COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON THE GUARANTEE FUND FOR EXTERNAL ACTION AND ITS MANAGEMENT IN 2018
Date: 2019-08-05
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Community loan, European Investment Bank, budgetary reserve (EU), closing of accounts, credit guarantee, financial control, fund (EU), general budget (EU), publication of accounts

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.8.2019 SWD(2019) 314 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON THE GUARANTEE FUND FOR EXTERNAL ACTION AND ITS MANAGEMENT IN 2018  {COM(2019) 363 final}  
 
 
TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

Introduction .................................................................................................................. 3 

Fund Management report ............................................................................................. 3 

Development of the Fund in 2018 ........................................................................... 3 

Situation of the Fund ............................................................................................... 4 

2.2.1.  Contributions as at 31 December 2018 ........................................................................ 4 

2.2.2.  The Fund’s holdings net of accrued interest at 31 December 2018 ............................. 4 

2.3. 

General and segmental analyses of the Fund .......................................................... 5 

2.3.1.  Liquidity analysis ......................................................................................................... 5 

2.3.2.  General analysis of the results of the Fund .................................................................. 5 

2.3.3.  Analysis by segment .................................................................................................... 6 

2.4. 

Benchmarking, performance and interest rate risk analysis .................................. 12 

2.4.1.  Benchmarking ............................................................................................................ 12 

2.4.2.  Performance ............................................................................................................... 13 

2.4.3. 

Interest rate risk .......................................................................................................... 14 

3. 

Guarantee Fund Financial Statements as at 31 December 2018 ................................ 15 

3.1. 

3.2. 

General disclosures ................................................................................................ 20 

Significant accounting policies ............................................................................. 20 

3.2.1.  Basis of preparation.................................................................................................... 20 

3.2.2.  Changes in accounting policies .................................................................................. 21 

3.2.3.  Significant accounting judgments and estimates ....................................................... 21 

3.2.4.  Summary of significant accounting policies .............................................................. 21 

3.2.5.  Taxation...................................................................................................................... 26 

3.3. 

Financial Risk Management .................................................................................. 26 

3.3.1.  Risk management organisation .................................................................................. 26 

1 

 
 
3.3.2.  Credit Risk ................................................................................................................. 27 

3.3.3.  Liquidity Risk ............................................................................................................ 31 

3.3.4.  Market Risk ................................................................................................................ 32 

3.3.5.  Foreign exchange risk exposure ................................................................................. 33 

3.4. 

Fair value of financial instruments ........................................................................ 34 

3.4.1.  Accounting classifications and fair value .................................................................. 34 

3.4.2.  Measurement of fair values ........................................................................................ 36 

3.4.3.  Transfers between level 1 and level 2 ........................................................................ 36 

3.4.4.  Level 3 fair value ....................................................................................................... 36 

3.5. 

3.6. 

3.7. 

3.8. 

3.9. 

Bond portfolio ....................................................................................................... 36 

Cash and cash equivalents ..................................................................................... 37 

Recovery fees ........................................................................................................ 37 

Contributions ......................................................................................................... 37 

Other payables (in EUR) ....................................................................................... 38 

3.10. 

Subsequent events ................................................................................................. 38 

2 

 
 
 
GUARANTEE FUND 

1. 

INTRODUCTION 

According to the Article 7 of the Guarantee Fund Regulation, the assets of the Guarantee Fund 
(the "Fund") are managed by the EIB (the "Bank"). The Management agreement signed between 
the European Commission (the "Commission") and the Bank defines the principles governing the 
management of assets. 

Under  Article 8(2)  of  the  Agreement,  at  the  beginning  of  March  of  each  year  the  Bank  has  to 
send the Commission an annual status report on the Fund and the management thereof and the 
financial statements of the Fund for the preceding year. 

The  management  report  on  the  Fund  is  presented  in  the  section  2  of  this  Commission  Staff 
Working Document (SWD). The financial statements audited by an external auditor are included 
in section 3. 

2. 

FUND MANAGEMENT REPORT 

2.1. 

Development of the Fund in 2018 

As  at  31  December  2018  total  assets  (excluding  accrued  interest)  of  the  Guarantee  Fund  (the 
to  EUR 2,596.7 million1 
at 
“Fund”) 
31 December 2017, an increase of EUR 50.1 million. 

against  EUR 2,546.6 million 

amounted 

as 

 2.625

 2.575

 2.525

2018
2017

)
o
r
u
e
n
o

i
l
l
i

m

(

 2.475

 2.425

Jan

Feb Mar Apr May Jun

Jul Aug

Sep Oct Nov Dec

Fig.1: Development of total assets in 2018 and 2017 

The net operating result amounted to EUR 12.04 million at 31 December 2018 compared with 
EUR 15.97 million at 31 December 2017 representing a decrease of 24.6%. 

1 

The  balance  of  total  assets  includes  a  contribution  receivable  of  EUR  103.2  million  which  is  due  to  be  paid  in  2019 
(2018: EUR 137.8 million). In the chart presented in figure 1 contributions receivable are recognized as assets in December 
of the corresponding years. 

The accompanying notes form an integral part of these financial statements. 

Page 3 

 
 
                                                 
 
 
 
   
GUARANTEE FUND 

2.2. 

Situation of the Fund 

2.2.1.  Contributions as at 31 December 2018 

2.2.1.1.  Contributions paid in as at 31 December 2018 

The  net  contributions  paid  into  the  Fund  by  the  European  Union  budget  increased  by 
EUR 82.2 million  or  5.8% 
to 
EUR 1,495.2 million at 31 December 2018.  

from  EUR  1,413.0  million  at  31  December  2017 

This is explained by the movements shown in the following table: 

Contributions paid in (in EUR) 

Provisioning 
Repayment of surplus 
Activation of guarantee calls 
Recovery of historic called 
amounts 
Repayment of Funds  

Situation at 
31/12/2017 

4,245,989,017 
-1,775,870,000 
-880,157,459 

578,854,354 

-755,856,713 

Movements in 2018  Situation at 31/12/2018 

137,800,722 
0 
-55,725,492 

136,093 

0 

4,383,789,739 
-1,775,870,000 
-935,882,951 

578,990,447 

-755,856,713 

Balance 

1,412,959,199 

82,211,323 

1,495,170,522 

2.2.1.2.  Contributions payable and receivable as at 31 December 2018 

As at 31 December 2018 the Fund has recorded EUR 103.2 million (2017: EUR 137.8 million) 
as contributions to be paid in by the European Union. In addition, as at 31 December 2018 the 
fund  has  recorded  EUR  Nil  (2017:  EUR  136,093)  as  contribution  receivable  from  historically 
called amounts. 

2.2.2.  The Fund’s holdings net of accrued interest at 31 December 2018 

The  Fund’s  holdings  at  31  December  2018  excluding  accrued  interest  and  contributions 
receivable totalled EUR 2,493.5 million as detailed below: 

– 
– 
– 

EUR 14.0 million in the monetary portfolio (nominal value of interbank term deposits); 
EUR 27.6 million in the current accounts;  
EUR 2,451.9 million in the Available For Sale (AFS) (portfolio market value of fixed rate 
bonds, floating rate bonds, zero-coupon bonds and commercial papers, excluding accrued 
interest). 

The Fund operates in one currency only, the Euro. 

2.3. 

General and segmental analyses of the Fund 

2.3.1.  Liquidity analysis 

The  liquidity  position  of  the  Fund  at  31  December  2018  is  outlined  in  the  table  below.  The 
liabilities  shown  in  the  column  "maturity  undefined"  represent  the  Contributor's  (i.e.  European 
Union's) resources.  

Liquidity position as at 31 December 2018 (in EUR million): 

The accompanying notes form an integral part of these financial statements. 

Page 4 

 
 
 
 
 
 
GUARANTEE FUND 

Maturity 

less than 
3 months 

3 months to 
1 year 

Total assets 

203 

120 

1 to 10 
years 

2,287 

maturity 
undefined 

0 

Total net assets 
Total liabilities 
Total net assets and 
liabilities 

0 
-1 

-1 

0 
0 

0 

0 
0 

0 

-2,609 
0 

-2,609 

Total 

2,610 

-2,609 
-1 

-2,610 

Net liquidity position 

202 

120 

2,287 

-2,609 

0 

2.3.2.  General analysis of the results of the Fund 

Overall,  during  the  reporting  period  1  January  2018  to  31  December  2018  the  Fund  achieved 
EUR 12.04 million in net revenue. The following table outlines the net revenue earned in 2018 
and compares it with 2017: 

In EUR million 

From 1 January to 
31 December 2018 

From 1 January to 
31 December 2017 

Interest income on cash and cash equivalents 
Interest income on AFS assets 
Realised gain on sale of AFS assets 
Income from securities lending activity 
Interest expense on cash and cash equivalents 
Realised loss on sale of AFS assets 
Commission and other charges 

0.00 
6.29 
9.96 
0.08 
-0.86 
-0.45 
-2.98 

0.0% 
52.2% 
82.7% 
0.7% 
-7.1% 
-3.7% 
-24.8% 

0.00 
8.76 
9.20 
0.10 
-0.96 
-0.03 
-1.10 

0.0% 
54.9% 
57.6% 
0.6% 
-6.0% 
-0.2% 
-6.9% 

Total 

12.04 

100.0% 

15.97 

100.0% 

2.3.3.  Analysis by segment 

2.3.3.1.  Analysis of money market operations 

Money-market  investments  (excluding  accrued  interest)  amount  to  EUR 14.0 million  at 
31 December 2018, as compared to EUR 224.2 million the year before. 

  Market development in 2018 

The  year  was  characterized  by  volatile  yield  movements  on  European  fixed  income 
markets  with  rates  moving  higher  in  Q1  due  to  ECB  QE  taper  expectations.  Rates  then 
moved  to  annual  lows  at  the  end  of  the  year  due  to  softening  economic  growth.  Credit 
spreads  edged  higher  during  the  year  and  the  move  accelerated  in  December  on  falling 
equity markets and expectation of tighter monetary policies. 

The accompanying notes form an integral part of these financial statements. 

Page 5 

 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
GUARANTEE FUND 

Throughout  the  year,  financial  markets  were  effected  by  the  following  risk  factors.  The 
imposition  of  trade  tariffs  by  president  Trump  slowed  economic  growth,  and  inflation 
remained  below  the  central  bank  targets  due  to  low  commodity  prices  and  globalization 
factors.  The  uncertain  outlook  of  Brexit  negotiations  weighed  on  UK  financials  and 
corporates.  The  ramifications  of  the  March  Italian  elections  were  felt  in  May,  as  Italian 
spreads widened out to more than 250 basispoints vs Germany as the market worried about 
a possible exit from the Euro and redenomination of Italian bonds. This led to a widening 
of peripheral spreads and financial spreads as well.  

Monetary  policy  of  major  global  central  banks  became  tighter  in  2018.  The  US  FED 
continued its rate hike cycle every quarter by 25 basispoints raising the FED funds target 
rate to 2.5-2.75% range by year-end. The ECB has reduced the monthly net asset purchases 
as  part  its  quantitative  easing  policy  from  EUR  30bn  to  EUR  15bn  in  September  and 
terminated the net purchases at the end of 2018. The reinvestments of the maturing bonds 
on  the  ECB  balance  sheet  will  keep  support  the  markets.  However,  more  recently,  the 
monetary  policy  on  both  sides  of  the  Atlantic  has  turned  more  dovish  with  increasing 
uncertainties. The market expectations for further FED hikes have been priced out and the 
first tightening for the ECB has been postponed to 2020. Economic growth is expected to 
slow  down  from  2.9%  in  2018  to  2.5%  in  2019  for  US,  and  from  1.9%  to  1.4%  for  the 
Eurozone. Despite of the slowdown, a recession seems to be avoidable for the time being, 
as employment and wages remain firm and fiscal policy will turn expansionary after many 
years of fiscal tightening. 

Going  forward,  in  2019  we  expect  market  volatility  to  remain,  as  uncertainty  around 
Brexit,  growth  slowdown  and  European  Parliamentary  elections  will  effect  market  rates 
being currently close to historical lows. In the same time credit spreads are tend to move 
wider as the economic cycle matures in the US and central bank asset purchases has been 
terminated in EU. 

 

Profile of counterparties 

In  accordance  with  the  agreement  between  the  European  Union  and  the  EIB  on  the 
management of the Fund, all banks with which deposits are placed should have a minimum 
short-term credit rating of P-1 (Moody's or equivalent). As at 31 December 2018 the short 
term  interbank investments  were held  with  the  counterparty that has  the  long term credit 
rating of Aa3 and the short term credit rating of P-1 (Moody's or equivalent). 

2.3.3.2.  Analysis of bond portfolio results  

The  bond  portfolio,  seen  as  a  long-term  investment  portfolio,  is  made  up  of  euro-denominated 
securities  initially  acquired  with  the  intention  of  holding  them  until  maturity.  In  the  Fund’s 
Financial Statements these securities are classified as Available for Sale (AFS) in line with the 
EC accounting rule 112. At 31 December 2018, the market value (excluding accrued interest) of 
securities  with  a  residual  period  to  maturity  of  less  than  three  months  amounted  to 
EUR 57.2 million,  between  3 months  and  one  year  EUR  119.4  million  and  between  one  and 
10 years EUR 2,275.3 million. 

2 

The  Available  for  Sale  portfolio  also  includes  the  zero-coupon  bonds  and  commercial  papers  with  original 
maturities of more than three months. 

The accompanying notes form an integral part of these financial statements. 

Page 6 

 
                                                 
GUARANTEE FUND 

The  starting  value  of  the  securities  in  this  portfolio  is  the  acquisition  cost.  The  difference 
between  the  entry  price  and  the  redemption  value  is  the  premium/discount  spread,  which  is 
amortised over the remaining life of each of the securities using the effective interest rate method 
as specified in the EC accounting rules. 

At  31  December  2018, 
EUR 2,399.4 million, against a clean market value of EUR 2,451.9 million. 

the  nominal  value  of 

the 

investment  bond  portfolio  was 

The  global  (modified)  duration  of  the  bond  portfolio  decreased  over  2018  to  reach  2.58  at  the 
end  of  the  year.  As  of  31 December 2018,  the  clean  market  value  of  the  investment  bond 
portfolio came to EUR 2,451.9 million (2017: EUR 2,184.5 million) compared with a book value 
(including  premiums/discounts)  of  EUR  2,439.7  million  (2017:  EUR 2,161.8  million),  which 
gives an unrealised fair value result of EUR +12.2 million (2017: EUR +22.7 million).  

In the 12-month period until December 2018, the German sovereign  yield curve bull flattened.  
The front-end of the curve until the 2-year rose marginally by 0-2 basispoints, as the ECB has 
terminated its quantitative easing monetary policy, rate hike expectations rose. In the same time 
the  mid  to  long  part  of  the  curve  moved  lower,  as  the  Euro  area  economic  outlook  has 
deteriorated and inflation remained below the ECB target.  

Fig. 2: Bull-flattening of the German sovereign yield curve during 2018 (source: Bloomberg) 

The  positive  absolute  performance  of  the  portfolio  was  driven  by  lower  yields,  while  the 
widening  of  credit  spreads  somewhat  reduced  the  result.  However,  the  spread  widening  was 
relatively smaller in higher quality credit segments, where the portfolio is typically invested. As 
rates  moved  lower,  the  contribution  of  floating  rate  notes  was  negative.  The  portfolio  absolute 
performance resulted 10 basispoints throughout 2018, which translates to a positive contribution 
of roughly EUR 2.4 million. 

After  the  negotiations  have  ended  between  EIB  and  the  Commission,  updated  Asset 
Management Guidelines  (AMGs) have been approved and were implemented in October 2018. 
This allows the portfolio to be invested in the full range of investment grade securities, down to 
BBB credit rating. An updated investment strategy was sent to the Commission to comply with 
the new AMGs in Q4 2018. Separately, a new benchmark has been introduced in early 2019 to 
better represent the investment universe and the 4 eligible asset classes for the GF portfolio. 

The accompanying notes form an integral part of these financial statements. 

Page 7 

 
 
GUARANTEE FUND 

In  line  with  the  updated  investment  strategy  and  in  compliance  with  the  guidelines,  a  total 
nominal  amount  of  EUR  1,032.2  million  was  invested  in  four  asset  classes:  Sovereigns, 
Supranationals  and  Agencies  (SSA)  (EUR 536.9 million  or  52%),  covered  bonds  (EUR  110.5 
million  or  10.7%),  corporate  bonds  (EUR  130.1  million  or  12.6%)  and  financials  (EUR  254.7 
million or 24.7%) either on an outright or on a switch basis. The purchases were made both on 
the  primary  and  on  the  secondary  market.  All  of  the  transactions  aimed  to  maximize  the  risk 
return profile of the portfolio while satisfying the liquidity constraints. The charts below outline 
the total 2018 investments per asset class as well as in terms of country distribution. 

Corporate 
12,6% 

Financial 
24,7% 

SSA 
52,0% 

Covered 
10,7% 

SSA

Covered

Financial

Corporate

IS 
2,38% 

PL 
3,17% 

JP 
3,17% 

NL 
3,17% 

BE 
3,97% 

Fig. 3: 2018 Investments per asset class 

FI 
1,59% 

LV 
0,79% 

NO 
0,79% 

AU 
0,79% 

CH 
1,59% 

DK 
2,38% 

IE 
0,79% 

GB 
0,79%  HU 
0,79% 

DE 
16,67% 

FR 
15,08% 

SE 
7,94% 

CA 
12,70% 

SNAT 
3,97% 

ES 
4,76% 

US 
5,56% 

CZ 
7,14% 

Fig. 4: 2018 Investments per country of exposure 

The accompanying notes form an integral part of these financial statements. 

Page 8 

 
 
 
 
GUARANTEE FUND 

The below chart displays the maturity and instrument format split of the 2018 investments. It can 
be inferred from the chart that the 5Y tenor, as most attractive spot on the yield curve in terms of 
supply dynamics of new issuances. 

400.000.000

350.000.000

300.000.000

250.000.000

200.000.000

150.000.000

100.000.000

50.000.000

0

FLOATING

FIXED

2019

2020

2021

2022

2023

2024

2025

Fig. 5: 2018 Investments per maturity tenor and instrument type (EUR) 

 

Breakdown  of  the  investment  portfolio  between  fixed  rate  and  variable  rate  securities 
(nominal value) 

Variable rate  
11% 

Fixed rate  89% 

Fig. 6: Investment portfolio breakdown between fixed3 and variable rate securities at 31 December 2018 

 

3 

Redemption profile of investment portfolio (nominal value) 

The fixed rate portfolio includes the zero-coupon bonds and commercial papers. 

The accompanying notes form an integral part of these financial statements. 

Page 9 

 
 
 
 
 
                                                 
GUARANTEE FUND 

FLOATING

FIXED

600.000.000

500.000.000

400.000.000

300.000.000

200.000.000

100.000.000

0

2019

2020

2021

2022

2023

2024

2025

2026

Fig.7: Investment portfolio: Redemption profile at 31 December 2018 (EUR) 

The latest final maturity date for fixed rate securities is 7 December 2026. 

 

Profile of issuers 

The Asset Management Guidelines for GF have been revised by EIB and DG ECFIN, and 
the revised version came into force at the end of September 2018. 

According  to  the  new  guidelines,  the  investment  universe  is  broader  and  it  can  include 
investment grade corporate and financial institutions (with a second best rating4 higher or 
at  least  equal  to  Baa3).  The  new  guidelines  follow  the  FAFA  template  for  defining  the 
eligibility criteria for different entities and the limit amounts. 

The securities held in the portfolio are in line with the new asset management guidelines 
and meet the following criteria for: 

– 

– 
– 

– 

Securities  issued  or  guaranteed  by  European  Union  or  Euratom:  minimum  rating 
Baa3; 
Securities issued or guaranteed by Member States5: minimum rating Baa3; 
Securities issued (or guaranteed) by a Supranational in which Member States have a 
participation,  or  by  sovereigns  that  are  not  Member  States  of  the  EU:  minimum 
rating Aa2; 
Securities issued by other legal entities: minimum rating Baa3. 

The profile of issuers by issuer type and long term rating 65
(nominal amount) at 31 December 2018 is as follows: 

6 of the investment portfolio 

4 
5 

6 

The second best rating of the three rating agencies: S&P, Moody’s and Fitch 
The second best rating of the three rating agencies: S&P, Moody’s and Fitch Member States securities (including securities 
guaranteed by Member States) may be kept in an event of downgrade below the minimum requirements. This applies also 
to cases where the rating downgrade would trigger a lower limit. 
Reported ratings are ratings of the respective issues. In the absence of all bond/issue ratings, the respective issuer ratings (in 
case of guaranteed positions the guarantor ratings) have been reported. 

The accompanying notes form an integral part of these financial statements. 

Page 10 

 
 
 
 
                                                 
GUARANTEE FUND 

Public Institution Aaa 
12,55% 

Banks Aa1 
1,92% 

Banks Aa2 
6,37% 

Corporates Aa2 
7,23% 

Corporates Aaa 
2,33% 

Corporates Baa1 
2,30% 

Public Institution Aa2 
2,44% 

Public Institution Aa1 
2,40% 

Other 
15,96% 

Member State Baa3 
2,21% 

Member State Aaa 
5,30% 

Member State Aa3 
1,97% 

Member State A2 
5,88% 

Member State A1 
2,33% 

Member State Aa2 
8,92% 

Covered Bonds Aaa 
19,89% 

Fig.8: Investment portfolio: Profile of issuers at 31 December 20187 

2.4. 

Benchmarking, performance and interest rate risk analysis 

2.4.1.  Benchmarking 

The  performance  of  the  Fund  is  monitored  on  a  marked-to-market  (MTM)  basis  against  a 
composite index. This index is the result of the combination of the following sub-indices: 

– 
– 
– 

– 

Euribid 1M for money-market operations; 
Euribid 3M for floating rate notes and fixed rate bond with less than one year to maturity; 
IBOXX  EUR  Sovereign  indices  for  fixed  rate  bonds  issued  by  sovereign  (or  similar) 
issuers, split by maturity buckets; 
IBOXX EUR Collateralized Covered indices for fixed rate bonds issued by non-sovereign 
issuers, split by maturity buckets. 

Index weightings are based on portfolio composition and are reviewed: 

– 

7 

at each end-month day: the dates which define the time buckets (up to 1y, from 1y to 3y, 
from 3y to 5y, from 5y to 7y and from 7y to 10y) are updated. As a consequence, the shifts 
between buckets due to the aging of existing positions are accounted only once per month 
at  end-month,  following  the  same  procedure  underlying  the  managing  of  the  IBOXX’s 
indexes; 

The “Other” category presented in figure 8 includes: Member State Baa2 (1.67%), Member State Aa1 (1.65%), Member 
State  A3  (1.61%),  Supranational  Aaa  (1.46%),  Corporates  A3  (1.08%),  Corporates  Aa1  (1.04%),  Banks  Aa3  (1.04%), 
Corporates  A1  (0.96%),  Non-EU  Public  Institution  A1  (0.84%),  Banks  A1  (0.83%),  Supranational  Aa1  (0.80%),  Banks 
Baa1 (0.61%), Corporates A2 (0.54%), Banks A2 (0.43%), Supranational Aa2 (0.42%), Corporates Baa2 (0.29%), Public 
Institution A3 (0.21%), Non-EU Public Institution Aa3 (0.21%), Non-EU Public Institution Aaa (0.17%), Corporates Aa3 
(0.10%). 

The accompanying notes form an integral part of these financial statements. 

Page 11 

                                                 
GUARANTEE FUND 

– 

during  the  month,  whenever  a  change  higher  then  ±5%  in  one  of  the  asset-classes  (with 
respect to the last benchmark’s adjustment) is observed. This change can be the result of: 

 

 

 

 

 

the  impact  of  a  contribution  from  the  European  Commission  to  the  portfolio 
(external cash flows from the European Commission); 

the impact of a withdrawal from the portfolio to the European Commission (external 
cash flows to the European Commission); 

the impact of a transaction settled (sales and purchases); 

the impact of a redemption; 

the  sum  of  the  impacts  of  previous  events  accumulated  from  the  last  benchmark’s 
adjustment,  taking  also  into  consideration  the  changes  in  the  clean  values  of  the 
positions.  

Instrument 

Money Market 
FRN and Fixed Rate 
Bonds 

Fixed 

Rate 

Bonds 

Performance Benchmark 
Sector 
1 m 

3 m 

sovereign 

covered bonds 

sovereign 

covered bonds 

sovereign 

covered bonds 

sovereign 

covered bonds 

Bucket 
(years) 

0-1 

1-3 

3-5 

5-7 

7-10 

Total 

Average Clean Market Value 
Composition of 2018 
10.6% 

15.4% 

17.2% 

11.3% 

20.5% 

17.2% 

4.5% 

2.2% 

0.6% 

0.5% 

100.00% 

2.4.2.  Performance 

The  performance  of  the  Fund  portfolio  was  monitored  on  a  marked-to-market  basis.  During 
2018,  the  portfolio  delivered  a  0.1005%  MTM  yearly  return,  outperforming  its  benchmark  by 
+13.5  bps.  The  evolution  of  the  portfolio  return  and  excess  return  vis-à-vis  its  benchmark  is 
presented in the following table: 

Portfolio8 

Out-performance 

8 

The  Benchmark  comprises  independently  calculated  IBOXX  indexes.  The  prices  of  the  securities  represented  in  the 
IBOXX indexes are sourced from Markit, which is the same source used for the prices of the correspondent securities in the 
table. These prices are different from the ones used for the financial reporting purposes. CBBT/BGN+ quotes (Bloomberg) 
is  the  source  of  pricing  of  the  securities  for  the  year-end  financial  reporting.The  Benchmark  comprises  independently 
calculated IBOXX indexes. The prices of the securities represented in the IBOXX indexes are sourced from Markit, which 
is the same source used for the prices of the correspondent securities in the table. These prices are different from the ones 
used for the financial reporting purposes. CBBT/BGN+ quotes (Bloomberg) is the source of pricing of the securities for the 
year-end financial reporting. 

The accompanying notes form an integral part of these financial statements. 

Page 12 

 
 
 
 
 
 
 
 
  
                                                 
GUARANTEE FUND 

Market Value 
(including 
accrued interest) 

Monthly  
return 
(absolute 
return in %) 

YTD  return 
(absolute 
return in %) 

Monthly 
Excess Return 
compared to 
benchmark 
(in%) 

YTD 
Excess 
Return (in%) 

31/01/2018 

2,414,728,998 

-0.3514 

-0.3514 

28/02/2018 

2,551,764,158 

0.0986 

-0.2532 

31/03/2018 

2,550,075,123 

0.2249 

-0.0289 

30/04/2018 

2,548,274,171 

-0.0704 

-0.0994 

31/05/2018 

2,550,441,038 

0.0853 

-0.0141 

30/06/2018 

2,536,610,812 

0.1347 

0.1206 

31/07/2018 

2,534,109,894 

-0.0987 

0.0217 

31/08/2018 

2,533,049,581 

0.0842 

0.1059 

30/09/2018 

2,519,374,083 

-0.2090 

-0.1033 

31/10/2018 

2,522,045,115 

0.1063 

0.0029 

30/11/2018 

2,518,132,850 

-0.0078 

-0.0049 

31/12/2018 

2,505,404,235 

0.1054 

0.1005 

-0.048 

0.017 

-0.116 

0.025 

0.496 

-0.128 

0.036 

0.244 

-0.132 

0.055 

-0.163 

-0.152 

-0.048 

-0.031 

-0.147 

-0.122 

0.374 

0.247 

0.283 

0.526 

0.394 

0.449 

0.287 

0.135 

2.4.3. 

Interest rate risk 

The interest rate risk sensitivity of the MTM value of the portfolio mainly stems from its fixed 
rate exposure. A 1bp increase of interest rates reduces the value of the portfolio by EUR 646,571 
of which EUR 626,227 is related to the fixed rate bond exposure. The global modified duration 
of the fund decreased during 2018 and stood at 2.58 years as of 31 December 2018, compared to 
2.93 years as of 31 December 2017. 

GF Sub- Portfolios 

Floating Rate Notes 

Fixed Rate Bonds 

Money Market 
Instruments 

Cash account 

Market Value (excluding 
accrued interest) 

Modified 
Duration (Years) 

302,709,477 

2,132,631,411 

29,025,962 

27,567,036 

0.645 

2.918 

0.261 

Interest Rate 
Exposure (+/-1bp) 
+/- 19,589 

+/- 626,227 

+/- 755 

The accompanying notes form an integral part of these financial statements. 

Page 13 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
GUARANTEE FUND 

Total GF 

2,491,933,885 

2.580 

+/- 646,571 

The accompanying notes form an integral part of these financial statements. 

Page 14 

 
GUARANTEE FUND 

3. 

GUARANTEE FUND FINANCIAL STATEMENTS AS AT 31 DECEMBER 2018 

GUARANTEE FUND 

FINANCIAL STATEMENTS 

AS AT 31 DECEMBER 2018 

 Balance sheet 

 Statement of financial performance 

 Statement of changes in net assets 

 Cash flow statement 

 Notes to the financial statements 

 Independent auditor’s report 

The accompanying notes form an integral part of these financial statements. 

Page 15 

 
 
 
 
 
 
 
 
 
 
                                                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

Balance sheet  
as at 31 December 2018 
(in EUR) 

ASSETS 
NON-CURRENT ASSETS 
Available for Sale portfolio 

Bond portfolio – cost 
Bond portfolio – actuarial difference 
Bond portfolio – adjustment to fair value 

Total Available for Sale Portfolio 
TOTAL NON-CURRENT ASSETS 
CURRENT ASSETS 
Available for Sale portfolio 

Bond portfolio – cost 
Bond portfolio – actuarial difference 
Bond portfolio – adjustment to fair value 
Bond portfolio – accrued interest 
Total Available for Sale portfolio 
Short-term receivables 

Contributions receivable 
Guarantee recoveries receivable 

Total short-term receivables 
Cash and cash equivalents 

Current accounts 
Short-term deposits – nominal  
Short-term deposits - accrued interest 

Total cash and cash equivalents 
TOTAL CURRENT ASSETS 
TOTAL ASSETS 

NET ASSETS AND LIABILITIES 
NET ASSETS 
Contributions  

Net contributions paid in 
Contributions allocated but not yet paid in 
Recovery of historically called amount 

Reserves 

Fair value reserve 
Accumulated surplus 
Economic result of the year 
TOTAL NET ASSETS 
LIABILITIES 
CURRENT LIABILITIES 

Other payables 

TOTAL CURRENT LIABILITIES 
TOTAL NET ASSETS AND LIABILITIES 

Notes 

31.12.2018 

31.12.2017 

5 

5 

8 
8 

6 

2,293,850,557.65 
-30,233,231.86 
11,725,338.09 
2,275,342,663.88 
2,275,342,663.88 

2,082,107,277.55 
-26,519,432.19 
22,382,639.48 
2,077,970,484.84 
2,077,970,484.84 

180,593,535.40 
-4,523,470.02 
501,853.62 
13,186,177.35 
189,758,096.35 

103,222,935.00 
0.00 
103,222,935.00 

106,392,110.10 
-201,075.31 
317,415.21 
14,263,342.00 
120,771,792.00 

137,800,722.00 
136,092.88 
137,936,814.88 

27,567,035.62 
14,000,000.00 
-8,983.34 
41,558,052.28 
334,539,083.63 
2,609,881,747.51 

45,569,131.18 
178,600,000.00 
-86,378.27 
224,082,752.91 
482,791,359.79 
2,560,761,844.63 

Notes 

31.12.2018 

31.12.2017 

8 

9 

1,495,170,522.10 
103,222,935.00 
0.00 

1,412,959,199.11 
137,800,722.00 
136,092.88 

12,227,191.71 
986,210,996.77 
12,036,762.67 
2,608,868,408.25 

22,700,054.69 
970,244,126.84 
15,966,869.93 
2,559,807,065.45 

1,013,339.26 
1,013,339.26 
2,609,881,747.51 

954,779.18 
954,779.18 
2,560,761,844.63 

The accompanying notes form an integral part of these financial statements. 

Page 16 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

Statement of financial performance 
For the year ended 31 December 2018 
(in EUR) 

Expenses from operating activities 
      Management fees 
      Audit fees 
      Bank fees 
      Recovery fees 

From 01.01.2018 
to 31.12.2018 

From 01.01.2017 
to 31.12.2017 

-2,978,737.26 
-894,626.42 
-39,500.00 
-143,460.81 
-1,901,150.03 

-1,103,635.38 
-915,279.18 
-39,500.00 
-148,856.20 
0.00 

7 

Result from operating activities 

-2,978,737.26 

-1,103,635.38 

Financial revenue 
Interest income 
       Cash and cash equivalents 
      Bond portfolio 
Realised gain on sale of Bond portfolio 
Income from securities lending activity 

Financial expenses 
Interest expense 
       Cash and cash equivalents 
Realised loss on sale of Bond portfolio 

6,292,695.57 
1,182.91 
6,291,512.66 
9,961,013.96 
76,535.48 

8,763,127.37 
2,414.67 
8,760,712.70 
9,195,734.53 
100,034.32 

-865,166.98 
-865,166.98 
-449,578.10 

-961,138.17 
-961,138.17 
-27,252.74 

Result from non-operating activities 

15,015,499.93 

17,070,505.31 

ECONOMIC RESULT OF THE YEAR  

12,036,762.67 

15,966,869.93 

Items directly recognised in net assets 
Net change in fair value of Bond portfolio 
Net amount transferred to statement of financial performance 
NET RESULT RECOGNISED IN NET ASSETS 

-657,312.28 
-9,815,550.70 
-10,472,862.98 

-11,916,684.46 
-876,907.33 
-12,793,591.79 

The accompanying notes form an integral part of these financial statements. 

Page 17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

Statement of changes in net assets 
For the year ended 31 December 2018 
(in EUR) 

Balance as at 01.01.2017 
Contributions from the European Commission allocated 
but not yet paid 
Contributions repaid to the European Commission 
Contributions paid to the EIB as guarantee call 
Change of fair value reserve 
Allocation of the Economic result of the year 2016 
Economic result of the year 2017 
Balance as at 31.12.2017 
Contributions from the European Commission allocated 
but not yet paid 
Contributions paid to the EIB as guarantee call 
Change of fair value reserve 
Allocation of the Economic result of the year 2017 
Economic result of the year 2018 
Balance as at 31.12.2018 

7 

7 
5 

7 

7 
5 

Contributions 
1,499,383,804.67 

reserve 
35,493,646.48 

Fair value              

Accumulated 
surplus 
940,394,573.31 

Economic result of 
the year 
29,849,553.53 

Total net assets 
2,505,121,577.99 

137,800,722.00 

0.00 

0.00 

0.00 

137,800,722.00 

136,092.88 
-86,424,605.56 
0.00 
0.00 
0.00 
1,550,896,013.99 

0.00 
0.00 
-12,793,591.79 
0.00 
0.00 
22,700,054.69 

0.00 
0.00 
0.00 
29,849,553.53 
0.00 
970,244,126.84 

0.00 
0.00 
0.00 
-29,849,553.53 
15,966,869.93 
15,966,869.93 

136,092.88 
-86,424,605.56 
-12,793,591.79 
0.00 
15,966,869.93 
2,559,807,065.45 

103,222,935.00 

0.00 

0.00 

0.00 

103,222,935.00 

-55,725,491.89 
0.00 
0.00 
0.00 
1,598,393,457.10 

0.00 
-10,472,862.98 
0.00 
0.00 
12,227,191.71 

0.00 
0.00 
15,966,869.93 
0.00 
986,210,996.77 

0.00 
0.00 
-15,966,869.93 
12,036,762.67 
12,036,762.67 

-55,725,491.89 
-10,472,862.98 
0.00 
12,036,762.67 
2,608,868,408.25 

The accompanying notes form an integral part of these financial statements. 

Page 18 

 
 
  
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

Cash flow statement  
For the year ended 31 December 2018 
(in EUR) 

Notes 

From 01.01.2018 
to 31.12.2018 

From 01.01.2017 
to 31.12.2017 

Operating activities 
     Treasury management fee paid during the year 
     Recovery fees paid during the year 
     Bank fees / audit fees paid during the year 
     Contributions paid  as guarantee call 
     Guarantee recoveries received from EIB 
Net cash flows used in operating activities 
Investing activities 
     Net interest paid on cash and cash equivalents 
     Purchase of investments - Bond portfolio 
     Proceeds of investments - Bond portfolio 
     Interest received - Bond portfolio 
     Income from securities lending activity 
Net cash flows used in investing activities 
Financing activities 
      Contributions received from the European Commission  
 Net cash flows from financing activities 
Net (decrease)/increase in cash and cash equivalents 

5 

7 

-915,279.18 
-1,821,937.19 
-180,770.99 
-55,725,491.89 
136,092.88 
-58,507,386.37 

-943,568.82 
-1,067,048,346.00 
781,731,604.17 
24,288,343.98 
76,535.48 
-261,895,431.19 

-891,975.15 
0.00 
-183,608.61 
-86,424,605.56 
0.00 
-87,500,189.32 

-946,897.88 
-831,402,720.51 
678,490,886.73 
27,956,264.34 
100,034.32 
-125,802,433.00 

137,800,722.00 
137,800,722.00 
-182,602,095.56 

240,540,250.00 
240,540,250.00 
27,237,627.68 

Cash and cash equivalents at the beginning of the 
financial year 
Cash and cash equivalents at the end of the financial year 

224,169,131.18 

196,931,503.50 

41,567,035.62 

224,169,131.18 

Cash and cash equivalents are composed of 
(excluding accrued interest): 

Current accounts 
Short-term deposits  
Total cash and cash equivalents 

27,567,035.62 
14,000,000.00 
41,567,035.62 

45,569,131.18 
178,600,000.00 
224,169,131.18 

The accompanying notes form an integral part of these financial statements. 

Page 19 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2018 

3.1. 

General disclosures 

The rules and principles for the management of the Guarantee Fund (the “Fund”) are laid out in 
the  Agreement  between  the  European  Commission  (the  “EC”)  and  the  European  Investment 
Bank  (the  “EIB”)  dated  25  November  1994  and  the  subsequent  amendments  to  the  Agreement 
dated 23 September 1996, 8 May 2002, 5 June 2002, 25 February 2008, 9 November 2010 and 
28 September 20189 (‘the Agreement’).  

The main principles of the Fund, as extracted directly from the Convention, are as follows: 

The Fund will operate in one single currency being Euro (EUR). It will exclusively invest in this 
currency in order to avoid any exchange rate risk. 

The  management  of  the  Fund  will  be  based  upon  the  traditional  rules  of  prudence  relating  to 
financial activities. Attention is given to control the risks and to ensure that the managed assets 
have  a  sufficient  degree  of  liquidity  and  transferability  while  considering  the  Fund’s 
commitments.  

In accordance with  the  Amendment Guarantee  Agreement dated 3 October 2018,  an Economic 
Resilience  Initiative  Private  Mandate  (ERI  Private  Mandate)  and  an  Economic  Resilience 
Initiative  Public  Mandate  (ERI  Public  Mandate)  were  set  up  to  grant  guarantees  to  the  bank 
against  losses  under  financing  operations  supporting  investments  in  private  and  public  projects 
directed to the long-term economic resilience of refugees, migrants, host and transit communities 
and communities of origin as a strategic response to addressing root causes of migration. The risk 
to  the Union budget  associated with  granted  guarantees to  the EIB Financing Operations under 
the ERI Private Mandate should be priced and the revenues generated from the commercial risk 
pricing should be paid into the Guarantee Fund. 

The present financial statements cover the period from 1 January 2018 to 31 December 2018. 

EIB’s management has authorized the financial statements for issue on 27 March 2019. 

3.2. 

Significant accounting policies 

3.2.1.  Basis of preparation 

The  Fund’s  financial  statements  have  been  prepared  in  accordance  with  the  accounting  rules 
adopted by the Accounting Officer of the European Commission, in particular “Accounting rule 
11  –  Financial  assets  and  liabilities”  dated  December  2004  and  updated  in  October  2006, 
December 2009  and December 20112.  

The  financial  statements  have  been  prepared  on  a  going  concern  basis,  which  assumes  that  the 
Fund will be able to meet the mandatory payments of the guarantees.  

According  to  articles  3,  5  and  6  of  Council  Regulation  (EC,  Euratom)  No  480/2009  of 
25 May 2009  if,  as  a  result  of  the  activation  of  guarantees  following  one  or  more  defaults, 
resources in the Fund fall below the set target amount of 9% of total outstanding capital liabilities 

9 

Supplementary Agreement no 5 to the Agreement relating to the Management of the Guarantee Fund between the European 
Union and the European Investment Fund - Ref. Ares(2018)5207374 - 10/10/2018. 

The accompanying notes form an integral part of these financial statements. 

Page 20 

 
 
                                                 
GUARANTEE FUND 

arising from each operation, plus any unpaid interest, then the European Commission transfers to 
the Fund the difference between the target amount and the value of the Fund’s net assets at the 
previous year-end balance sheet date.  

The  amounts  in  the  financial  statements  are  not  rounded  except  in  the  section  financial  risk 
management where the amounts are rounded to the nearest thousand EUR.  

3.2.2.  Changes in accounting policies 

The  Fund  has  consistently  applied  to  all  periods  the  accounting  policies  set  out  in  Note  2.4 
presented in these financial statements. 

3.2.3. 

Significant accounting judgments and estimates 

The preparation of financial statements in  conformity with  the  accounting  rules adopted by the 
Accounting Officer of the European Commission requires the use of certain  critical  accounting 
estimates.  It  also  requires  the  EIB  Management  to  exercise  its  judgment  in  the  process  of 
applying  the  Fund’s  accounting  policies.  The  areas  involving  a  higher  degree  of  judgment  or 
complexity, or areas where assumptions and estimates are significant to the financial statements 
are disclosed hereafter. 

The most significant use of judgments and estimates are as follows: 

–  Measurement of fair value of financial instruments  

The fair value of financial assets and financial liabilities that are traded in active markets is 
based on quoted market prices or broker price quotations. Where the fair values of financial 
assets  and  financial  liabilities  recorded  on  the  balance  sheet  cannot  be  derived  from  active 
markets, they are determined using a variety of valuation techniques that include the use of 
mathematical  models.  The  input  to  these  models  is  taken  from  observable  markets  where 
possible, but where this is not feasible, a degree of judgment is required in establishing fair 
values.  

– 

Impairment losses on financial instruments  

The  Fund  reviews  its  financial  instruments  at  each  reporting  date  to  assess  whether  an 
allowance  for impairment  should be  recorded  in the statement of financial  performance.  In 
particular,  judgment  by  EIB  Management  is  required  in  the  estimation  of  the  amount  and 
timing of future cash flows when determining the level of allowance required. 

3.2.4. 

Summary of significant accounting policies 

3.2.4.1.  Foreign currency translation 

The Fund uses the Euro (EUR) for presenting its financial statements, which is also the functional 
currency. 

Foreign  currency  transactions  are  translated  at  the  exchange  rate  prevailing  on  the  date  of  the 
transaction. 

Monetary assets and liabilities denominated in currencies other than Euro are translated into Euro 
at  the  exchange  rate  prevailing  at  the  balance  sheet  date.  The  gain  or  loss  arising  from  such 
translation is recorded in the statement of financial performance. 

The accompanying notes form an integral part of these financial statements. 

Page 21 

 
GUARANTEE FUND 

Non-monetary  items  that  are  measured  in  terms  of  historical  cost  in  a  foreign  currency  are 
translated  using  the  exchange  rates  at  the  dates  of  the  initial  transactions.  Non-monetary  items 
measured  at  fair  value  in  a  foreign  currency  are  translated  using  the  exchange  rates  at  the  date 
when the fair value was determined. 

Exchange differences on non-monetary assets are a component of the change in their fair value. 
Depending on the classification of a non-monetary financial asset, exchange differences are either 
recognised in the statement of financial performance or within the reserves. 

Exchange differences arising on the settlement of transactions at rates different from those at the 
date of the transaction, and unrealised foreign exchange differences on unsettled foreign currency 
monetary assets and liabilities, are recognised in the statement of financial performance. 

3.2.4.2.  Financial instruments 

All  financial  assets  are  recognised  in  the  balance  sheet  on  trade  date  basis  and  measured 
according to their assigned category. 

 

Cash and cash equivalents 

The  Fund  defines  cash  and  cash  equivalents  as  current  accounts,  commercial  papers,  treasury 
bills and short-term deposits with original maturity of three months or less. 

 

Bond portfolio 

The bond portfolio is composed of Euro-denominated securities.  

These  securities  are  classified  as  Available  for  Sale  (AFS)  according  to  the  accounting  rules 
adopted by the Accounting Officer of the Commission and consequently, are carried out at their 
fair value through net assets.  
In accordance with the decision of the Accounting Officer of the Commission10 concerning the 
“Presentation of the Guarantee Fund for external actions and other Available for Sale portfolios” 
on  31  January  2013,  the  Available  for  Sale  financial  instruments  of  the  Fund’s  Portfolio  are 
categorised following the current/non-current distinction of Article 8.3 of the Accounting rule 1 
according  to  their  remaining  contractual  maturity  at  the  balance  sheet  date.  Available  for  Sale 
investments with a remaining maturity of less than a year and accrued interest with due date less 
than  a  year  are  presented  in  the  balance  sheet  as  current  assets,  while  Available  for  Sale 
investments with a remaining maturity of more than a year are presented in the balance sheet as 
non-current assets. 

Unrealised  gains  or  losses  are  reported  in  reserves  until  such  a  security  is  sold,  collected  or 
otherwise disposed of, or until  such a security is  determined to  be impaired.  Impairment  losses 
identified are recognised in the statement of financial performance for the year.  

On disposal of an Available for Sale security, the accumulated unrealised gain or loss included in 
net assets is transferred to the statement of financial performance for the year. Interest income on 
Available for Sale securities is included in “interest income”.  

10  Decision of the Accounting Officer. Subject: Presentation of the Guarantee Fund for external actions and other available for 

sale portfolios (Ref. Ares (2013) 122752 – 31/01/2013). 

The accompanying notes form an integral part of these financial statements. 

Page 22 

 
                                                 
GUARANTEE FUND 

The determination of fair values of Available for Sale investments is generally based on quoted 
market rates in active markets. 

These  securities  are  initially  measured  at  their  acquisition  cost,  being  their  fair  value  at  this 
moment.  The  difference  between  the  entry  price  and  the  redemption  value,  i.e.  the 
premium/discount spread, is amortised over the remaining life of each of the securities using the 
effective interest rate method as specified under Accounting rule 11. 

Securities are considered impaired if there is objective evidence of impairment as a result of one 
or more events that occurred after the initial recognition of the security (a “loss event”) and that 
loss event  has an impact  on the estimated future  cash flows  of the security  that can be reliably 
estimated.  

Evidence  of  impairment  is  mainly  about  significant  financial  difficulties  of  the  issuer,  e.g.  a 
breach of contract, a restructuring of the debt of the issuer or a high probability of bankruptcy. It 
is  important  to  stress  that  the  disappearance  of  an  active  market  because  the  entity’s  financial 
instruments  are  no  longer  publicly  traded  is  not  evidence  of  impairment.  A  downgrade  of  an 
entity’s  credit  rating  is  not,  in  itself,  evidence  of  impairment,  although  it  may  be  evidence  of 
impairment  when  considered  with  other  available  information.  A  decline  in  the  fair  value  of  a 
financial asset below its cost or amortised cost is not necessarily evidence of impairment.  

If  in  a  subsequent  period,  the  fair  value  of  a  debt  instrument  classified  as  Available  for  Sale 
increases and the increase can be objectively related to an event occurring after the impairment 
loss  was  recognised  in  the  statement  of  financial  performance,  the  impairment  loss  shall  be 
reversed, with the amount of the reversal recognised in the statement of financial performance. 

 

Fair value of financial instruments 

Fair  value  is  the  amount  for  which  an  asset  could  be  exchanged,  or  a  liability  settled,  between 
knowledgeable, willing parties in an arm’s length transaction. 

When applicable, the EIB on behalf of the Fund measures the fair value of an instrument using 
the  quoted  price  in  an  active  market  for  that  instrument.  A  market  is  regarded  as  active  if 
transactions for the asset or liability take place with sufficient frequency and volume to provide 
pricing information on an on-going basis. 

Where  the  fair  values  of  financial  assets  and  financial  liabilities  recorded  on  the  balance  sheet 
cannot  be  derived  from  active  markets,  they  are  determined  using  a  variety  of  valuation 
techniques that include the use of mathematical models. The input to these models is taken from 
observable  markets  where  possible,  but  where  this  is  not  feasible,  a  degree  of  judgement  is 
required  in  establishing  fair  values.  The  chosen  valuation  technique  incorporates  all  the  factors 
that market participants would take into account in pricing a transaction. 

The  Fund  measures  fair  values  using  the  following  fair  value  hierarchy  that  reflects  the 
significance of the inputs used in making the measurements: 

–  Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; 

–  Level 2:  Inputs other than quoted prices included within Level 1 that are observable for 
the asset or liability, either directly (i.e., as price) or indirectly (i.e., derived from prices); 

The accompanying notes form an integral part of these financial statements. 

Page 23 

 
GUARANTEE FUND 

–  Level  3:  Inputs  for  the  asset  or  liability  that  are  not  based  on  observable  market  data 

(unobservable 

inputs). 

The  Fund  recognises  transfers  between  levels  of  the  fair  value  hierarchy  as  of  the  end  of  the 
reporting period during which the change has occurred. 

 

Impairment of financial assets 

The  EIB  assesses  at  each  balance  sheet  date  whether  there  is  any  objective  evidence  that  a 
financial asset or a group of financial assets is impaired. A financial asset or a group of financial 
assets  is  deemed  to  be  impaired  if,  and  only  if,  there  is  objective  evidence  of  impairment  as  a 
result of one or more events that has occurred after the initial recognition of the asset (an incurred 
“loss event”) and that loss event has an impact on the estimated future cash flows of the financial 
asset or the group of financial assets that can be reliably estimated. Evidence of impairment may 
include indications that the borrower or a group of borrowers is experiencing significant financial 
difficulty, default or delinquency in interest or principal payments, the probability that they will 
enter bankruptcy or other financial reorganisation and where observable data indicate that there is 
a measurable decrease in the estimated future cash flows, such as changes in arrears or economic 
conditions that correlate with defaults. 

For the Available for Sale financial assets, an objective evidence would include a significant or 
prolonged decline in the fair value of the investment below its cost. Where there is evidence of 
impairment, the cumulative loss (measured as the difference between the acquisition cost net of 
any principal repayment and amortisation and the current fair value, less any impairment loss on 
that investment previously recognised in the statement of financial performance) is removed from 
net  assets  and  recognised  in  the  statement  of  financial  performance.  Impairment  losses  on 
Available for Sale financial assets are reversed through the statement of financial performance. 

3.2.4.3.  Contributions 

Contributions are increased by: 

–  Payment  allocations  made  to  the  Fund  by  the  general  budget  of  the  European  Union; 

Guarantee recoveries received from EIB. 

Contributions are decreased by: 

–  Payment  allocations  to  be  made  from  the  Fund  to  the  general  budget  of  the  European 

Union; 
Guarantee calls made by the EIB.  

Contributions to be received from the general budget of the European Union, or to be paid back 
to the general budget of the European Union are recognized in the balance sheet on the date when 
they  become  due  or  owed  according  to  articles  3,  4,  5  and  6  of  the  Council  Regulation  (EC, 
Euratom)  No  480/2009  of  25 May 2009  establishing  a  Guarantee  Fund  for  external  actions 
(codified  version).  When  it  relates  to  articles  5  and  6  the  contributions  to  be  paid  or  received, 
based on the previous year end difference between the target amount and the value of the Fund’s 
net  assets,  are  calculated  and  recorded  at  the  beginning  of  the  current  year.  When  article  4 

The accompanying notes form an integral part of these financial statements. 

Page 24 

 
GUARANTEE FUND 

applies, the contribution to be paid back is calculated and recorded at the date of accession of the 
new Member State to the European Union. 

Contributions  to  be  paid  to  the  EIB in  the context  of guarantee  calls in  line with  the Recovery 
Agreement between the  European  Union  and the EIB signed on 03  October 2018 in  respect  of 
loans  and  loan  guarantees  granted  by  the  EIB  for  projects  outside  the  European  Union 
(“Recovery Agreement”) are derecognised from the balance sheet on the date when the guarantee 
call becomes due. 

Guarantee  recoveries  paid  by  EIB  to  the  Fund  in  line  with  the  Recovery  Agreement  are 
recognised  in  the  balance  sheet  as  contributions  (recovery  of  historically  called  amounts)  and 
recoveries receivable on the date when the guarantee recovery is received in cash in the accounts 
of the Bank. 

3.2.4.4.  Interest income 

Interest income covers interest earned on cash and cash equivalents and the Bond portfolio and is 
recorded in the statement of financial performance on an accrual basis. 

3.2.4.5.  Interest expense 

Interest expense covers interest paid on cash and cash equivalents, due to negative interest rate, 
and is recorded in the statement of financial performance on an accrual basis. 

3.2.4.6.  Treasury management fees 

According to the Management Agreement, EIB shall receive a treasury management fee which is 
calculated on the basis of, in the case of securities, the average market value at the end of each 
month, and in the case of cash and money market deposits, the average nominal value at the end 
of each month. 

Treasury management fees are recorded in the statement of financial performance on an accrual 
basis. 

3.2.4.7.  Recovery fees 

According  to  the  Recovery  Agreement  dated  3  October  2018  the  EU  shall  reimburse  EIB  for 
external costs and expenses incurred by it in the course of execution of the recovery proceedings. 

Recovery fees are recorded in the statement of financial performance on an accrual basis. 

3.2.4.8.  Securities Lending Activity 

In April 2008, the EIB for  the account of the Fund entered into an automatic securities lending 
program with Euroclear Bank SA/NV to lend assets from its bond portfolio. Within this securities 
lending program all bonds from the Bond portfolio are eligible to be lent out. 

Securities  lent  within  the  automatic  securities  lending  program  are  not  derecognized  from  the 
Fund’s balance sheet as the risks and rewards of these securities are still held by the Fund itself. 

Income from securities lending activity is recorded in the statement of financial performance on 
an accrual basis. 

The accompanying notes form an integral part of these financial statements. 

Page 25 

 
GUARANTEE FUND 

3.2.4.9.  Risk-related remuneration 

In  accordance  with  the  Guarantee  Agreement  dated  3  October  2018,  the  risk-related  revenues 
received  by  the  Bank  from  the  pricing  (in  accordance  with  the  Bank’s  standard  risk  pricing 
methodology as may be amended from time to time) of EIB financing operations under the ERI 
Private  Mandate  shall  remunerate  on  a  quarterly  basis  the  risk  for  the  Union  budget  associated 
with EIB Financing Operations under the ERI Private Mandate. 

The  Risk-related  remuneration  is  recognised  in  the  statement  of  financial  performance  on  an 
accrual basis.. 

3.2.5.  Taxation 

The Protocol on the Privileges and Immunities of the European Union, appended to the treaty on 
the European Union and the treaty of the functioning of the European Union, stipulates that the 
assets,  revenues  and  other  property  of  the  Institutions  of  the  Union  are  exempt  from  all  direct 
taxes. 

3.3. 

Financial Risk Management 

This note presents information about the Fund’s treasury portfolio exposure, its management and 
control  of  credit  and  financial  risks,  in  particular  the  primary  risks  associated  with  its  use  of 
financial instruments. These are: 

–  credit  risk  –  the  risk  of loss  resulting  from  client  or  counterparty  default  and  arising  on 

credit exposure in all forms, including settlement risk; 

– 

liquidity  risk  –  the  risk  that  an  entity  will  encounter  difficulty  in  meeting  obligations 
associated with financial liabilities that are settled by delivering cash or another financial 
asset; 

–  market  risk  –  exposure to observable market  variables such as interest  rates and foreign 

exchange rates. 

3.3.1.  Risk management organisation 

The Risk Management function of EIB ensures that the treasury portfolio is managed in line with 
the  agreed  asset  management  guidelines,  especially  in  respect  of  the  eligible  investments,  the 
maximum  maturity,  the  interest  rate  risk  and  the  credit  risk  exposure  of  the  Fund’s  treasury 
portfolio.  In this respect quarterly reporting is  also delivered to the EC  concerning the risk and 
the performance of the Fund’s treasury portfolio. The reporting makes reference to  breaches, if 
any, of the limits set  out in  the  asset management  guidelines and includes a  comparison  of the 
valuations of the portfolio to a performance index taken as benchmark.  

3.3.2.  Credit Risk 

Credit risk is the potential loss that could result from client or counterparty default and arising on 
credit exposure in all forms, including settlement. 

3.3.2.1.  Credit risk policy 

The  treasury  portfolio’s  agreed  asset  management  guidelines  and/or  investment  strategy  define 
certain limits and restrictions in order to limit the exposure to credit risk of the treasury portfolio. 
The compliance  with these limits is monitored by  the Risk Management on a daily  basis. Such 
limits  and  restrictions  include  eligibility  criteria,  absolute  credit  limits  in  nominal  terms 

The accompanying notes form an integral part of these financial statements. 

Page 26 

 
GUARANTEE FUND 

depending  on  issuer  category,  relative  concentration  limits  depending  on  issuer  category  and 
concentration limits per issue. 

3.3.2.2.  Maximum  exposure  to  credit  risk  without  taking  into  account  any  collateral  and  other 

credit enhancements 

The  following  table  shows  the  maximum  exposure  to  credit  risk  for  the  components  of  the 
balance sheet (in EUR): 

Maximum exposure  
ASSETS 
Available for Sale portfolio 
Contributions receivable 
Guarantee recoveries receivable 
Cash and cash equivalents 
Total assets 

31.12.2018 

31.12.2017 

2,465,100,760.23 
103,222,935.00 
0.00 
41,558,052.28 
2,609,881,747.51 

2,198,742,276.84 
137,800,722.00 
136,092.88   
224,082,752.91 
2,560,761,844.63 

Total credit exposure 

2,609,881,747.51 

2,560,761,844.63 

3.3.2.3.  Credit risk on cash and cash equivalents 

 

Analysis of current accounts per profile of counterparties 

The following table shows  the  breakdown of  current account balances  per  maximum long-term 
counterparty rating (based on the external long term ratings assigned by Fitch, Standard & Poor’s 
and Moody’s) (in EUR): 

Rating 
A1 
Aa1 
Total 

31.12.2018 
27,566,935.63 
99.99 
27,567,035.62 

31.12.2017 
45,568,040.56 
1,090.62 
45,569,131.18 

All  counterparties  are  maximum  rated  P-1  short-term  (based  on  the  external  short  term  ratings 
assigned by Fitch, Standard & Poor’s and Moody’s). 

The  Fund  has  two  current  accounts  opened  with  BNP  Paribas  Fortis  and  one  current  account 
opened with Euroclear Bank as follows (in EUR): 

Current accounts 
BNP Paribas Fortis transitory account 
BNP Paribas Fortis current account 
Euroclear Bank current account 
Total 

31.12.2018 
0.00 
27,566,935.63 
99.99 
27,567,035.62 

31.12.2017 
6,239.06 
45,561,801.50 
1,090.62 
45,569,131.18 

The accompanying notes form an integral part of these financial statements. 

Page 27 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

 

Analysis of short term deposits per profile of counterparties 

In  accordance  with  the  agreement  between  the  European  Commission  and  the  EIB  on  the 
management  of  the  Fund,  all  interbank  investments  should  have  a  minimum  issuer  short-term 
rating  from  Moody’s  or  equivalent  of P-1.  The  following  table  shows  the  breakdown  of  short 
term deposits (excluding short-term deposits under settlement) per  maximum counterparty long 
term  rating  (based  on  the  external  long  term  ratings  assigned  by  Fitch,  Standard  &  Poor’s  and 
Moody’s), the amounts presented include accrued interest (in EUR): 

Rating 
Aa2 
Aa3 
A1 
A2 
Total 

31.12.2018 
0.00 
13,991,016.66 
0.00 
0.00 
13,991,016.66 

0.00% 
100.00% 
0.00% 
0.00% 
  100.00% 

31.12.2017 
42,390,941.17 
64,465,588.06  
11,792,410.00  
59,864,682.50 
178,513,621.73 

23.75% 
36.11% 
6.61% 
33.54% 
  100.00% 

3.3.2.4.  Credit risk on Bond portfolio 

 

Risk concentration per issuance Credit risk on Bond portfolio 

All the securities held in the portfolio are in line with the management guidelines and meet the 
following criteria for: 

–  Securities issued or guaranteed by Member States: minimum rating Baa3;  
–  Securities  issued  or  guaranteed  by  a  Supranational  or  other  States:  minimum  rating 

Aa2;  

–  Securities issued by other legal entities:  minimum rating Baa3.  

The  following  table  shows  the  breakdown  of  the  Bond  portfolio,  at  market  value  excluding 
accrued interest, per security type and rating (in EUR): 

The accompanying notes form an integral part of these financial statements. 

Page 28 

 
 
  
  
 
 
 
 
 
 
 
 
 
 
Issuer - Rating 
Banks Aaa 
Banks Aa1 
Banks Aa2 
Banks Aa3 
Banks A1 
Banks A2 
Banks Baa1 
Member State Aaa 
Member State Aa1 
Member State Aa2 
Member State Aa3 
Member State A1 
Member State A2 
Member State A3 
Member State Baa1 
Member State Baa2 
Member State Baa3 
Covered Bonds Aaa 
Covered Bonds A2 
Corporates Aaa 
Corporates Aa1 
Corporates Aa2 
Corporates Aa3 
Corporates A1 
Corporates A2 
Corporates A3 
Corporates Baa1 
Corporates Baa2 
Public Institution Aaa 
Public Institution Aa1 
Public Institution Aa2 
Public Institution A3 
Supranational Aaa 
Supranational Aa1 
Supranational Aa2 
Non-EU Public Institution Aaa 
Non-EU Public Institution Aa2 
Non-EU Public Institution Aa3 
Non-EU Public Institution A1 
Total 

GUARANTEE FUND 

31.12.2018 
0.00 
46,255,730.00 
154,740,017.50 
25,121,200.00 
20,016,000.00 
10,298,686.30 
14,832,978.50 
128,657,262.00 
40,348,665.00 
216,783,850.00 
51,996,220.72 
56,495,670.00 
147,813,370.00 
42,537,786.40 
0.00 
41,671,950.00 
56,082,170.00 
482,342,055.50 
0.00 
57,806,210.00 
25,852,249.97 
177,626,986.00 
2,551,225.00 
22,846,250.00 
13,017,410.00 
25,964,500.00 
55,574,008.10 
6,984,110.00 
306,330,014.00 
58,371,941.84 
61,428,285.00 
5,275,500.00 
35,255,850.00 
20,956,978.00 
10,002,300.00 
4,013,720.00 
0.00 
5,416,400.00 
20,647,033.05 

0.00% 
1.90% 
6.31% 
1.02% 
0.82% 
0.42% 
0.60% 
5.25% 
1.65% 
8.84% 
2.12% 
2.30% 
6.03% 
1.73% 
0.00% 
1.70% 
2.29% 
19.67% 
0.00% 
2.36% 
1.05% 
7.24% 
0.10% 
0.93% 
0.53% 
1.06% 
2.27% 
0.28% 
12.50% 
2.38% 
2.51% 
0.22% 
1.44% 
0.85% 
0.41% 
0.16% 
0.00% 
0.22% 
0.84% 
2,451,914,582.88  100.00% 

31.12.2017 
1.00% 
21,575,004.00 
0.00% 
0.00 
5.49% 
119,934,463.15 
3.99% 
87,175,199.70 
0.00% 
0.00 
0.00% 
0.00 
0.00% 
0.00 
3.84% 
84,139,839.29 
2.40% 
52,403,581.10 
4.73% 
103,327,566.10 
1.76% 
38,552,687.60 
2.72% 
59,424,433.30 
6.17% 
134,709,611.00 
0.65% 
14,238,280.00 
2.29% 
50,089,110.80 
2.43% 
53,096,030.00 
2.52% 
55,087,500.00 
21.00% 
458,781,908.13 
0.28% 
6,136,980.00 
2.68% 
58,447,766.10 
1.19% 
25,901,070.00 
8.48% 
185,344,768.99 
0.00% 
0.00 
0.00% 
0.00 
0.00% 
0.00 
0.00% 
0.00 
0.00% 
0.00 
0.00% 
0.00 
12.91% 
282,076,108.16 
3.11% 
67,994,399.52 
7.77% 
169,682,931.10 
0.00% 
0.00 
0.00% 
0.00 
2.15% 
46,861,238.00 
0.00% 
0.00 
0.19% 
4,061,466.80 
0.25% 
5,436,992.00 
0.00% 
0.00 
0.00% 
0.00 
2,184,478,934.84  100.00% 

The accompanying notes form an integral part of these financial statements. 

Page 29 

 
 
 
 
GUARANTEE FUND 

The  above  table  presenting  securities  ratings  is  prepared  according  to  the  agreed  asset 
management  guidelines.  In  particular,  security  ratings  of  the  Bond  portfolio  refer  to  the  best 
rating given by Moody’s, Standard & Poor’s or Fitch. 

In case of securities for which no security rating is available the rating of the issuer (or guarantor 
for guaranteed positions) has been taken into account. 

 

EU sovereign exposure 

The  following  tables  show  the  portfolio  structure  by  exposure  towards  EU  sovereign  (either 
directly  or  indirectly)  and  exposure  towards  other  entities  as  at  31  December  2018  and  as  at 
31 December 2017 (in EUR): 

At 31.12.2018 
EU sovereigns 
Austria 
Czech Republic 
Finland 
France 
Germany 
Hungary 
Ireland 
Italy 
Latvia 
Netherlands 
Poland 
Romania 
Slovakia 
Slovenia 
Spain 
EU Supranational 
Total EU sovereigns 
Others 
TOTAL 

Purchase price 

Value at maturity  Carrying Value(*) 

10,190,000.00 
63,747,770.50 
29,445,625.00 
216,161,690.00 
121,617,810.00 
31,022,900.00 
30,347,000.00 
44,342,400.00 
16,128,020.00 
6,790,548.00 
138,658,400.00 
28,791,818.75 
15,035,340.00 
1,122,000.00 
44,058,642.00 
30,416,400.00 
827,876,364.25 
1,646,567,728.80 
2,474,444,093.05 

10,000,000.00 
57,388,000.00 
29,500,000.00 
214,000,000.00 
120,300,000.00 
28,000,000.00 
30,000,000.00 
40,000,000.00 
16,000,000.00 
6,800,000.00 
125,000,000.00 
25,000,000.00 
15,000,000.00 
1,000,000.00 
38,515,000.00 
30,000,000.00 
786,503,000.00 
1,612,932,000.00 
2,399,435,000.00 

10,099,100.00 
61,994,120.72 
30,249,565.00 
216,783,850.00 
121,791,234.00 
29,276,520.00 
30,395,300.00 
41,671,950.00 
16,234,640.00 
6,866,028.00 
131,578,730.00 
26,805,650.00 
15,025,950.00 
1,076,520.00 
42,537,786.40 
30,185,950.00 
812,572,894.12 
1,639,341,688.76 
2,451,914,582.88 

*) The carrying value represents the clean market value of the assets excluding accrued interest. 

The accompanying notes form an integral part of these financial statements. 

Page 30 

 
 
 
 
 
 
 
 
 
At 31.12.2017 
EU sovereigns 
Austria 
Belgium 
Czech Republic 
Finland 
France 
Germany 
Hungary 
Ireland 
Italy 
Latvia 
Luxembourg 
Poland 
Romania 
Slovenia 
Spain 
EU Supranational 
Total EU sovereigns 
Others 
TOTAL 

GUARANTEE FUND 

Purchase price 

Value at maturity 

Carrying Value(*) 

21,610,950.00 
21,957,400.00 
16,416,350.00 
29,445,625.00 
101,848,140.00 
67,655,030.00 
27,881,900.00 
59,848,000.00 
54,493,000.00 
13,978,020.00 
14,946,600.00 
138,845,490.00 
28,791,818.75 
1,122,000.00 
51,108,370.10 
20,372,150.00 
670,320,843.85 
1,518,178,543.80 
2,188,499,387.65 

21,500,000.00 
20,000,000.00 
14,900,000.00 
29,500,000.00 
101,000,000.00 
66,300,000.00 
25,000,000.00 
50,000,000.00 
50,000,000.00 
14,000,000.00 
15,000,000.00 
125,000,000.00 
25,000,000.00 
1,000,000.00 
45,000,000.00 
20,000,000.00 
623,200,000.00 
1,477,972,000.00 
2,101,172,000.00 

22,180,194.10 
22,501,450.00 
16,051,237.60 
30,223,387.00 
103,327,566.10 
67,447,519.79 
27,132,500.00 
58,317,465.00 
53,096,030.00 
14,238,280.00 
16,692,319.50 
134,709,611.00 
27,955,000.00 
1,106,968.30 
50,089,110.80 
20,728,052.00 
665,796,691.19 
1,518,682,243.65 
2,184,478,934.84 

*) The carrying value represents the clean market value of the assets excluding accrued interest. 

In the tables above “EU sovereigns” refer to bonds issued or guaranteed by EU Member States 
and  EU Supranationals  while  “others”  refer  to  bonds  issued  by  banks,  covered  bonds,  bonds 
issued or guaranteed by non EU Supranationals or EU and non EU Public Institutions. 

3.3.3.  Liquidity Risk 

Liquidity  risk  refers  to  an  entity’s  ability  to  meet  obligations  as  they  become  due,  without 
incurring unacceptable losses. It can be split into funding liquidity risk and market liquidity risk. 
Funding liquidity risk is the risk that an entity will not be able to meet efficiently both expected 
and  unexpected  current  and  future  cash  flow  needs  without  affecting  its  daily  operations  or  its 
financial condition. Market liquidity risk is the risk that an entity cannot easily offset or eliminate 
a position at the market price because of inadequate market depth or market disruption. 

3.3.3.1.  Liquidity risk management 

The  treasury  portfolio’s  agreed  asset  management  guidelines  and/or  investment  strategy  define 
certain  limits  and  restrictions  in  order  to  limit  the  exposure  to  funding  liquidity  risk  of  the 
treasury portfolio. The compliance with these limits is monitored by Risk Management on a daily 
basis. Such limits and restrictions include a target liquidity buffer. 

The accompanying notes form an integral part of these financial statements. 

Page 31 

 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

3.3.3.2.  Liquidity risk measurement 

The  table  below  provides  an  analysis  of  the  non-derivative  liabilities  into  relevant  maturity 
groupings based on the  remaining  contractual maturities.  The table is  presented under the most 
prudent consideration of maturity dates where the earliest possible repayment date is shown. 

Maturity profile 
(at 31 December 2018) 
Other payables 
Total  

Maturity profile 
(at 31 December 2017) 
Other payables 
Total  

3.3.4.  Market Risk 

Less than 
 1 year 

1 year to 
 5 years 

More than 
 5 years 

TOTAL 

1,013,339.26 
1,013,339.26 

0.00 
0.00 

0.00  1,013,339.26 
0.00  1,013,339.26 

Less than 
1 year 
954,779.18 
954,779.18 

1 year to  
5 years 
0.00 
0.00 

More than 
 5 years 
0.00 
0.00 

TOTAL 

954,779.18 
954,779.18 

Market risk represents the risk that changes in market prices and rates, such as interest rates and 
foreign  exchange  rates  will  affect  an  entity’s  income  or  the  value  of  its  holdings  in  financial 
instruments. 

The  treasury  portfolio’s  agreed  asset  management  guidelines  and/or  investment  strategy  define 
certain restrictions  (such as concentration  limits, modified duration and target combined spread 
duration) in order to fulfil diversification and to control to market risk of the treasury portfolio. 
The compliance with these limits is monitored by Risk Management on a daily basis.  

3.3.4.1.  Interest rate risk position 

Interest rate risk arises from the volatility in the economic value of, or in the income derived from 
the treasury portfolio’s interest rate bearing positions due to adverse movements in interest rates. 
Exposure  to  interest  rate  risk  occurs  when  there  are  differences  in  repricing  and  maturity 
characteristics of the different assets and liabilities. 

3.3.4.2.  Interest rate sensitivity analysis  

The interest rate sensitivity of the treasury portfolios represents the amount of a potential change 
in the fair value of the portfolio and is computed on a deal by deal basis assuming that all interest 
rate curves rose by one percentage basis and 100 basis points or decrease by one percentage basis 
point and 100 basis points. 

The following table shows the sensitivity to interest rate variations of the three Guarantee Fund 
(“GF”) treasury sub-portfolios GF-Short term (Short term deposits, commercial papers and zero 
coupon bonds), GF-FRN  (Bond portfolio variable interest), GF-Long term (Bond portfolio fixed 
interest). It is presented on the same basis as the quarterly risk management reporting delivered to 
the EC concerning the risk and the performance of the Fund’s portfolio. 

31 December 2018 

GF sub-portfolios 

Clean market 
value  

Modified 
Duration 

IR Exposure  
(+/-1bp)  

IR Exposure 
(100bp)  

IR Exposure  
(-100bp)  

The accompanying notes form an integral part of these financial statements. 

Page 32 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

in EUR'000 

(Years) 

in EUR'000 

in EUR'000 

in EUR'000 

29,026  
302,709  
2,134,179  
27,567  
2,493,481 

0.26 
0.64 
2.92 
0.00 
2.58 

-/+ 1 
-/+ 20 
-/+ 627 
-/+ 0 
-/+ 648 

-75  
-1,929  
-61,189  
0 
-63,193 

+ 76 
+ 1,990 
+ 64,241 
0 
+ 66,307 

Clean market 
value  
in EUR'000 
198,611 
258,351 
1,906,117 
45,569 
2,408,648 

Modified 
Duration 
(Years) 
0.07 
0.17 
3.67 
0.00 
2.93 

IR Exposure  
(+/-1bp)  
in EUR'000 
-/+ 1 
-/+ 4 
-/+ 704 
-/+ 0 
-/+ 709 

IR Exposure 
(100bp)  
in EUR'000 
-143 
-430 
-68,606 
0 
-69,179 

IR Exposure  
(-100bp)  
in EUR'000 
+ 145 
+ 435 
+ 72,355 
0 
+ 72,935 

GF - Short term 
GF - FRN 
GF - Long term 
Current accounts 
TOTAL GF 

31 December 2017 

GF sub-portfolios 

GF - Short term 
GF - FRN 
GF - Long term 
Current accounts 
TOTAL GF 

The clean market value of the GF-Short term sub-portfolio as reported above represents the sum 
of  clean  market  values  calculated  for  short  term  deposits,  commercial  papers  and  zero  coupon 
bonds. Those clean market values are determined as follows: 

–  Short-term deposits: the sum of the nominal value and total interest at maturity for each 
position is discounted from the maturity date to the spot date, whereas the spot date equals 
the  valuation  date  plus  two  business  days.  Finally,  accrued  interest  at  spot  date  is 
subtracted from the calculated market value of the position. 

–  Commercial papers: the nominal value of each position is discounted from the maturity 
date  to  the  spot  date,  whereas  the  spot  date  equals  the  valuation  date  plus  two  business 
days; 

–  Zero coupon bonds: the nominal value of each position is multiplied with the observed 

spot/quote/price. 

The  clean  market  values  of  the  GF-FRN  and  GF-Long  term  sub-portfolios  as  reported  above 
represents the sum of the clean market values calculated for fixed and floating rate bonds. Those 
clean market values are determined as follows: 

–  Fixed rate bonds: the nominal value of each position is multiplied by its market quote as 

observed at valuation date. 

–  Floating  rate  bonds  (FRNs):  the  nominal  value  of  each  position  is  multiplied  by  its 

market quote as observed at valuation date. 

3.3.5.  Foreign exchange risk exposure 

Foreign exchange risk is the volatility in the economic value of, or in the income derived from, 
the Fund’s positions due to adverse movements of foreign exchange rates. 

As  all  assets  and  liabilities  of  the  Fund  are  denominated  in  Euro,  the  Fund  is  not  exposed  to 
foreign exchange risk. 

The accompanying notes form an integral part of these financial statements. 

Page 33 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.4. 

Fair value of financial instruments 

3.4.1.  Accounting classifications and fair value 

GUARANTEE FUND 

The  following  tables  show  the  carrying  amounts  and  fair  values  of  financial  assets  and  financial  liabilities,  including  their  levels  in  the  fair  value 
hierarchy. These do not include fair value information for financial assets and financial liabilities not carried at fair value if the carrying amount is a 
reasonable approximation of fair value. 

At 31 December 2018 
in EUR 

Carrying amount 

Fair value 

Available for Sale 

Cash, loans and 
receivables 

Other financial 
liabilities 

Total 

Level 1 

Level 2  Level 3 

Total 

Financial assets carried at 
fair value: 
Bond portfolio 
Total  
Financial assets not 
carried at fair value: 
Contributions receivable 
Current accounts 
Short-term deposits 
Total  
Total financial assets 

Financial liabilities not 
carried at fair value: 
Other payables 
Total  
Total financial liabilities 

2,465,100,760.23 
2,465,100,760.23 

0.00 
0.00 

0.00  2,465,100,760.23 
0.00  2,465,100,760.23 

  2,465,100,760.23 
  2,465,100,760.23 

0.00 
0.00 

0.00  2,465,100,760.23 
0.00  2,465,100,760.23 

0.00 
0.00 
0.00 
0.00 
2,465,100,760.23 

103,222,935.00 
27,567,035.62 
13,991,016.66 
144,780,987.28 
144,780,987.28 

0.00 
103,222,935.00 
0.00 
27,567,035.62 
0.00 
13,991,016.66 
0.00 
144,780,987.28 
0.00  2,609,881,747.51 

0.00 
0.00 
0.00 

0.00 
0.00 
0.00 

-1,013,339.26 
-1,013,339.26 
-1,013,339.26 

-1,013,339.26 
-1,013,339.26 
-1,013,339.26 

At 31 December 2017 

Carrying amount 

Fair value 

The accompanying notes form an integral part of these financial statements. 

Page 34 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
in EUR 

Financial assets carried at fair 
value: 
Bond portfolio 
Total  
Financial assets not carried at 
fair value: 
Contributions receivable 
Current accounts 
Short-term deposits (including 
amounts under settlement) 
Total  
Total financial assets 

Financial liabilities not carried 
at fair value: 
Other payables 
Total  
Total financial liabilities 

GUARANTEE FUND 

Available for 
Sale 

Cash, loans and 
receivables 

Other 
financial 
liabilities 

Total 

Level 1  Level 2  Level 3 

Total 

2,198,742,276.84 
2,198,742,276.84 

0.00 
0.00 

0.00  2,198,742,276.84 
0.00  2,198,742,276.84 

  2,198,742,276.84 
  2,198,742,276.84 

0.00 
0.00 

0.00  2,198,742,276.84 
0.00  2,198,742,276.84 

0.00 
0.00 

0.00 

137,800,722.00 
136,092.88 

45,569,131.18 

0.00 
2,198,742,276.84 

183,505,946.06 
183,505,946.06 

0.00 
0.00 

0.00 

137,800,722.00 
136,092.88 

45,569,131.18 

0.00 
183,505,946.06 
0.00  2,382,248,222.90 

0.00 
0.00 
0.00 

0.00  -954,779.18 
0.00  -954,779.18 
0.00  -954,779.18 

-954,779.18 
-954,779.18 
-954,779.18 

The accompanying notes form an integral part of these financial statements. 

Page 35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

3.4.2.  Measurement of fair values 

Assets for which carrying value approximates fair value 

For financial assets and financial liabilities that are liquid or have a short term maturity (less than three 
months), it is assumed that the carrying amount approximates their fair value. 

Assets and liabilities carried at fair value 

Published price quotations in an active market are the first source  for determining the fair value of a 
financial instrument.  

For instruments without available market price, the fair value is estimated using a discounted cash flow 
model  based  on  either  directly  or  indirectly  observable  market  data  (discount  curves  and  estimation 
curves) prevailing at the balance sheet date. 

3.4.3.  Transfers between level 1 and level 2  

There  were  no  transfers  between  level  1  and  level  2  of  the  fair  value  hierarchy  during  the  financial 
period. 

3.4.4.  Level 3 fair value 

As at 31 December 2018 and 31 December 2017 the Fund has no financial instruments classified under 
Level 3. 

3.5. 

Bond portfolio 

The following tables show the movements of the Bond portfolio (in EUR): 

Balance as at 1 January 2017 
Acquisitions 
Disposals and withdrawals (original acquisition cost) 
Change in carrying amount -  actuarial difference 
Change in accrued interest 
Change in fair value 
Balance as amount at 31 December 2017 

Balance as at 1 January 2018 
Acquisitions 
Disposals and withdrawals (original acquisition cost) 
Change in carrying amount -  actuarial difference 
Change in accrued interest 
Change in fair value 
Balance as at 31 December 2018 

2,068,651,104.70 
831,402,720.51 
-675,778,085.73 
-11,612,501.21 
-1,127,369.64 
-12,793,591.79 
2,198,742,276.84 

2,198,742,276.84 
1,067,048,346.00 
-781,103,640.60 
-8,036,194.38 
-1,077,164.65 
-10,472,862.98 
2,465,100,760.23 

The accompanying notes form an integral part of these financial statements. 

Page 36 

 
 
 
 
 
 
 
 
 
 
 
GUARANTEE FUND 

As  at  31  December  2018  the  nominal  value  of  the  investment  portfolio  was  EUR 2,399.4 million 
(2017:  EUR 2,101.2 million), 
(2017: 
EUR 2,184.5 million), excluding accrued interest. 

a  market  value  of  EUR 2,451.9 million 

against 

Accrued 
EUR 14,263,342.00) is split between: 

interest  as  at  31  December  2018  amounting 

to  EUR  13,186,177.35 

(2017: 

  Fixed rate notes 

EUR 13,109,531.34 (2017: EUR 14,238,402.84); 

  Floating rate notes 

EUR 76,646.01 (2017: EUR 24,939.16). 

As  at  31  December  2018  the  market  value  of  securities  lent  within  the  automatic  security  lending 
agreement  with  Euroclear  (excluding  accrued  interest)  amounts  to  EUR  11,281,092.69  (2017:  EUR 
9,521,272.29). 

3.6. 

Cash and cash equivalents 

The following table shows the split of cash and cash equivalents (including accrued interest) (in EUR): 

Description 

Current accounts 
Short-term deposits 
of which accrued interest 
Total 

3.7. 

Recovery fees 

31.12.2018 

31.12.2017 

27,567,035.62 
13,991,016.66 
-8,983.34 
41,558,052.28 

45,569,131.18 
178,513,621.73 
-86,378.27 
224,082,752.91 

According to the Recovery Agreement dated 3 October 2018 the EU shall reimburse EIB for external 
costs and expenses incurred by it in the course of execution of the recovery proceedings. 

During the reporting year 2018, recovery fees were amounting to EUR 1,901,150.03 (2017: EUR 0.00) 
of which the amount of EUR 79,212.84 is accrued as at 31 December 2018 (2017: EUR 0.00). 

3.8. 

Contributions 

Contributions are increased by contributions from the general budget of the European Union and by the 
recoveries  of  previous  interventions  made  by  the  Fund  with  regard  to  defaulted  guaranteed  loans. 
Contributions are either decreased by repayments to the general budget of the European Union or by 
interventions the Fund is paying  with regard to defaulted guaranteed loans. Contributions to/from the 
budget of the European Union are recognised in the balance sheet on the date when they become due or 
owed  according  to  articles  3,  4,  5  and  6  of  the  Council  Regulation  (EC,  Euratom)  No  480/2009  of 
25 May 2009 establishing a Guarantee Fund for external actions. 

to 
The  contribution  allocated  but  not  yet  paid 
EUR 137,800,722.00  was  paid  in  cash  during  the  reporting  period.  In  2018,  the  Fund  has  been 
allocated  an  additional  contribution  amount  of  EUR  103,222,935.00  which  has  not  been  paid  as  at 
31 December 2018.  

in  as  at  31  December  2017  amounting 

During  2017  the  amount  of  EUR  136,092.88  was  recovered  from  the  historically  called  amounts  by 
EIB. 

The accompanying notes form an integral part of these financial statements. 

Page 37 

 
 
 
 
 
 
 
The following table shows the movements of the contributions during the reporting period (in EUR):  

GUARANTEE FUND 

Balance as at 1 January 2017 
Contributions from the European Commission allocated but not paid in 
Contributions paid to the EIB as guarantee call 
Contributions repaid to the Fund 
Balance as at 31 December 2017 

Balance as at 1 January 2018 
Contributions from the European Commission allocated but not paid in 
Contributions paid to the EIB as guarantee call 
Balance as at 31 December 2018 

1,499,383,804.67 
137,800,722.00 
-86,424,605.56 
136,092.88 
1,550,896,013.99 

1,550,896,013.99 
103,222,935.00 
-55,725,491.89 
1,598,393,457.10 

3.9. 

Other payables (in EUR) 

Description 
Treasury management fees 
Recovery fees 
Audit fees 
Total 

31.12.2018 
894,626.42 
79,212.84 
39,500.00 
1,013,339.26 

31.12.2017 
915,279.18 
0.00 
39,500.00 
954,779.18 

Treasury management fees are payable to the EIB on an annual basis.  

3.10. 

Subsequent events 

There have been no material post-balance sheet events, which would require disclosure or adjustment 
to the 31 December 2018 financial statements. 

The accompanying notes form an integral part of these financial statements. 

Page 38