REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ON THE MANAGEMENT OF THE GUARANTEE FUND OF THE EUROPEAN FUND FOR STRATEGIC INVESTMENTS IN 2020
Date: 2021-07-28
Institutions: Directorate-General for Budget, European Commission
Subjects: European Fund for Strategic Investments, European Investment Bank, European Investment Fund, financial control, operation of the Institutions

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.7.2021  COM(2021) 427 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS          ON THE MANAGEMENT OF THE GUARANTEE FUND OF THE EUROPEAN FUND FOR STRATEGIC INVESTMENTS IN 2020 {SWD(2021) 209 final}  
 
 
TABLE OF CONTENTS 

Introduction .................................................................................................................................................... 2 
1. 
2.  Operational context ........................................................................................................................................ 2 

3. 

Financial accounts and significant budgetary transactions in 2020 ................................................................ 3 
Financial situation of the EFSI GF as at 31 December 2020 ................................................................. 3 

3.1. 

3.2. 
3.3. 

EFSI operations under the EU Guarantee .............................................................................................. 4 
Provisioning of the EFSI GF ................................................................................................................. 4 

3.4. 

Calls and use of the EU Guarantee ........................................................................................................ 5 
4.  Management of the EFSI GF in 2020 ............................................................................................................. 5 

4.1. 
Financial Management .......................................................................................................................... 5 
4.2.  Market developments in 2020 ............................................................................................................... 5 

4.3. 
4.4. 

Composition and key risk characteristics of the portfolio ..................................................................... 6 
Performance ........................................................................................................................................... 7 

5.  Assessment of the adequacy of the target amount and the level of the EFSI GF ........................................... 7 

1 

 
 
 
 
 
 
 
1.  INTRODUCTION 

Regulation (EU) 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 Investment Project Portal (the EFSI Regulation) has established the Guarantee 
Fund of the EFSI whose resources are to be managed by the Commission.1 

By  Regulation  (EU)  2017/2396  of  the  European  Parliament  and  Council  of  13  December 
2017, the EFSI Regulation was further amended to extend the duration of the European Fund 
for Strategic  Investments  and to  introduce a number of technical  enhancements to  the Fund 
and  the  European  Investment  Advisory  Hub2  (the  EFSI  2.0  Amendment).  The  EFSI  2.0 
Amendment  increased,  inter  alia,  the size  of  the  EU  Guarantee  and  also  adjusted  the  target 
amount for the provisioning of the Fund. On 22 July 2015, the European Commission and the 
European Investment Bank (the EIB) signed the agreement on the management of EFSI and 
on the granting of the EU Guarantee (the EFSI Agreement).3  

Article 16(6) of the EFSI Regulation provides that the Commission shall, by 31 May of each 
year,  submit  to  the  European  Parliament,  to  the  Council  and  to  the  Court  of  Auditors  an 
annual  report4  on  the  management  of  the  EFSI  Guarantee  Fund  (the  EFSI  GF)  in  the 
preceding calendar year, including an assessment of the adequacy of the target amount and the 
level of the EFSI GF and of its potential replenishment need. This annual report shall describe 
the financial position of the EFSI GF at the end of the preceding calendar year, the financial 
flows during the preceding calendar  year as well as a list of the significant transactions and 
any relevant information on the financial accounts. The report shall also include information 
on the financial management, the performance and the risk of the EFSI GF at the end of the 
preceding calendar year. 

The Financial Regulation 2018/10465 has established the Common Provisioning Fund (CPF) 
to  hold  the  provisions  assigned  to  cover  the  financial  liabilities  arising  from  budgetary 
guarantees and financial assistance programmes from the date of application of the 2021-2027 
Multi-Annual  Financial  Framework  (MFF)6  onward.  These  provisions  entered  into  force  on 
January  1,  2021,  as  of  which  date  the  EFSI  Guarantee  Fund  constitutes  a  separate 
compartment within the CPF. 

2.  OPERATIONAL CONTEXT 

The EU Guarantee7 covers financing and investment operations: 

1  Amending  Regulations  (EU)  No  1291/2013  and  (EU)  No  1316/2013  —  the  European  Fund  for  Strategic 
Investments (the EFSI Regulation). OJ L 169, 1.7.2015, p. 1. 
2 OJ L 345, 27.12.2017, p. 34 
3 The EFSI Agreement was later amended and restated, more precisely on 21 July 2016, 21 November 2017, 9 
March 2018, 20 December 2018, 27 March 2020 and 27 April 2020. 
4 This report is the sixth report on the EFSI GF. For previous reports, see COM(2016)353 final, COM(2017)326 
final, COM(2018)345 final, COM(2019)244 final and COM (2020)385 final. 
5 Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the 
financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) 
No  1301/2013,  (EU)  No 1303/2013,  (EU)  No 1304/2013, (EU)  No  1309/2013, (EU)  No  1316/2013,  (EU)  No 
223/2014,  (EU)  No  283/2014,  and  Decision  No  541/2014/EU  and  repealing  Regulation  (EU,  Euratom)  No 
966/2012, OJ L 193, 30.7.2018, p. 1 (the Financial Regulation). 
6 Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial 
framework for the years 2021 to 2027, OJ L 433I, 22.12.2020. 
7  The  size  of  the  EU  Guarantee  has  been  increased  from  EUR  16  billion  to  EUR  26  billion  by  the  EFSI  2.0 

2 

 
 
                                                           
 
- 

- 

signed by the EIB under the main part of the  Infrastructure and  Innovation Window 
(IIW), and; 
signed by the European Investment Fund (EIF) under the SME Window (SMEW) and 
the SME / MidCap fund investment sub-window of IIW. 

Part of the overall EFSI operations are covered by the EU Guarantee, while a part is carried 
out at the EIB Group’s own risk8. 

According  to  Article  12  of  the  EFSI  Regulation,  the  EFSI  GF  shall  constitute  a  liquidity 
cushion  from  which  the  EIB  shall  be  paid  in  the  event  of  a  call  on  the  EU  Guarantee.  In 
accordance with the EFSI Agreement between the EU and the EIB, calls are paid by the EFSI 
GF  if  the  called  amounts  are  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  to  collect  the  EU 
revenues and recovered amounts resulting from EFSI operations under the EU Guarantee and, 
to the extent that the available balance allows, to pay calls under the EU Guarantee. 

The  EFSI  GF  has  been  provisioned  progressively,  but  this  provisioning  will  cease  in  2022. 
According  to  Article  12(4),  the  resources  of  the  EFSI  GF  are  directly  managed  by  the 
Commission  and  invested  in  accordance  with  the  principle  of  sound  financial  management 
and following appropriate prudential rules. 

The EIB and the EIF are responsible for assessing and monitoring the risk of the individual 
operations  backed  by  the  EU  Guarantee  and  for  reporting  to  the  Commission,  in  line  with 
Article  16  of  the  EFSI  Regulation.  On  the  basis  of  this  reporting  and  making  coherent  and 
prudent  assumptions  on  future  activity,  the  Commission  ensures  the  adequacy  of  the  target 
amount and the level of the EFSI GF under review. 

Furthermore,  pursuant  to  Article  16(2)  of  the  EFSI  Regulation,  the  EIB  submits  to  the 
European  Parliament  and  Council  an  annual  report  containing  specific  information  on  the 
aggregate risk associated with the financing and investment operations carried out under the 
EFSI, as well as on the guarantee calls. 

3.  FINANCIAL ACCOUNTS AND SIGNIFICANT BUDGETARY TRANSACTIONS IN 

2020 

Financial information concerning EFSI is presented below, broken down in four sections: 

(1) the financial situation of the EFSI GF as at 31 December 2020; 

(2) the EFSI operations under the EU Guarantee carried out by the EIB Group as at 31 
December 2020;  

(3) the provisioning of the EFSI GF and; 

(4) the calls and use of the EU Guarantee. 

Amendment. 
8 The size of EIB Group’s own resources contribution has been increased from EUR 5 billion to EUR 7.5 billion 
by the EFSI 2.0 Amendment. 

3 

 
 
 
                                                                                                                                                                                     
3.1.  FINANCIAL SITUATION OF THE EFSI GF AS AT 31 DECEMBER 2020 

The  total  assets  of  the  EFSI  GF9  stood  at  EUR 8 028 million  as  at  31  December  2020.  The 
assets  comprised  the  investment  securities  portfolio,  classified  as  available-for-sale  (EUR 7 
526  million),  an  FX  forward  sale  of  USD  with  positive  net  present  value,  classified  as 
financial assets at fair value through surplus and deficit (EUR 6 million), and cash equivalents 
(EUR 496 million). 

As to the 2020 financial performance10, the EFSI GF ended the year with an economic result 
of  EUR 21.6 million.  The  main  contribution  came  from  positive  net  interest  revenue  of 
securities11 
EUR 17.0 million 
(EUR 11.1 million).  This  was  offset  by  a  negative  foreign  exchange  revaluation  result  of 
EUR -5.7  million12.  The  remaining  net  expense  of  EUR -0.8  million  mainly  consisted  of 
custodian fees. 

and  net  gains 

available-for-sale 

sales  of 

from 

3.2.  EFSI OPERATIONS UNDER THE EU GUARANTEE 

The EU guarantee exposure in relation to disbursed outstanding EFSI operations by the EIB 
Group  amounted  to  EUR 18.9 billion  as  at  31  December  2020,  out  of  the  net  available  EU 
guarantee13  of  EUR 25.8  billion14.  The  amount  of  EUR 18.6 billion  is  recorded  as  a 
contingent liability in the notes to the 2020 financial statements of the EU, while a provision 
has been recognised for the remaining amount. 

In  2020,  EFSI  operations  under  the  Infrastructure  and  Innovation  Window  generated  net 
revenue  of  EUR 243.4 million  for  the  EU15.  Of  this  amount,  a  net  receivable  of  the 
Commission from the EIB of EUR 76.8 million as at 31 December 2020 was recorded in the 
2020 EU financial statements. 

For  the  EFSI  operations  under  the  SME  Window,  the  EU  incurred  a  net  cost  of 
EUR 295.2 million in 202016. 

3.3. PROVISIONING OF THE EFSI GF 

A total budgetary appropriation of EUR 301 million relating to the provisioning of the EFSI 
GF  was  committed  in  2020.  Of  this  amount,  a  budgetary  appropriation  of  EUR 153 million 
in  compliance  with  Commission  Decision  C(2020)451.  Additional 
was  committed 
commitment  appropriations  for  an  amount  of  EUR 148 million  were  committed  as  assigned 

9  The  audited  financial  statements  of  the  EFSI  Guarantee  Fund  are  disclosed  in  the  staff  working  document 
accompanying the EFSI GF report. 
10  See  Section  3  “EFSI  GF  FINANCIAL  STATEMENTS”  of  the  staff  working  document  accompanying  the 
EFSI GF report. 
11 The net figure is composed of gains of EUR 12.7 million and losses of EUR 1.6 million. 
12 After hedging the currency risk of the USD-denominated portion of the portfolio, presented as fair value  
changes of derivatives in the financial statements. 
13 According to Article 11 of the EFSI 2.0 Amendment, the EU Guarantee shall not, at any time, exceed EUR 26 
billion.  Calls  and  uses  of  the  EU  Guarantee,  and  provisions  for  portfolio  guarantee  products  under  SME 
Window, are deducted from the maximum amount of the EU Guarantee. 
14 In the notes to the EU 2020 annual accounts this figure is presented net of the financial provisions of 0,3 
billion. 
15  This  amount  includes  EUR  18.4  million  of  unrealized  revenue  derived  from  upward  movement  of  the  IIW 
equity portfolios fair value at 31 December 2020 compared to 31 December 2019. 
16 This amount includes EUR 216.5 million of financial provisions in respect  of the SMEW debt portfolios, as 
well as unrealized revenue of EUR 23.4 million derived from upward movement of the SMEW equity portfolios’ 
fair value at 31 December 2020 compared to 31 December 2019. 

4 

 
 
                                                           
revenues17. 
A total amount of EUR 1 249 million was effectively paid into the EFSI GF during the year. 
Of this, the bulk came from payment appropriations of the general budget of the EU, while an 
amount of EUR 156 million was recovered as assigned revenue from the EFSI, and an amount 
of  EUR 5 million  was  transferred  as  additional  payment  appropriations  at  the  end  of  the 
budgetary year. 

3.4. CALLS AND USE OF THE EU GUARANTEE 

During  2020,  there  were  no  guarantee  calls  due  to  defaulted  operations.  However,  the  EU 
Guarantee was called as follows: 

  EUR 33.1 million for value adjustments18 under the IIW; 
  EUR 2.3 million for EIB funding costs19 under the IIW; 
  EUR 2.1 million for recovery costs20 under the IIW; 
  EUR 37.5 million for non-euro hedging under the SMEW. 

All calls were paid from funds available on the EFSI Account, except for one SMEW call that 
was partially paid from the EFSI GF (EUR 0.5 million). 

4.  MANAGEMENT OF THE EFSI GF IN 2020 

4.1. FINANCIAL MANAGEMENT 

The  EFSI  GF’s  investment  portfolio  is  invested  in  accordance  with  the  management 
principles laid down in Commission Decision C(2016)165 of 21 January 2016 approving the 
asset management guidelines of the EFSI GF. 

These  guidelines  foresee  that  the  assets  in  the  investment  portfolio  shall  provide  sufficient 
liquidity in relation to the potential guarantee calls, while still aiming at optimising the return 
and risk level that is compatible with maintaining a high degree of security and stability. 

Investment and risk management strategies were adopted reflecting the investment objectives 
and  the  market  outlook.  The  investment  approach  aimed  to  enhance  diversification  across 
various fixed income asset classes. 

4.2.  MARKET DEVELOPMENTS IN 2020 

Market developments in 2020 were dominated by the Covid-19 virus, its devastating impact 
on  public  health  and  the  global  economy  and  the  quick  and  strong  policy  response  by 
governments and central banks. 

Fixed income markets started the year on an optimistic note, courtesy of progress in the US-
China  trade  relationship  and  a  generally  positive  economic  sentiment.  The  10-year  German 
government bond (Bund) yield reached a high of -0.16% in mid-January, which would prove 

17  Assigned  revenues  refer  here  to  what  is  commonly  termed  ‘reflows’.  They  are,  for  example,  composed  of 
EFSI  remuneration,  dividends,  capital  gains  or  annual  repayments  including  capital  repayments,  guarantees 
released, and repayments of the principal of loans recovered from the EIB. 
18 See Article 8.1(b) of the EFSI Agreement. 
19 See Article 8.1(d) of the EFSI Agreement. 
20 See Articles 8.1(d) and 11.7 of the EFSI Agreement. 

5 

 
 
                                                           
to be the peak level for the whole year. 

Around  March,  more  than  half  the  world’s  population  was  effectively  put  in  confinement 
when  the  threat  of  the  virus  became  increasingly  clear.  This  created  a  global  shock  to  both 
supply and demand, particularly in face-to-face services. 

Financial markets worldwide experienced a sudden shock, which went hand in hand with an 
important spike in risk aversion and volatility. The ensuing ‘dash for cash’ led to the fire sale 
of assets, causing dislocations and threatening the stability of financial markets. 

Equity markets plummeted and investors turned to safe assets, such as the Bund, whose yield 
quickly dropped to its year low of -0.86% by mid-March. US Treasuries yields dropped even 
further, fuelled by two emergency rate cuts by the US Federal Reserve, for a total of 150bps, 
at the beginning of March. Safe-haven yields then reversed and, in tandem with the rest of the 
fixed income universe, moved higher in the midst of market uncertainty and limited liquidity. 
The Bund moved back towards -0.20% ten days after reaching its year low. Spreads of other 
European  government  bonds  to  the  Bund  widened  substantially,  as  did  spreads  of  all  other 
fixed income asset classes. 

To restore confidence, governments implemented rescue packages and central banks provided 
monetary  accommodation  (e.g.  policy  rate  cuts  and/or  asset  purchases)  at  an  unprecedented 
scale.  This  helped  markets  to  calm  and  overall  asset  valuations  to  rebound.  Following  a 
volatile  March,  spreads  stabilized  from  April  onwards,  moving  to  a  generally  downward 
trajectory.  The  announcement  of  unprecedented  fiscal  packages  worldwide  and  in  Europe, 
notably the EUR 750 billion Next  Generation EU, nudged the overall  yield  levels  higher in 
June, but central banks continued to ensure favourable financing conditions amidst lingering 
downside risks. Overall, for the rest of the year, euro-area yields and spreads were gradually 
decreasing, while investor confidence kept improving on the back of advances on the front of 
vaccination and the prospect of further stimulus following the US elections in November. The 
Bund finished the year at -0.57%. 

Overall,  fixed  income  markets,  although  characterized  by  very  high  volatility,  provided 
attractive  investment  opportunities,  which  in  turn  contributed  to  the  positive  return  of  the 
EFSI GF at year-end. 

4.3.  COMPOSITION AND KEY RISK CHARACTERISTICS OF THE PORTFOLIO 

The  year-end figures  of  the EFSI  GF  portfolio show that the portfolio is well diversified in 
terms  of asset  classes  and rating categories.  In addition,  there is  also  diversification in  non-
euro denominated securities (USD) in the form of an allocation to US Treasuries and other US 
issuers  (e.g.  Supranational,  other  Sovereigns  or  Agencies)  and  cash  for  about  6%  of  the 
portfolio. The currency risk is hedged. 

The  proportion  of  bonds  complying  with  environmental,  social  and  governance  criteria  was 
9.5% at the end of 2020 compared with 6.9% at the end of 2019. The portfolio duration21 at 
the end of 2020 was 3.19 years, while its average credit rating was BBB+. 

About  33%  of  the  portfolio  consisted  of  bonds  with  a  maturity  below  1-year,  floating  rate 
notes and short-term  money  market  instruments  which provide a further  liquidity buffer for 
the portfolio. 

21 The duration figure refers to 'modified duration' which measures the price sensitivity of a bond to interest rate 
movements. This figure is based on the concept that a security price and interest rates are inversely related. 

6 

 
 
                                                           
The profile of the portfolio, in terms of duration, credit risk and liquidity, has been calibrated 
in  line  with  the  forecasted  cash-flows  arising  from  the  EFSI  operations  under  the  EU 
Guarantee (e.g. projected calls, revenues). 

4.4.  PERFORMANCE 

The annual performance is calculated on a time-weighted basis so as not to be affected by the 
size of the portfolio, which continued to grow during the year. 

In a market environment characterised by health-related volatility and historically low yields, 
the Fund delivered an annual absolute performance of 1.246 % in 2020. This return is in line 
with  the  annual  performance  of  the  EFSI  benchmark  (1.23 %).  However,  the  2020 
performance  of  both  the  benchmark  and  the  portfolio  were  largely  driven  by  positive  curve 
returns.  Considering  the  historically  low  levels  reached  by  EU  and  US  yields,  the  portfolio 
and  the  benchmark  could  be  negatively  impacted  in  the  coming  years  by  opposite  curve 
movements (i.e. rising yields). 

5.  ASSESSMENT OF THE ADEQUACY OF THE TARGET AMOUNT AND THE LEVEL 

OF THE EFSI GF 

total  cumulated  signatures  under  EFSI  amounted 

As  of  31  December  2020, 
to 
EUR 82.7 billion  covering  all  Member  States,  of  which  EUR 57.2 billion  was  signed  under 
the IIW (629 operations) and EUR 25.5 billion was signed under the SMEW (792 operations). 
Overall,  this  represents  a  significant  increase  compared  to  31  December  2019,  when  total 
signatures amounted to EUR 68.7 billion. The above figures represent total amounts signed by 
the EIB Group from the inception of EFSI, whereas the outstanding exposure is only partially 
covered by the EU Guarantee under the EFSI. The latter is further detailed in the subsequent 
paragraphs of this section, as well as in section 3 above. As of 31 December 2020, the overall 
outstanding disbursed exposure covered by the EU Guarantee amounted to EUR 18.9 billion 
(16.5  and  EUR  2.4  billion  for  respectively  IIW  and  SMEW),  up  from  EUR 18.4 billion  in 
2019. 

The exposure of the EU budget to possible future payments under the EU Guarantee in terms 
of signed operations (disbursed and undisbursed) amounted to EUR 24.1 billion (18.5 billion 
for IIW and for 5.6 billion for SMEW). 

Under  the  IIW,  the  outstanding  disbursed  exposure  covered  by  the  EU  Guarantee  was 
EUR 16.5 billion, of which EUR 15.2 billion was for debt operations and EUR 1.3 billion was 
for equity-type operations. 

Should  there  be  any  losses  due  to  these  IIW  operations,  those  will  be  covered  by  the  EU 
Guarantee in accordance with the terms set out in the EFSI Agreement. In particular, the EU 
Guarantee under the  IIW is granted in the form of a Portfolio First  Loss Piece coverage for 
operations  under  the  IIW  Debt  Portfolios  and  IIW  NPB  Equity  Portfolio.  Under  the  IIW 
Standard Equity Portfolio, the EU Guarantee is in the form of a full guarantee provided that 
the EIB invests the same amount at its own risk on a pari passu basis. 

As of 31 December 2020, under SMEW, the total outstanding disbursed exposure covered by 
the  EU  Guarantee  was  EUR 2.4 billion,  of  which  EUR 1.7 billion  was  for  guarantee 
operations and EUR 0.7 billion was for equity operations22. 

22 As evidenced in the financial statements of the EU as at 31 December 2020, not including guarantee contracts 

7 

 
 
                                                           
 
Should there be any losses due to the SMEW guarantee operations, they would be primarily 
covered  by  the  contributions  of  the  InnovFin  SME  Guarantee  Facility,  the  COSME  Loan 
Guarantee  Facility,  the  Cultural  and  Creative  Sectors  Guarantee  Facility  and  the  EaSI 
Guarantee Financial Instrument. EFSI SMEW provides a senior coverage for losses above the 
EU  contribution.  Under  EFSI  Combination  Product,  EFSI  covers  the  Second  Loss  Piece 
tranche  of  the  operations  after  the  Member  State  or  Managing  Authority,  while  the  EIF 
provides  the  complementary  senior  risk  coverage.  Under  SMEW  Skills  and  Education 
Product, EFSI provides a guarantee up to 80% of each signed operation. 

In the case of SMEW Equity Product Sub-windows, any losses would be covered pro-rata by 
the EU Guarantee under the EFSI and by the EIF, depending on their contributions specified 
in the EFSI Guarantee Agreement. In the case of Equity Product Sub-window 2, the InnovFin 
Equity Financial Instrument will cover the First Loss Piece. Under the SMEW Private Credit 
Product, EFSI povides a First  Loss Piece tranche coverage, and under  the SMEW Scale-Up 
Action for Risk capital it provides a full guarantee. 

The  target  amount  of  the  EFSI  GF  has  been  set  at  35%  of  the  total  EU  Guarantee 
obligations23.  The  risk  assessment  of  the  different  products  supported  by  the  EU  Guarantee 
shows  that  -  with  this  target  rate  -  the  Union  budget  would  overall  be  adequately  shielded 
from  potential  calls  under  the  EU  Guarantee,  taking  into  consideration  recoveries,  revenues 
and reflows from EIB operations. Therefore, the target rate of 35% is considered adequate. 

As the EFSI GF - as part of the CPF compartment since January 2021 - is still in the build-up 
phase until 2022, the need for replenishment will only be assessed at a later stage. 

whose availability period starts in 2021. 
23 See Article 12(5) of the EFSI Regulation. 

8