16.6.2022
EN
3.2.4.
Official Journal of the European Union
L 161/111
Proportionality of the aid
132.
State aid must be proportionate to the market failure or other relevant obstacle which it is intended to address in order to achieve the relevant policy objectives.
It must be designed in a cost-efficient manner, in accordance with the principles of sound financial management.
Therefore, for any risk finance aid measure to be considered proportionate, the aid must be limited to the strict minimum necessary to attract funding from the market to overcome the market failure or the other relevant obstacle, without generating undue advantages.
133.
As a general rule, at the level of the final beneficiaries, risk finance aid is considered to be proportionate if the risk finance investment per eligible beneficiary does not exceed the cap fixed in Article 21 of the General Block Exemption Regulation and complies with the conditions set out in this Section.
For risk finance measures where the risk finance investment per eligible beneficiary exceeds the cap fixed in the General Block Exemption Regulation, the higher risk finance investment per beneficiary must, furthermore, be commensurate to the size of the funding gap quantified in the ex ante assessment (see paragraph 64).
134.
At the level of the investors, aid must be limited to the minimum necessary to attract private capital in order to achieve the minimum leverage of private resources and address the market failure or other relevant obstacle.
3.2.4.1.
C o n d i ti on s for f i n a n ci a l i nstr u m en ts
135.
Financial intermediaries have to select the eligible final beneficiaries on the basis of a commercially sound investment strategy (see paragraph 70) and a viable business plan that justifies the amount of risk finance that is to be provided.
Those elements are a further safeguard to ensure that the aid is necessary and proportionate.
136.
The measure must ensure a balance between the preferential conditions offered by a financial instrument in order to maximise the leverage of private resources while addressing the identified market failure or other relevant obstacle and the need for the instrument to generate sufficient financial returns to remain operationally viable.
137.
The exact nature and value of the incentives must be determined through an open, transparent and nondiscriminatory selection process in the context of which financial intermediaries, as well as fund managers or investors, are called to present competing bids.
Fa i r rat e of r e t u r n
138.
The Commission considers that where any asymmetric risk-adjusted returns or loss-sharing is established through such a process, the financial instrument is to be regarded as proportionate and to reflect a fair rate of return.
Where the fund managers are selected through an open, transparent, and non-discriminatory process requiring the applicants to present their investor base as part of the selection process, the private investors are considered to be duly selected.
139.
In the case of co-investment by a public fund with private investors participating on a deal-by-deal basis, the latter should be selected through a separate competitive process in respect of each transaction, which is the preferred way of establishing the fair rate of return.
140.
Where private investors are not selected through a proper selection process (for instance because the selection procedure has proven to be ineffective or inconclusive) the fair rate of return must be established by an independent expert on the basis of an analysis of market benchmarks and market risk on the basis of a generally accepted, standard methodology such as the discounted cash flow valuation methodology in order to avoid overcompensation of investors.
On that basis, the independent expert must calculate a minimum level of fair rate of return and add to that an appropriate margin to reflect the risks.