it  determines  in  accordance  with  its  professional  judgment  and  in  line  with  the  care 
and diligence applied in respect of operations at its own risk that the possible recovery proceedings 
are unlikely to result in recovery of sums in excess of the costs of such recovery. 
As of 30 June 2016, no recoveries had taken place since no defaults had taken place either. 

4.2.5  Guarantee calls in relation to EIB funding costs 
As of 30 June 2016, an amount of EUR 2 160 was paid to cover the EIB's funding costs. The amount 
was paid out of the EFSI Account. 
4.2.6  Guarantee calls in relation to other EIB costs (recovery costs, recoverable 

administrative costs) 

The recovery costs per operation, paid by the Union to the EIB, are calculated through a flat-fee; the 
rate  is  fixed  at  1%  of  the  outstanding  commitments  of  the affected  debt-type  operation  or  equity-
type  operation,  subject  to  an  overall  aggregate  cap  of  0.50%  of  the  EU  Guarantee.  As  of  30  June 
2016, no recovery costs had been paid to the EIB. 
The  recoverable  administrative  costs  are  determined  as  per  the  EFSI  Agreement.16  As  of  30  June 
2016, no recoverable administrative costs had been paid to the EIB. 

16 As per the EFSI Agreement, the "EIB Recoverable Administrative Costs”, in relation to a debt-type operation where a payment event of 
default has occurred, means that part of the margin related to administrative costs which would have been paid to the EIB over the life of 
that  debt-type  operation  had  the  event  of  default  not  occurred,  the  overall  amount  being  capped  at  1%  of  the  total  outstanding  EU 
Guarantee obligations. 

12 

 
 
  
 
 
                                                            
5.  Risk analysis and scenarios 

5.1 

IIW – Debt products 

As  referred  to  in  section  3.1.1,  it  is  expected  that  the  first-loss  piece  buffer  provided  by  the  EU 
Guarantee  represents  around  25  %  of  the  exposure  under  the  IIW  debt  sub-window  as  originally 
constructed  by  the  Commission  and  the  EIB.  However,  the  recently  amended  and  restated  EFSI 
Agreement allows distinct sub-portfolios to be introduced, in which case, the percentage may differ 
depending on the risk and capital charges related to such sub-portfolios. 
EFSI operations are characterised by a higher level of risk compared to standard EIB operations. For 
example,  the  typical  rating  of  an  EFSI  operation  ranges  between  Baa3  (BBB-)  and  B2  (B)  with  an 
average  rating  between  Ba1  (BB+)  and  Ba2  (BB).  The  average  rating  of  a  standard  EIB  operation  is 
BBB+ (Baa1). EFSI operations also typically present higher loss given defaults compared to standard 
EIB operations. For example, subordinated operations have a very high loss given default given the 
low expected recovery. Moreover, as opposed to EIB standard operations, the EFSI does not focus on 
public sector borrowers which present typically a higher recovery rate. 
The risk model used for the purpose of the evaluation is a one-factor credit risk model to simulate 
the  credit  loss  distribution  generated  by  the  EFSI  portfolio  under  the  following  simplified 
conservative assumptions: 

- 

- 

The first-loss piece amounts to EUR 10.5 billion and supports an amount of EUR 42 billion EIB 
financing.  Losses  are  split  between  the  Union  budget  (first-loss  piece  or  25%)  and  the  EIB 
(residual risk); 

The portfolio is composed of 100 identical linear amortizing transactions with a maturity of 
15 years, instantaneous recoveries, instantaneous portfolio ramp-up with a 20 % correlation 
for the defaults of individual transactions; 

-  Average counterpart rating is 50% Ba1 and 50% Ba2; 

- 

- 

The loss given default is ranging from 40 % to 90 %; 
The haircut between signatures and disbursements is 10 %.17 

Revenues  generated  by  the  EFSI portfolio  are  determined in accordance  with the  EIB  standard  risk 
pricing model and are shared between the two institutions in line with the EFSI Agreement.  

The  expected  loss  of  the  EFSI  portfolio  on  average  corresponds  to  8.1  %  of  the  total  amount  of 
financing.  The  amount  of  revenues  under  the  simplified  assumptions  is  expected  to  outweigh  the 
expected  losses  at  portfolio  level.  However,  it  is  considered  that  an  adequate  level  of  provisioning 
needs,  following  deduction  of  the  expected  revenues,  based  on  the  value-at-risk  of  the  first-loss 
piece tranche under the EFSI portfolio after 15 years, is 38.3% of the EU Guarantee allocated to the 
IIW debt sub-window. 

5.2 

IIW – Equity instruments 

Under  the  IIW  equity  sub-window,  the  EIB  may  invest  up  to  EUR  2.5  billion  of  funds  under  the  EU 
Guarantee pari passu with its own funds. EIB financing may be delivered through infrastructure funds 
or other types of funds (indirect financing) or through direct EIB investments in individual companies 
or  projects.  The  EIB's  activity  has  to  date  focused  on  indirect  intervention  through  funds  but  it  is 
expected  that  the  volume  of  direct  equity  or  equity-type  investments  will  also  increase.  A  more 
precise expected distribution may become available when the EIB agrees on an equity strategy later 
in 2016. Irrespective of the final distribution between direct and indirect operations, it is important 
to note that the overall amount of EIB equity-type operations under the EFSI, i.e. EUR 5 billion to be 
deployed in three years, represent a tenfold increase compared to previous years. 

17 This is usually in the order of 10 to15% due to cancellations and amounts not fully drawn by the borrowers. 

13 

 
 
                                                            
In any event, for the purpose of the evaluation it may be assumed that, given the size of the overall 
portfolio  expected  to  be  generated,  the  behaviour  of  the  portfolio  of  direct  equity  investments 
follows the pattern of a portfolio of indirect investments through equity funds (e.g. the EIB portfolio 
of direct investments could be considered an equity fund). 

In line with the Regulation, EIB equity investments are made at market terms. Hence, it is expected 
to be a profitable activity with ultimately – under normal circumstances – limited or no recourse to 
the EU Guarantee. In order to simulate losses under stressed scenarios, a conservative assumption 
was  applied  such  that  the  portfolio's  performance  mirrors  the  pattern  of  the  portfolio  of  EIF 
investments in equity funds for SMEs and mid-caps. 

As  a  result,  it  is  considered  that  an  adequate  level  of  provisioning  needs,  taking  into  account  the 
effect of reflows, funding costs and possible exchange rates, under the IIW equity portfolio is 17.9 % 
of the EU Guarantee allocated to the IIW equity sub-window. 

5.3  SMEW – Debt products 

During the reporting period, the use of the EU Guarantee under the SMEW was limited to an amount 
equivalent to EUR 2.5 billion. EUR 1.25 billion of the Union-backed EFSI guarantee capacity is used to 
enhance the speed of implementation of Union financial instruments that support lending to SMEs, 
the  COSME  Loan  Guarantee  Facility  and  the  InnovFin  SME  Guarantee  Facility  (frontloaded 
instruments  with  progressive  release  of  the  EU  guarantee  when  the  Union  budget  becomes 
available).  The  remaining  margin  under  the  overall  limit  of  EUR  2.5  billion  backed  by  the  EU 
Guarantee is to be used for a recently developed SMEW Equity Product described under section 5.4. 

As explained before, given the strong uptake of the SMEW, the EFSI Steering Board decided to adjust 
the limit of the SMEW up to the maximum of EUR 3 billion by reassigning EUR 500 million from the 
IIW Debt Portfolio to the SMEW, after which up to EUR 1.73 billion is now foreseen for the SMEW 
debt window. Moreover, the Commission and the EIB have agreed to gradually convert the release of 
the EFSI guarantee covering the frontloaded amounts to second-loss exposure or mezzanine tranches 
as the annual Union budget contributions become available (the so-called "top-up", see also section 
6). The use of the EU Guarantee would be expanded to cover not only the COSME Loan Guarantee 
Facility  and  the  InnovFin  SME  Guarantee  Facility,  but  also  the  EaSI18  guarantee  instruments  and  a 
securitisation instrument. 

While those changes will significantly add value to the EFSI contribution to the SMEW, the risk profile 
of  the  EFSI  intervention  will  also  change.  Under  the  current  set-up  estimated  losses  for  EFSI  are 
negligible,  whereas  the  risk  of  EFSI  incurring  losses  increases  under  the  new  setup.  Table  3 
summarises the expected loss of the EFSI exposure of different debt products envisaged under the 
SMEW  on  the  basis  of  the  expected  loss  of  the  underlying  portfolio  of  loans  of  financial 
intermediaries to SMEs and mid-caps. 

Table 3: SMEW debt instrument - Risk assessment (Expected Loss)  

Instrument 

InnovFin SME Guarantee Enhancement 
(including top-up)* 
COSME Loan Guarantee Facility 
Enhancement (including top-up)* 
EaSI Guarantee Enhancement (including top-

18 EU Programme for Employment and Social Innovation (EaSI). 

Allocation 
(EUR m) 
880 

550 

100 

14 

Expected 
Loss (%) 

Expected Loss 
(EUR m) 

5.6% 

77.3% 

80.4% 

49 

425 

80 

 
 
                                                            
up)* 
Uncapped guarantee for EaSI* 
Securitisation** 
TOTAL 

100 
100 
1730 

70.0% 
14.9% 
37.0% 

70 
15 
639 

* Assuming 10 % haircut on final usage of the guarantees by financial intermediaries. 

** 10-year B2 expected loss. 

As described above, the expected losses will primarily be covered by the Union budget (first loss) but 
the baseline  is  that approximately  EUR  639  million of  guarantee  calls  could be triggered under  the 
SMEW debt products (37% out of EUR 1.73 billion).  

5.4  SMEW – Equity products 

The  SMEW  Equity  Product  is  an  equity  facility  pursuant  to  which  the  EIF  will  provide  equity-type 
investments and co-investments in or alongside financial intermediaries that target SMEs and small 
mid-caps, as well as social enterprises. It uses EUR 1.27 billion of funding provided by  the EIB. It is 
split  into  two  sub-windows  that  are  expected  overall  to  support  approximately  EUR  24.8  billion  of 
investment: 

-  Under sub-window 1, the EIF will invest up to EUR 1 billion of EIB-provided funding (with a 5 
%  pari  passu  co-investment  from  the  EIF's  own  resources  for  alignment  of  interest)  into 
financial intermediaries targeting expansion-stage companies. EUR 12.6 billion of investment 
is expected to be mobilised under that sub-window. 

-  Under sub-window 2, EIB funding of EUR 270 million under the EFSI will be combined with 
financial resources of the Union budget-supported InnovFin Equity Facility (EUR 458 million) 
and  the  EIF's  own  resources  (EUR  290  million),  to  create  a  pool  of  EUR  1.018  billion  to  be 
invested  in  financial  intermediaries  targeting  early-stage  companies.  It  is  foreseen  that  the 
InnovFin  Equity  Facility  is  used  as  a  first-loss  piece,  thus  providing  a  protection  to  the  EFSI 
investment.  EUR  12.2  billion  of  investment  is  expected  to  be  mobilised  under  that  sub-
window. 

The  EIB  funding  (and  related  funding  cost)  will  be  reimbursed  from  revenues  generated  by  the 
investments. The EU Guarantee under EFSI can be called by the EIB to cover any irreversible capital 
losses  –  as  calculated  by  the  EIF  –  and  unpaid  funding  cost  for  the  EFSI-attributable  part  of  sub-
window  1.  For  sub-window  2  the  initial  risk  is  borne  the  Union  budget  contribution  and  only 
irreversible capital losses above the volume of the Union budget contribution are borne  pari passu 
and pro rata by the EU Guarantee and the EIF's own resources. 

EIF  equity  investments  are  made  at  market  terms.  Hence,  it  is  expected  that  there  will  be–  under 
normal  circumstances  –  limited  or  no  recourse  to  the  EU  Guarantee.  In  order  to  estimate  the 
provisioning needs under more stressed scenarios, the potential loss of the EFSI exposure has been 
estimated  based  on  the  historical  performance  of  early-stage  and  later-stage  equity  investments 
together with assumptions about funding costs and foreign currency variations. 

In that context, it is considered that an adequate level of provisioning needs, taking into account the 
effect of reflows, funding costs and possible exchange rates, under the SME equity portfolio is 17.9 % 
of the EU Guarantee allocated to that sub-window. 

15 

 
 
 
6.  Evaluation findings 

6.1 

Effectiveness 

6.1.1 IIW 

Under  the  IIW,  the  EU  Guarantee  allowed  the  EIB  to  expand  significantly  the  volume  of  its  special 
activities.  In  the  first  year  of  the  EFSI,  including  the  operations  approved  under  the  transitional 
"warehousing"  system,  the  volume  of  approved  operations  was  EUR  11  billion.  It  is  forecast  that 
around EUR 17-18 billion will be signed by the end of 2016, which compares with an annual amount 
of special activities in the EU amounted of around EUR 4 billion in 2014.  

While  the  broad  objective  of  allowing  the  EIB  to  finance  higher-risk  operations  was  attained,  the 
experience  acquired  under  the  EFSI  showed  that  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 deploy new financing products for corporates. In particular, in order to 
make  it  possible  for  the  EIB  to  co-finance  operations  with  national  promotional  banks  under  a 
delegated model and to support securitisation deals, it was necessary to  introduce in the amended 
EFSI  Agreement  (under  the  Regulation)  the  possibility  to  segment  the  first-loss  piece  coverage  in 
different  sub-portfolios.  Moreover,  in  order  for  the  EIB  to  provide  subordinated  financing  to 
corporates  (including  hybrid  debt-equity  products),  which  is  a  clear  objective  of  the  EFSI,  the  EFSI 
Agreement  was  revised  to  better  cater  for  that  possibility.  Given  that  the  ability  of  the  EIB  to 
implement risk-sharing instruments and take subordinated positions is key to enhance the capacity 
of private sector investors to support riskier and more innovative projects as well as SMEs, a strong 
emphasis should be put on that aspect. 

Another main finding after one year of implementation is that the requirement under the Regulation 
that  debt  operations  must  be  priced  in  line  with  the  EIB's  pricing  policy  and  that  equity-type 
operations must be priced in line with market terms, implies that the EU Guarantee is not designed 
to cover excessive risks as their pricing would not be acceptable from a market perspective. The EIB 
and  the  Commission  have  so  far  dealt  with  that  limitation  by  developing  instruments,  including 
investment platforms, that rely on the Union budget programmes, like the  European Structural and 
Investment  Funds  (ESIF),  InnovFin  or  the  Connecting  Europe  Facility  (CEF),  to  take  the  riskier 
tranches, with the EIB (supported by the EFSI) bearing the risk on the mezzanine tranches.  

6.1.2 SMEW 

The SMEW has seen a very strong uptake, exceeding expectations and demonstrating a high market 
demand for the products available under it. After one year, the EFSI has supported EIF transactions 
expected to mobilise a total investment value of EUR 48.4 billion, which is already about 65% of the 
target of EUR 75 billion to be reached under the SMEW over three years. 

As  announced  in  the  Commission's  Communication  "Europe  investing  again.  Taking  stock  of  the 
Investment plan for Europe and next steps"19, given its success, it was decided to scale up the SMEW 
under  the  current framework for  the  benefit  of  SMEs  and  small  mid-cap  companies  in  all  Member 
States, using all the existing possibilities under the Regulation. As foreseen in the Regulation, the EFSI 
Steering Board has thus decided to adjust the limit of the SMEW up to the maximum of EUR 3 billion 
by reassigning EUR 500 million from the IIW Debt Portfolio to the SMEW, after which up to EUR 1.73 
billion is now foreseen for SMEW debt products. 

19 COM(2016)359 final. 

16 

 
 
                                                            
The  main  impact  of  the  EFSI  on  COSME  and  InnovFin  under  the  current  set-up  is  faster 
implementation,  but  the  volumes  of  support  are  the  same  as  would  have  been  achieved  with  the 
Union  budget,  only  at  a  later  point  in  time.  Given  the  higher  than  expected  demand  for  those 
instruments and their successful implementation, the EIF is likely to exhaust the support capacity by 
end-2017. That high speed of implementation creates a risk of a gap in implementation in 2018-2020, 
as  no  Union  budgetary  resources  are  currently  foreseen  to  top  up those instruments  in 2018-2020 
above the volumes already planned. 

6.1.3. Guarantee calls and the Guarantee Fund 

So far, there have been no calls due to defaults or value adjustments of EIB and EIF operations. The 
EU Guarantee has only been called to cover funding costs which were paid out of existing revenues 
stemming from IIW operations. Therefore, it was not possible to assess the effectiveness of the call 
procedure or the monitoring of calls. 

The procedures for the management of the Guarantee Fund and the monitoring of its results have 
been developed. Moreover, a liquidity agreement was concluded with the EIB (see section 6.2.3). It 
will be possible to assess the effectiveness of the management of the Guarantee Fund starting from 
2017. 

As regards the provisioning mechanism, the Guarantee Fund was endowed with initial resources in 
April 2016 and will be progressively fed during 2016-2022.  

6.2. 

Efficiency20 

6.2.1. IIW 

The  availability  of  the  EU  Guarantee  proved  to  be  an  efficient  tool  to  considerably  increase  the 
volume of special activities by the EIB. The reliance on the EIB's rules and procedures allowed a swift 
start of the EFSI. For debt operations, the EU guarantee is expected to represent around 25 % of the 
overall EIB financing (with provisioning representing around half of it). 

The EIB intervention under that initial phase focused on long-term (riskier) senior loans, investments 
in infrastructure funds and, through financial intermediaries, in SMEs and mid-caps. In parallel, the 
EIB  developed  new  subordinated  products  and  forms  of  cooperation  with  national  promotional 
banks  and  financial  intermediaries.  In  order  to  allow  the  coverage  of  such  operations,  the  EFSI 
Agreement  had  to  be  adapted  within  the  framework  of  the  Regulation,  which  was  allowed  by  the 
flexibility  of  its  provisions  in  that  respect.  The  efficiency  of  the  coverage  of  those  new  types  of 
operations can only be assessed after their implementation. 

6.2.2. SMEW 

The availability of the EU Guarantee was the only way to frontload guarantee activities under COSME 
and  InnovFin.  The  reliance  on  existing  products  developed  by  the  Commission  and  the  EIF  and  on 
well-tested EIF rules and procedures allowed a very fast implementation, which required an increase 
of the SMEW envelope. 

20 The efficiency of the EU guarantee has to be assessed taking into account that EU financial instruments for 
the period 2014-2020 were designed before the conception of EFSI. 

17 

 
 
                                                            
At the current speed of implementation, even with the increase of the SMEW recently decided by the 
EFSI  Steering  Board,  the  current  level  of  the  EU  Guarantee  would  only  be  sufficient  to  cover  EIF 
operations after 2017 to a certain extent. 

6.2.3. Guarantee calls and the Guarantee Fund 

Given  the  lack  of  calls  due  to  defaults  or  value  adjustments  of  EIB  and  EIF  operations,  it  was  not 
possible  to  assess  the  efficiency  of  the  call  procedure.  However,  during  the  period  under  review  it 
was possible to ascertain the positive role played by the EFSI Account as a first layer to absorb calls of 
a limited size such as those arising from funding costs under equity products. The newly concluded 
liquidity agreement between the Commission and the EIB should also allow calls of a larger size to be 
managed efficiently where the amount of liquidity in the Guarantee Fund is insufficient to cover the 
full  amount  of  the  call  and  it  is  deemed  preferable  to  make  recourse  to  the  EIB  liquidity  on  a 
temporary basis rather than divesting longer-term placed assets. 

As  regards  the  budgetary  procedure  related  to  the  provisioning  of  the  Guarantee  Fund,  all 
contributions  from  the  budget  were  received  in  good  time  and  after  agreement  with  the 
management  of  the  Guarantee  Fund  on  the  timing  of  those  payments  (EUR  380  million 
corresponding to 17 cash transfers from 11 April 2016 to 27 June 2016). 

6.3. 

Relevance 

6.3.1 The EU Guarantee 

The EU Guarantee enabled the EIB to undertake riskier activities in line with expectations. Moreover, 
it  was  essential  to  allow  the  EIF  to  enhance  its  intervention  in  support  of  SMEs  and  mid-caps.  The 
need  to  strengthen  the  investment  environment  by  providing  loans,  guarantees  and  equity  to 
economically viable projects presenting a higher risk profile still persists. 

However, the EU Guarantee is not a panacea for all types of financing. For example, 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 and would probably be too 
high  for  the  platform  to  be  financially  viable.  In  that  case,  the  use  of  the  Union  budget  (e.g.  ESIF, 
COSME InnovFin and CEF) 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.  That  gap  has  a  bearing  on  the  capacity  of  the  EIB  to  deliver  long-term  fixed-rate 
financing in certain non-euro countries with less developed financial markets. 

6.3.2 The Guarantee Fund and the provisioning mechanism 

The Guarantee Fund is intended to provide a liquidity cushion  for the general budget of the Union 
against losses incurred under the EU Guarantee by the EIB for EFSI operations. In particular, pursuant 
to Article 9 of the EFSI Agreement, calls made under the EU Guarantee have to be honoured within 
20  business  days  (in  certain specific  cases  within 40  business  days) after  demand by  the  EIB,  while 
both  the  time  and  size  of  potential  calls  are  uncertain.  The  investment  strategy  for  the  Guarantee 
Fund takes into account the projected inflows (budget contributions and income) and the projected 
outflows to arrive at the best results while guaranteeing the ability to honour calls. The period over 
which  the  investment  process  is  planned  to  attain  the  investment  objectives  (the  investment 
horizon)  must  in  particular  reflect  cash-flow  projections,  such  as  expected  calls  and  revenues 
resulting from the EFSI operations. The estimates have to be reviewed overtime and improved on the 
basis of an improved knowledge of the projects guaranteed. 

18 

 
 
Since  there  have  been  no  calls  on  the  Guarantee  Fund,  it  was  not  possible  to  test  the 
appropriateness  of  the  investment  strategy.  However,  the  professional  management  of  the 
Guarantee  Fund,  together  with  the  liquidity  arrangements  foreseen  with  the  EIB,  provide  for  an 
adequate  framework  to  produce  a  satisfactory  yield  (that  can  be  used  as  assigned  revenue  to 
increase the provisioning) and handle guarantee calls. The managed assets are expected to provide 
sufficient  liquidity  in  relation  to  the  potential  guarantee  calls,  while  still  aiming  at  optimising  the 
return and risk level. 

The risk assessment of the different products supported by the EU Guarantee shows that overall the 
Union budget would also be adequately shielded from potential calls under the EU Guarantee with 
an  adjusted  target  rate  for  provisioning  the  Guarantee  Fund,  taking  into  consideration  recoveries, 
revenues and reflows from EIB operations. Table 4 summarises the findings in section 5. 

Table 4: EFSI - Provisioning rate estimation 

7.  Conclusions 

Despite the fact that the EFSI has started only one year ago, it is already possible to draw some initial 
conclusions on the use of the EU Guarantee and partly on the provisioning mechanism feeding the 
Guarantee Fund. 

As  regards  the  use  of  the  EU  Guarantee,  the  first  year  of  experience  shows  that  it  has  been  an 
efficient  and  effective  way  of  considerably  increasing  the  volume  of  EIB  special  activities  and  EIF 
guarantees in favour of SMEs and mid-caps. 

Moreover,  the  high  profile  of  the  initiative  and  related  market  expectations  have  represented  a 
continuous stimulus for the Commission and the EIB Group to closely monitor the implementation of 
the EFSI and adapt it to support new emerging needs. In that context, within the parameters of the 
Regulation, some changes to the initial set up have already been implemented after the cut-off date 
of  this  evaluation,  e.g.  the  reinforcement  of  the  SMEW  by  EUR  500  million  or,  under  the  IIW  debt 
sub-window,  the  possibility  to  have  different  portfolios  and  the  clarification  of  the  guarantee 
treatment of subordinated debt. 

Some other changes that can be implemented under the Regulation as it stands are expected to take 
place  before  the  end  of  2016,  the  most  important  of  which  is  the  restructuring  of  the 
guarantee/securitisation  part  of  the  SMEW  to  avoid  disruption  of  support  from  Union  financial 
instruments in favour of SMEs during the second part of the Multiannual Financial Framework. That 
restructuring  will  involve  the  gradual  conversion  of  the  release  of  the  EU  Guarantee  covering  the 
frontloaded  amounts  to  second-loss  exposure  or  mezzanine  tranches  as  the  annual  Union  budget 
contributions  become  available,  thereby  topping  up  the  COSME  and  InnovFin  guarantee  products 
under  SMEW.  The  first-loss  piece  will  be  taken  by  the  Union  budget,  and  in  case  of  InnovFin 
guarantee where the EFSI takes a mezzanine tranche, residual risk will be covered by the EIB Group's 
own resources. Those changes lead to an increase in the overall size of the budgetary allocations for 
those instruments allowing the EIF to finance a significant extra volume of operations. New products 
to be supported under the SMEW in that second phase also include a topping-up of the guarantee 
instrument  under  the  EU  Programme  for  Employment  and  Social  Innovation  ('EaSI'),  an  uncapped 

19 

TOTALEquityDebtEquityDebtCombinedAllocation (EUR m)2.500      10.500   1.270      1.730      16.000   Net Loss (EUR m)447,5      4.021,5  227,3      640,1      5.336,4  Net Loss (%)17,9%38,3%17,9%37,0%33,4%IIWSMEWWindow/Product 
 
 
 
guarantee  instrument  under  EaSI  targeting  in  particular  social  enterprises  and  a  securitisation 
instrument mobilising additional finance for SMEs. 

Under the current set-up the combined Union budgetary allocation for COSME and InnovFin SMEG 
would by 2020 reach approximately EUR 1.7 billion (and the EFSI coverage would be fully released) 
and the instruments would eventually support an estimated EUR 34 billion of investment. Under the 
new  set-up,  the  COSME  and  InnovFin  SMEG  instruments  benefit  from  a  combined  budget  of  EUR 
2.95  billion  (EUR  1.7  billion  of  Union  budget  as  first-loss  and  EUR  1.25  billion  under  the  EFSI  as 
second-loss/mezzanine).  Those  two  financial  instruments  together  with  the  newly  EFSI-supported 
EaSI financial instruments and the securitisation instrument could mobilise just under EUR 60 billion 
of investment, indicatively broken down as follows (estimates): 

InnovFin SME Guarantee Enhancement: EUR 22 200 million 

- 
-  COSME Loan Guarantee Facility Enhancement: EUR 31 600 million 
- 
- 
- 

EaSI Guarantee Enhancement: EUR 2 100 million 
EaSI uncapped guarantee instrument: EUR 900 million 
Securitisation instrument: EUR 2 600 million 

As  regards  the  IIW,  to  enhance  the  impact  of  the  use  of  the  EU  Guarantee,  the  EFSI  should  target 
investments and address market gaps at local level. As a result, a strong emphasis should be put on 
defining  models  of  cooperation  with  national  promotional  banks  and  replicable  patterns  for  the 
setting  up of  investment  platforms  and  combination  of  the  EFSI  with Union  budgetary  instruments 
(both financial instruments and grant based). 

The  legislative  proposal  issued  by  the  Commission  would  provide  for  some  adaptations  of  the 
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; 

the possibility for the EU Guarantee to cover the potential impact of currency fluctuations, 
taking into consideration both losses and gains arising from such fluctuations. 

20 

 
 
 
 
Appendix A – Information sources 

Legal framework: 

  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. (the 
Regulation) 

  Agreement on the Management of the European Fund For Strategic Investments and on the 

Granting of the EU Guarantee between the EU and the EIB (22 July 2015, the EFSI Agreement) 
"EFSI Amendment and Restatement Agreement" (21 July 2016)  

 

Data sources: 

  Signed and approved EFSI operations as of 30 June 2016 provided by the EIB Group 
  EFSI Annual Operational Reports (data as of December 2015) 
  EFSI Risk Reports (incl. data as of 30 June 2016) 
  EFSI Financial Reporting 

Other documents and reports: 

  Report from the Commission to the European Parliament, the Council and the European Court of 
Auditors    on  the  Management  of  the  Guarantee  Fund  of  the  European  Fund  for  Strategic 
Investments in 2015 (COM(2016)353, 31 May 2015) 

  Commission Communication COM/2016/0359 final - "Europe investing again, taking stock of the 

Investment Plan for Europe and next steps" (1 June 2016) 

21 

 
 
 
 
 
 
 
Appendix B – Abbreviations 

CEF 

COSME 

EaSI 

EFSI 

EIAH 

ESIF 

IIW 

Connecting Europe Facility 

Programme for the Competitiveness of Enterprises and small and medium-sized 
enterprises 

EU Programme for Employment and Social Innovation 

European Fund for Strategic Investments 

European Investment Advisory Hub 

European Structural and Investment Funds 

Infrastructure and Innovation Window 

InnovFin 

  "InnovFin – EU Finance for Innovators", launched jointly by the Commission and the 
EIB Group with funds from the Horizon 2020 programme and EIB Group own resources 

LGF 

MFF 

SMEG 

SMEW 

Loan Guarantee Facility 

Multiannual Financial Framework 

SME Guarantee 

SME Window 

22 

 
 
 
 
 
 
 
Appendix C – IIW – List of projects as of 30 June 2016 

List updated at the end of June in accordance with data provided by the EIB. Data not disclosed by the EIB due to commercial reasons are indicated with an 
asterisk.  

Table 5: IIW - Debt sub-window projects 

No 

Project name 

Country 

Main Sector 
(Objective as 
per EFSI 
Regulation) 

EFSI 
financing 
(approved -  
mEUR) 

EFSI 
financing 
(signed -  
mEUR) 

Related total 
EFSI 
investment 
(mEUR) 

ÄÄNEKOSKI BIO-PRODUCT MILL 
Project 
ARVEDI MODERNISATION 
PROGRAMME 
GRIFOLS BIOSCIENCE R&D 
Project 
PRIMARY CARE CENTRES PPP 
Project 
REDEXIS GAS TRANSMISSION 
AND DISTRIBUTION Project 

Finland 

Energy 

Italy 

Spain 

RDI 

RDI 

Ireland 

Social 

Spain 

Energy 

SMART METERS-SPARK Project 

UK 

SAARLB - RE PROJECT FINANCE 
GUARANTEE (DE,FR) 

Germany, 
France 

Energy 

Energy 

NOBELWIND OFFSHORE WIND 
Project 
HBOR RISK-SHARING FOR MID-
CAPs AND OTHER PRIORITIES 

Belgium 

Energy 

Croatia 

QREDITS LOAN FOR SMES I 

Netherlands 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11  GALLOPER OFFSHORE WIND 

12 

MIDLAND METROPOLITAN 
HOSPITAL PPP 

UK 

UK 

smaller 
companies 

smaller 
companies 
Energy 

Social 

75 

100 

100 

70 

160 

478 

100 

100 

20 

314 

148 

281 

194 

241 

135 

326 

1378 

356 

542 

* 

327 

1556 

468 

75 

100 

100 

70 

160 

480 

150 

200 

50 

24 

314 

166 

23 

 
 
  
No 

Project name 

Country 

Main Sector 
(Objective as 
per EFSI 
Regulation) 

EFSI 
financing 
(approved -  
mEUR) 

EFSI 
financing 
(signed -  
mEUR) 

13 

14 

15 

AUTOVIE VENETE A4 WIDENING 
PPP Project 

NORD PAS DE CALAIS THD 
(maximum guarantee amount) 

ALSACE TRES HAUT DEBIT 
(maximum guarantee amount) 

Italy 

Transport 

France 

Digital 

France 

Digital 

16  D4R7 SLOVAKIA PPP 

Slovakia 

Transport 

LONDON ENERGY EFFICIENCY 
CO-FINANCING FACILITY  

Beatrice Offshore 

TI - ACCELERATED FIXED HIGH 
SPEED BB ROLLOUT 

GRAND CONTOURNEMENT 
OUEST DE STRASBOURG (A355) 

UK 

UK 

Italy 

Energy 

Energy 

Digital 

France 

Transport 

RAFFINERIA DI MILAZZO 

Italy 

TRENITALIA REGIONAL ROLLING 
STOCK 
ENVO BIOGAS TONDER 

ACCESSIBILITY PORTS 
INFRASTRUCTURE  
BALEARIA GREEN FLEET 
RENEWAL  

IRISH WATER INVESTMENT 
PROGRAMME I - ERVIA 

Environment 
and resource 
efficiency 
Transport 

Italy 

Denmark 

Energy 

Spain 

Spain 

Ireland 

Transport 

Environment 
and resource 
efficiency 
Environment 
and resource 
efficiency 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

* 

427 

292 

500 

30 

300 

105 

120 

147 

* 

500 

136 

306 

500 

280 

30 

300 

* 

105 

75 

200 

24 

Related total 
EFSI 
investment 
(mEUR) 

1117 

610 

* 

636 

* 

2466 

1808 

510 

225 

617 

* 

425 

350 

459 

 
 
  
  
  
  
 
  
  
No 

Project name 

Country 

Main Sector 
(Objective as 
per EFSI 
Regulation) 

EFSI 
financing 
(approved -  
mEUR) 

EFSI 
financing 
(signed -  
mEUR) 

Related total 
EFSI 
investment 
(mEUR) 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 

2I RETE GAS SMART METERING  

NOVAMONT RENEWABLE 
CHEMISTRY  
EASTERN POLAND DAIRY 
PRODUCTION FACILITY 

LOGEMENTS INTERMEDIAIRES-
SLI  (maximum guarantee 
amount) 
EUROMED RORO Project  
(maximum guarantee amount) 

A6 WIESLOCH-RAUENBERG TO 
WEINSBERG PPP Project 
(maximum guarantee amount) 
ECOTITANIUM  

ENERGIEPARK BRUCK ONSHORE 
WIND 
COMBINED HEAT AND POWER 
PLANT KIEL 
HEIDELBERGER 
DRUCKMASCHINEN-PRINTING 
RDI 
NORMANDY DAIRY PRODUCTION 
FACILITY 
A6 ALMERE MOTORWAY PPP 

Italy 

Italy 

Poland 

France 

Italy 

Germany 

Energy 

RDI 

smaller 
companies 

Environment 
and resource 
efficiency 
Environment 
and resource 
efficiency 
Transport 

France 

Austria 

RDI 

Energy 

Germany 

Energy 

Germany 

RDI 

France 

Netherlands 

smaller 
companies 
Transport 

RENTEL OFFSHORE WIND 

Belgium 

Energy 

AGRO FOOD INDUSTRY RDI 

RDI project (*) 

SME Financing (*) 

Greece 

France 

Spain 

RDI 

RDI 

smaller 
companies 

200 

15 

40 

100 

55 

79 

15 

415 

93 

72 

1553 

501 

* 

* 

65 

249 

306 

125 

234 

1115 

31 

* 

* 

200 

15 

38 

500 

200 

250 

* 

40 

105 

100 

55 

100 

250 

15 

* 

* 

25 

 
 
  
  
  
  
  
  
  
 
 
Main Sector 
(Objective as 
per EFSI 
Regulation) 

EFSI 
financing 
(approved -  
mEUR) 

EFSI 
financing 
(signed -  
mEUR) 

Related total 
EFSI 
investment 
(mEUR) 

RDI 

160 

160 

330 

No 

Project name 

Country 

AUTOMOTIVE STEEL RDI Project 

TRIPLA NEAR-ZERO ENERGY 
BUILDING Project 
APERAM R&D AND COHESION 
REGIONS Project 

CALVIN SMARTMETER ROLL-OUT 
Project 
LIETUVOS ENERGIJA VILNIUS CHP 
PROJECT 
SOCIETA GASDOTTI ITALIA - GAS 
TRANSMISSION Project 

BIOMASS PLANTS PORTUGAL 
Project 
LTE VOLTE - HIGH SPEED MOBILE 
INTERNET ROLLOUT Project 

Germany, 
France, 
Spain, UK, 
Sweden 
Finland 

Energy 

France 

RDI 

UK 

Energy 

Lithuania 

Energy 

Italy 

Energy 

Portugal 

Energy 

Sweden, 
Netherlands 

Digital 

NBG LOAN FOR SMES AND MID-
CAPS 
ISP RISK SHARING INITIATIVE 
FOR SMES AND MIDCAPS 

GUARANTEE FOR ENHANCED 
SME AND MIDCAP SUPPORT 

Greece 

Italy 

Spain 

MALIN CORPORATION - LIFE 
SCIENCES INVESTMENTS Project 

UK, Ireland 

SME Financing (*) 

Spain 

smaller 
companies 
smaller 
companies 

smaller 
companies 

RDI, Social, 
smaller 
companies 
smaller 
companies 

43 

44 

45 

46 

47 

48 

49 

50 

51 

52 

53 

54 

55 

130 

50 

52 

* 

* 

2115 

* 

88 

96 

252 

* 

280 

364 

70 

1425 

* 

150 

50 

507 

190 

44 

50 

125 

200 

100 

130 

70 

* 

26 

 
 
  
  
  
  
  
  
  
 
No 

Project name 

Country 

Main Sector 
(Objective as 
per EFSI 
Regulation) 

EFSI 
financing 
(approved -  
mEUR) 

EFSI 
financing 
(signed -  
mEUR) 

Related total 
EFSI 
investment 
(mEUR) 

56  Wind Turbine RDI (*) 
57 

LITHUANIAN AIRPORTS Project 

SEM ENERGIES POSIT-IF ILE DE 
FRANCE (PROGRAMME EE 
FRENCH PRIVATE HOUSING)  

SPEE EN PICARDIE (PROGRAMME 
EE FRENCH PRIVATE HOUSING)  

58 

59 

Germany 

Lithuania 

France 

RDI, Energy 

Transport 

Energy 

100 

30 

100 

100 

431 

44 

200 

France 

Energy 

24 

24 

58 

Total 

9,862 

4,545  

 34,365 

Source: EIB 

27 

 
 
  
  
 
No 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

Table 6: IIW - Equity sub-window projects 

Project name  

Country 

Main Sector 
(Objective as 
per EFSI 
Regulation) 

EIB finance under 
EFSI (approved -  
mEUR) 

EIB finance 
under EFSI 
(signed -  
mEUR) 

Related 
total EFSI 
Investment 
(mEUR) 

COPENHAGEN INFRASTRUCTURE II Project  Denmark, UK, 

Energy 

CAPENERGIE 3 FUND (FR) 

IF TRI EN NORD-PAS DE CALAIS 

GINKGO FUND II 

IMPAX CLIMATE PROPERTY FUND 

ICO INFRASTRUCTURE RISK SHARING 
LOAN 
Co-investment Wind (*) 

Germany, 
Regional EU 
countries 
Regional - EU 
Countries, 
France, Italy, 
Germany 
France 

Regional – EU 
Countries, 
France, Belgium 

UK 

Spain 

Energy 

Environment 
and resource 
efficiency 
Environment 
and resource 
efficiency 

Energy 

Multi 

Sweden 

Energy 

QUAERO EUROPEAN INFRASTRUCTURE 
FUND 

Regional – EU 
Countries 

ODEWALD RENEWABLE ENERGY 
INFRASTRUCTURE FUND 

SUSI RENEWABLE ENERGY FUND II 

Regional – EU 
Countries 

Regional – EU 
Countries 

Multi 

Energy 

Energy 

28 

75 

50 

20 

30 

36 

25 

16 

40 

80 

66 

75 

50 

20 

30 

25 

12 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

 
 
  
  
  
  
No 

11 

12 

13 

14 

15 

Project name  

Country 

GROWTH EQUITY FUND MID-CAPs 

Spain, Portugal 

IMPAX NEW ENERGY INVESTOR III FUND 

FONDS SPI - SOCIETE DE PROJETS 
INDUSTRIELS 

FOND-ICO RISK SHARING LOAN 

INFRACAPITAL GREENFIELD 
INFRASTRUCTURE FUND 

16  MIROVA BTP IMPACT LOCAL FUND 

DASOS FUND II CO-INVESTMENT 
FORESTRY  

CUBE INFRASTRUCTURE FUND II 

17 

18 

Regional – EU 
Countries 

France 

Spain, Multi-
country 
Regional - EU 
Countries, UK 

France 

Ireland 

Regional - EU 
countries, 
Norway, 
Switzerland 

Main Sector 
(Objective as 
per EFSI 
Regulation) 

smaller 
companies 

Energy 

RDI, smaller 
companies 

smaller 
companies 
Multi 

Multi 

Environment 
and resource 
efficiency 

Multi 

EIB finance under 
EFSI (approved -  
mEUR) 

EIB finance 
under EFSI 
(signed -  
mEUR) 

Related 
total EFSI 
Investment 
(mEUR) 

40 

 125 

40 

75 

100 

125 

* 

* 

* 

100 

* 

* 

* 

* 

* 

* 

* 

* 

Source: EIB 

Total 

 1,054  

265 

23,500 

29