REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ON THE GUARANTEE FUND FOR EXTERNAL ACTIONS AND ITS MANAGEMENT IN 2020
Date: 2021-08-20
Institutions: Directorate-General for Budget, 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, 20.8.2021  COM(2021) 465 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS       ON THE GUARANTEE FUND FOR EXTERNAL ACTIONS AND ITS MANAGEMENT IN 2020 {SWD(2021) 224 final}  
 
 
Table of Contents 

1. 

2. 

2.1. 

2.2. 

Introduction ................................................................................................................... 2 

Financial Position and Significant Transactions of the Guarantee Fund ...................... 2 

Financial Position of the Guarantee Fund at 31 December 2020 ................................. 2 

Significant Transactions of the Fund in 2020 ............................................................... 3 

2.2.1  Calls on the Guarantee Fund 2020 ................................................................................ 3 

2.2.2 

Provisioning of the Guarantee Fund 2020 .................................................................... 3 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

5. 

6. 

Significant transactions after the reporting date (as of end March 2021) ..................... 3 

Pre-consolidated Financial Statements of the Fund ...................................................... 3 

Pre-consolidated Financial Position at 31 December 2020 .......................................... 4 

Pre-consolidated Statement of Financial Performance ................................................. 5 

Guarantee Fund Treasury Management ........................................................................ 6 

Investment policy .......................................................................................................... 6 

 Performance and market developments in 2020 .......................................................... 7 

Calls on the Guarantee Fund ......................................................................................... 7 

EIB remuneration .......................................................................................................... 7 

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INTRODUCTION 

1. 
Council Regulation (EC, Euratom) No 480/2009  of 25 May 2009 (‘the Regulation‘)1 
established a Guarantee  Fund for  external  actions (‘the  Fund’) in  order to provide a 
liquidity buffer to repay the Union’s creditors in the event of default by beneficiaries 
of loans granted or guaranteed by the European Union. In accordance with Article 7 
of the Regulation, the Commission entrusted the financial management of the Fund to 
the  European  Investment  Bank  (EIB)  under  an  agreement  between  the  European 
Union  and  the  EIB  dated  25 November 1994,  and  subsequently  amended  on 
23 September 1996,  8 May 2002,  25 February 2008,  9 November 2010  and  28 
September 20182 (‘the Agreement’). 

Article 8 of the Regulation requires the Commission to send a report to the European 
Parliament, the Council and the Court of Auditors on the situation of the Fund and the 
management  of  the  Fund  at  the  end  of  the  previous  calendar  year  thereof  for  each 
financial year by 31 May of the following year.  

This report, together with the Commission Staff Working Document (SWD), provides 
this information. It is based on data received from the EIB, in line with the agreement. 

2. 
GUARANTEE FUND 

FINANCIAL  POSITION  AND  SIGNIFICANT  TRANSACTIONS  OF  THE 

2.1. 

Financial Position of the Guarantee Fund at 31 December 2020 

The  Guarantee  Fund  totalled  EUR 2,855,047,432.59  as  of  31  December  2020 
(EUR 2,828,738,292.88 as of 31 December 2019) (see Annex of the SWD: Guarantee 
Fund financial statements, as provided by the EIB). 

The  total  balance  sheet  value  of  the  Fund  increased  by  about  EUR  26.31  million  in 
2020. This is mainly explained by the following: 

Increases: 

 

 

 

 

The  contribution 
(provisioning  amount)  of 
EUR 42.34 million to adjust the Fund to its target amount of 9% of the total 
outstanding liabilities; 

the  EU  budget 

from 

The economic result on financial operations amounted to EUR 22.26 million; 

The portfolio valuation increased by EUR 13.39 million due to the mark-to-
market adjustment of its value. 

EUR  0.70  million  of  historically  called  amount  were  recovered  from  a 
defaulted debtor.  

1  OJ  L 145,  10.6.2009,  p. 10;  the  Regulation  codified  and  repealed  Regulation  (EC,  Euratom) 
No 2728/94  of  31  October  1994  establishing  a  Guarantee  Fund  for  external  actions.  It  has  been 
amended on 14.3.2018 by Regulation (EU) 2018/409 of the EP and of the Council. 
Supplementary  Agreement  no  5  to  the  Agreement  relating  to  the  Management  of  the  Guarantee 
Fund between the European Union and the European Investment Bank - Ref. Ares(2018)5207374 - 
10/10/2018. 

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 

The  payable  to  the  EIB  for  the  treasury  management  fees  and  for  the  audit 
fees outstanding at 31 December increased by 0.05 million 

Decreases: 

 

Interventions of the Fund to cover defaulted payments for a total amount of 
EUR 52.43 million. 

2.2. 

Significant Transactions of the Fund in 2020 

Calls on the Guarantee Fund 2020 

2.2.1 

Syria 

In  2020,  the  EIB  has  continued  facing  arrears  on  Syrian  sovereign  loans.  As  a 
consequence, and in line with the Guarantee Agreement between the EU and the 
EIB,  the  EIB  has  made  14  additional  calls  on  the  EU  Guarantee  Fund  up  to 
31 December 2020 for a total amount of EUR 52.43 million (see point 5). 

2.2.2 

Provisioning of the Guarantee Fund 2020 

In  February  2020  an  amount  of  EUR  240.15  million  was  transferred  from  the 
budget to the Fund corresponding to the provisioning amount for 2019. 

The calculation of the contribution from the EU budget to the Fund for 2021 was 
also calculated in February 2020 resulting in EUR 42.34 million.  

It was calculated following Article 3 and Article 5 of the Regulation: 

Article 3 of the Regulation sets the target amount for the Fund at 9 % of the total 
outstanding  capital  liabilities  arising  from  each  operation,  plus  any  accrued 
unpaid interest due.  

Article  5  of  the  Regulation  states  that  the  amount  to  be  transferred  from  the 
budget  to  the  Fund  in  year  n  +  1  is  calculated  on  the  basis  of  the  difference 
between  the  target  amount  and  the  value  of  the  Fund’s  net  assets  at  the  end  of 
year n - 1, calculated at the beginning of year n. 

To adjust the Fund to 9% of the total outstanding capital liabilities, an amount of 
EUR 42.34 million was calculated based on guaranteed operations outstanding at 
31 December 2019 and entered in the EU budget of 2021 for the provisioning of 
the Fund. The amount was approved by the Council and the European Parliament 
and  recognised  as  an  asset  (receivable)  of  the  Fund  in  the  balance  sheet  at 
31 December 2020. 

The payment of the EUR 42.34 million to the Common Provisioning Fund (CPF) 
is planned to take place end-November as agreed internally. It is directly related 
to the previous transfer of the assets of the GFEA from the EIB to the Common 
Provisioning  Fund  (CPF)  which  is  expected  to  be  carried  out  in  Q3  (end-July) 
subject to the adoption of the NDICI Regulation. 

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2.3. 

Significant transactions after the reporting date (as of end April 2021) 

In  January  and  March  2021,  EUR  498,490.95  and  EUR  167,718.31  were 
recovered respectively from the defaulted loan to Enfidha Airport (Tunisia).  

In  April  2021,  a  guarantee  call  of  EUR  7.4  million  was  paid  for  defaulted 
payments of Syria (penalties applied by EIB). 

3. 

PRE-CONSOLIDATED FINANCIAL STATEMENTS OF THE FUND 

The pre-consolidated financial statements of the Fund are prepared in order to include 
accounting  operations  which  are  not  included  in  the  Fund's  financial  statements 
prepared  by  the  EIB  (see  SWD).  They  are  part  of  the  EU's  consolidated  financial 
statements. 

3.1. 

Pre-consolidated Financial Position at 31 December 2020 

Balance Sheet – Assets 

NON-CURRENT 
ASSETS 

Financial assets 

CURRENT ASSETS 

Financial assets 

Receivables 

Cash 
equivalents 

and 

cash 

31 December 2020 

31 December 2019 

2,378,221,641 

2,312,151,734 

2,378,221,641 

2,312,151,734 

434,485,659 

415,856,202 

1,810,109 

16,819,348 

277,139,064 

233,048,865 

1,290,863 

42,799,336 

TOTAL ASSETS 

2,812,707,300 

2,589,290,798 

Balance Sheet - Liabilities 

CONTRIBUTOR'S 
RESOURCES 

European 
Commission 
contribution 

31 December 2020 

31 December 2019 

2,609,255,287 

2,407,419,308 

2,190,348,119 

1,950,195,297 

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Fair value reserve 

Retained earnings 

NON-CURRENT 
LIABILITIES 

Financial provisions 

CURRENT 
LIABILITIES 

Financial provisions 

guarantee 

Financial 
liability 

Payables 

TOTAL 
CONTRIBUTOR'S 
RESOURCES + 
LIABILITIES 

34,252,128 

384,655,040 

82,892,623 

82,892,623 

120,559,388 

29,880,034 

89,750,000 

20,859,023 

436,364,988 

111,685,549 

111,685,549 

70,185,941 

49,709,547 

19,590,000 

929,354 

886,394 

2,812,707,300 

2,589,290,798 

The difference of EUR 42.34 million between the total pre-consolidated balance sheet 
value  of  the  Fund  (EUR 2,812,707,300)  and  the  value  of  the  Fund  in  the  financial 
statements prepared by the EIB (EUR 2,855,047,433) can be mainly explained by the 
following items: 

  The pre-consolidated balance sheet (assets) includes: 

  all amounts  subrogated to the EU as a result of the guarantee payments for 
EIB calls on defaulted loan instalments (arrears due plus the interest accrued 
on  late  payments).  However,  in  view  of  the  political  situation  of  Syria  and 
based on a decision of the Accounting Officer of the EC, these amounts have 
been fully impaired in the 2020 financial statements. 

  The pre-consolidated balance sheet does not include: 

  Financial  provisions  of  EUR  112.8  million  relating  to  future  instalments  of 
the remaining outstanding Syrian loans, that have been recognised in the pre-
consolidated balance sheet in 2020.  

  EUR  42.34  million  of  contribution  from  the  EU  budget  to  the  Common 
Provisioning  Fund  (CPF)  as  this  receivable  is  offset  by  the  corresponding 
payable in the consolidated accounts of the EU.  

  The payments of calls from the Guarantee Fund to the EIB (and where applicable 
successive  recoveries  of  the  calls  and  late  interests)  are  recognised  as  decreases 
(increases)  of  the  Net  Assets  (EU  Contribution)  in  the  financial  statements 

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prepared  by  the  EIB.  In  the  pre-consolidated  financial  statements,  the  amounts 
paid  for  EIB  calls  are  not  deducted  from  the  Net  Assets  as  they  become 
subrogated  amounts.  Related  amounts  are  either  accounted  for  as  revenues 
(accruing  late  interest  and  penalties,  foreign  exchange  gains)  or  as  expenses 
(provisions,  impairments,  financial  guarantee  liability,  foreign  exchange  losses). 
This  leads  into  a  permanent  difference  between  the  Net  Assets  items  (EU 
Contribution  and  Retained  earnings)  recognised  in  the  financial  statements 
prepared by the EIB and the pre-consolidated financial statements prepared by the 
EC. 

3.2. 

Pre-consolidated Statement of Financial Performance 

In  the  same  way  as  the  balance  sheet,  the  pre-consolidated  Statement  of  Financial 
Performance is prepared for inclusion in the consolidated Financial Statements of the 
EU.  

2020 

2019 

Revenue from operating activities 

Expenses from operating activities 

RESULT 
ACTIVITIES 

FROM 

OPERATING 

Financial income 

Financial costs 

FINANCIAL RESULT 

0 

(3,460,002) 

(3,460,002) 

42,933,660 

(91,183,606) 

(48,249,946) 

266,252 

(3,494,876) 

(3,228,615) 

42,681,966 

(39,575,953) 

3,106,013 

ECONOMIC RESULT OF THE YEAR 

(51,709,948) 

(122,602) 

  Expenses  from  operating  activities  mainly  include  EIB  asset  management  fees 
(EUR  0.8  million),  additions  to  financial  provisions  on  the  outstanding  future 
Syrian  instalments  (EUR  1.1  million  and  foreign  exchange  losses  (EUR  1.2 
million). 

  The  Financial  income  mainly  includes  the  interest  income  from  the  investment 
portfolio  (EUR  6.8  million),  realised  gains  on  sale  of  financial  assets 
(EUR 8.8 million), risk related remuneration from ERI private mandate operations 
(EUR  9.1  million)  and  accrued  late  payment  interest  on  subrogated  amounts 
(EUR 18.1 million). 

  The  Financial  costs  mainly  include  impairment  losses  (EUR  19.6  million)  on 
amounts  subrogated  to  the  EU  in  2020  (see  point  5),  realised  losses  on  sale  of 

6 

 
 
 
 
 
 
 
 
financial assets  (EUR  1.4 million) and recognised financial  guarantee liability on 
ERI Private mandate operations (EUR 70.2 million). 

4. 

GUARANTEE FUND TREASURY MANAGEMENT 

4.1. 

Investment policy 

The Fund’s liquid assets are invested in accordance with the management principles 
laid  down  in  the  Annex  to  the  Management  Agreement,  as  amended3.  Accordingly, 
sufficient assets shall be placed in monetary assets to cover the short term (less than 
one year) outflows, at a proportion to be set out in the annual investment strategy. The 
remaining  assets  may  be  allocated  to  medium  and  long  term  instruments,  with  a 
maximum  maturity  of  10  years  and  6  months  from  the  payment  date  (medium  and 
long-term  portfolio).  As  of  end  of  2020,  the  overall  modified  duration  of  the  Fund 
portfolio was ca. 3 years. 

4.2. 

 Performance and market developments in 2020 

The  performance  of  the  Fund  portfolio  was  monitored  on  a  mark-to-market  basis. 
During  2020,  the  Fund  portfolio  delivered  a  return  of  1.074%,  outperforming  the 
benchmark by 28.6 bps. The performance was shaped by the high volatility while the 
lower yield environment continued, supported by the accommodative stance of fiscal 
and  monetary  policy  during  the  pandemic.  The  positive  return  translated  into  a 
positive  contribution  of  EUR  30  million.  As  of  end  2020,  the  market  value  of  the 
Fund portfolio amounted to ca. EUR 2,810 million. 

The  pandemic  created  sudden  and  unparalleled  challenges  to  global  economy. 
Measures to contain the spread of the virus had a pronounced negative effect on the 
economic activity, a  contraction of the  global trade and increase in  financial market 
volatility.  Large  parts  of  the  global  economy  were  in  the  lockdowns,  fuelling 
consumer uncertainty and weakening the demand, with the service sectors facing the 
most negative impact and manufacturing having shown more resilience.  

The monetary and fiscal policy stance remained supportive. In Euro area, the ECB has 
introduced a new temporary Pandemic Asset Purchase Programme for a total of EUR 
1850 bn, complementing the existing Asset Purchases Programmes (APP). Additional 
monetary accommodation was delivered through easing of conditions for Long Term 
Refinancing  Operation  (LTRO)  and  Targeted  Long  Term  Refinancing  Operations 
(TLTRO) and extending the APP by the additional temporary envelope of EUR 120 
bn. In the US, the Federal Reserve introduced a set of measures to stabilise markets 
and stimulate growth,  including the 2 new facilities (the Primary  and the Secondary 
Market  Corporate  Credit  Facility),  removing  caps  on  planned  asset  purchases  under 
QE  and  cutting  its  rate  for  1.5  percentage  points  since  March  2020,  bringing  it  to 
near-zero levels.   

The financial markets performed relatively well in late 2020, on the back of improved 
risk  sentiment,  reassuring  news  on  the  vaccine  development  and  optimism  on  the 

3        Amended  by  Supplementary  Agreement  No 1  of  23 September 1996,  Supplementary  Agreement 
No 2  of  8 May 2002,  Supplementary  Agreement  No  3  of  25  February  2008,  Supplementary 
Agreement No 4 of 9 November 2010 and Supplementary Agreement No 5 of 28 September 2018. 

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fiscal  stimulus  package  following  the  US  presidential  elections.  In  Europe,  the 
introduction  of  Next  Generation  EU  (NGEU)  programme  and  Support  to  mitigate 
Unemployment Risks in an Emergency (SURE) instrument further bolstered the fiscal 
measures  on  the  national  level,  helping  to  gain  the  momentum  and  compress  the 
spreads.  Against  this  backdrop,  the  rates  and  credit  in  the  euro  area  continued  to 
decrease,  albeit  at  a  slower  pace  than  before,  while  the  Treasury  long-term  yields 
trended higher. 

5. 

CALLS ON THE GUARANTEE FUND 

Syria 

In  the  wake  of  the  deteriorating  situation  in  Syria,  the  Foreign  Affairs  Council,  the 
European  Parliament  and 
in  2011  prohibiting 
disbursements  by  the  EIB  in  connection  with  existing  loan  agreements  as  well  as 
supending  EIB  technical  assistance  contracts  for  sovereign  projects  in  Syria.  The 
restrictive  measures  were  thereafter  enshrined  in  Council  Regulation  (EU)  N° 
36/2012 of 18 January 2012, as amended. 

took  decisions 

the  Council 

As  a  consequence,  no  new  financing  operation  has  been  pursued  by  the  EIB  since 
May 2011  and all on-going disbursements and technical  assistance services  to  Syria 
have been suspended since November 2011 until further notice. 

Since November 2011, the EIB is facing arrears on sovereign loans that were granted 
to  Syria.  As  a  consequence,  and  in  line  with  the  relevant  guarantee  agreements 
between the EU and the EIB, the EIB has made 91 calls on the EU Guarantee Fund up 
to 31 December 2020 for a total amount of EUR 528.39  million (including penalties 
applied by EIB and amounts recovered). 

6. 

EIB REMUNERATION 

The  EIB  remuneration  is  composed  of  the  management  fees  and  the  recovery  fees. 
The  management  fees  cover  the  asset  management  of  the  Fund.  The  recovery  fees 
cover  the  EIB’s  external  recovery  expenses  regarding  claims  following  defaults 
covered by the EU guarantee for EIB financing operations outside the Union. 

The  second  Supplementary  Agreement  to  the  Agreement  dated  8 May 2002 
establishes  that  the  Bank’s  management  fees  shall  be  calculated  by  applying 
degressive annual rates of fees to each tranche of the Fund’s assets. This remuneration 
is calculated on the basis of the annual average assets of the Fund. 

The Bank’s management fees for 2020 were set at EUR 837,634 and were entered as 
expense in the Statement of Financial Performance and as accruals (liabilities) on the 
Balance Sheet. 

The Recovery Agreement signed between the Commission and the Bank in December 
2018  only  envisages  payment  for  EIB’s  external  (and  no  longer  internal)  recovery 
expenses. 

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