CELEX: 51993PC0003
Language: en
Date: 1993-01-12
Title: PROPOSAL FOR A COUNCIL DECISION ON COMMUNITY MEMBERSHIP OF THE EUROPEAN INVESTMENT FUND

'-i^&
                    COMMISSION OF THE EUROPEAN COMMUNITIES
                                                        C0MC93)  3  final
   \ ,mm
                                                        Brussels, 12 January 1993
4.
         —zÊËîM
                                     THE EUROPEAN INVESTMENT FUND
                                                  (EIF)
      ï£=24±^i&pytï
                                            PROPOSAL FOR AN
                                    ADDITION TO THE PROTOCOL ON THE
                                STATUTE OF THE EUROPEAN INVESTMENT BANK
                             empowering the Board of Governors of the EIB
                               to establish the European Investment Fund
                                  PROPOSAL FOR A COUNCIL DECISION ON
                                      COMMUNITY MEMBERSHIP OF THE
                                       EUROPEAN INVESTMENT FUND
                                     (PRESENTED BY THE COMMISSION)
   F    v
         ? VS5
 ---pagebreak---                     THE EUROPEAN INVESTMENT FUND (EIF)
                          Explanatory Memorandum
A.    INTRODUCTION
 In the context of promoting economic recovery in Europe, a proposal to
set up a European Investment Fund (EIF) was endorsed by the European
Council in Edinburgh on 11 and 12 December, who invited the Council and
the EIB to give urgent and sympathetic consideration to the
establishment as quickly as possible of the Fund.
The discussions on the Fund were originally initiated by the Commission
representatives in the Bank's Board of Directors and reflected the
concern - also highlighted In C0M(92) 2000 - that the Bank should be
able to contribute fully to the pursuit of the Community's objectives
by assuming and managing more specific risks without jeopardizing its
credit standing and mainstream lending. A Working Party of Board
Members (principally representatives of Ministries of Finance) was
mandated to conduct a detailed examination of the modalities and to
work out specific proposals.
B.    PESCRtPTIQN OF THE EIF
The Fund is a tripartite organization In which the Community, the EIB
and other financial institutions will participate.
The main objectives of the Fund will be to contribute to the
strengthening of the Internal market and the furthering of economic and
social cohesion. Major Infrastructure projects in the framework of the
transeuropean networks (TENs), as well as small and medium-sized
enterprises (SMEs), especially in Community assisted areas, constitute
the main targets of support of the EIF. Other projects, for example in
the areas of environmental protection and energy production, may become
eligible later after decision of the Fund's ruling bodies.
The Fund's operations will predominantly take the form of fInane la I
guarantees, while the provision of equity will constitute a secondary
activity and be developed at a later stage. Loan guarantees are,
besides feasibility studies and interest subsidies, one of the three
ways set out In the Union Treaty (Title XII, Art. 129C) in which the
Community should concentrate Its financial interventions In favour of
TEN projects. The targetting of SMEs, especially in Community assisted
areas, on the other hand, corresponds to the objectives of both Title
XI I I (Industry) and Title XIV (Economic and Social Cohesion) of the new
Treaty. The operations of the Fund will be co-ordinated, where
necessary, with other forms of Community Intervention.
The EIF is intended to direct the main part of its activities towards
projects that should operate wholly or partially on a self-financing or
commercial basis. The existence of the Fund will thus facilitate
private    Infrastructure  financing   by providing    a complement   or
alternative to recourse to government guarantees for infrastructure
financing. The viability criterion will also be an essential element in
its approach to SMEs.
                                                       ./.
                                                                          T
 ---pagebreak---                                                         2.
The EIF    Itself will operate on a self-sustaining basis and therefore
seek an   acceptable return on Invested capital by charging Its services
 in line  with market practices. As a separate legal entity, Its accounts
will be    totally distinct from those of the EIB, although It will be
created   by decision of the Bank's Board of Governors. It will also be
managed   on a day-to-day basis by the EIB under mandate.
Supervision and direction of the Fund's policy and activities will take
place at the level of Its General Meeting, Supervisory Board and
Financial Committee. The contributions from the Community budget wi I I
be subject to the provisions of Article 24 of the Financial Regulation
and to the normal control of the Court of Auditors.
C.    CAPITAL REQUIREMENTS
The initial subscribed capital amounts to ECU 2 billion. According to
 initial estimates based on the prudential ratios suggested for the EIF,
this would cover between 5 and 10 billion ECUs of guarantees. The
Community budget will provide 30% of the Initial capital, the EIB 40%
and other financial institutions the remaining 30%.
Only 20% of subscribed capital will be paid-in; as far            as the
Community's share in the capital is concerned, this amounts      to four
annual instalments of 30 MECU each, or 120 MECU in total.
The other 80% of the Community's capital share (480 MECU) will take the
form of uncalled subscribed capital. This remaining capital can only be
called by the Fund as and when required to meet Its liabilities, and
not as a way to permit an expansion of Its operations. In addition,
great care has been taken to ensure that the likelihood of this
happening Is minimal. The Fund's Statute will include a number of
specific ceilings and prudential rules to this effect, limiting total
exposure     and  ensuring     effective risk   diversification  as   all
shareholders have every interest In the Fund's financial success.
As largest shareholder of the Fund, the EIB will finance Its share out
of its annual surpluses. Share subscriptions by financial institutions
will probably be phased over several years as a large number of them
are concerned. The broad concept has already been presented to a large
number of institutions and many have shown a receptive attitude to a
potential shareholding in the Fund.
D.    BANKING SOLVENCY RATIO DIRECTIVE
The Commission will take the necessary steps to have the EIF classed as
a 'multilateral development bank' under the Solvency Ratio Directive
for Credit Inst I tutions< 1 >.
                                                        ./.
(1) Council Directive 89/647 of 18 December 1989 (O.J. L386            of
     30.12.89, p. 14) as amended by Commission Directive 91/31         of
     19 December 1990 (O.J. L17 of 23.01.91, p. 2 0 ) .                   "*>
 ---pagebreak---                                                 3.
COMMISSION PROPOSAIS
Since the Board of Governors of the EIB is currently not empowered
to establish a Fund, an addition to the Protocol on the Statute of
the European Investment Bank Is required to this effect. This will
entail an article 236 procedure. The Commission therefore Invites
-   the Council, after consulting the European Parliament, to
   deliver an opinion In favour of calling a conference of
   representatives of the Governments of Member States on the
   basis of the proposed addition to the Protocol on the EIB
   attached to this memorandum-,
-  the President of the Council to convene the conference for the
   purpose of determining the amendment by common accord.
The Commission also asks the Council, after        consulting the
Parliament, to adopt the decision In annex on      the Community's
membership of the Fund.
                                                                   U
 ---pagebreak---                               PROPOSAL FOR AN
                      ADDITION TO THE PROTOCOL ON THE
                  STATUTE OF THE EUROPEAN INVESTMENT BANK
               empowering the Board of Governors of the EIB
                 to establish the European Investment Fund
HIS  MAJESTY THE KING OF THE BELGIANS,
HER  MAJESTY THE QUEEN OF DENMARK,
THE  PRESIDENT OF THE FEDERAL REPUBLIC OF GERMANY,
THE  PRESIDENT OF THE HELLENIC REPUBLIC,
HIS  MAJESTY THE KING OF SPAIN,
THE  PRESIDENT OF THE FRENCH REPUBLIC,
THE  PRESIDENT OF IRELAND,
THE  PRESIDENT OF THE ITALIAN REPUBLIC,
HIS  ROYAL HIGHNESS THE GRAND DUKE OF LUXEMBOURG,
HER  MAJESTY THE QUEEN OF THE NETHERLANDS,
THE  PRESIDENT OF THE PORTUGUESE REPUBLIC,
HER  MAJESTY THE QUEEN OF THE UNITED KINGDOM OF GREAT BRITAIN
AND  NORTHERN IRELAND,
RECALLING the objective defined by the Treaty,
DESIRING to contribute to this objective and especially to the
strengthening of the internal market and to economic and social
cohesion,
DETERMINED to provide for the necessary financial     Instruments to this
end,
HAVING REGARD to the conclusions of the Presidency of the European
Council in Edinburgh that urgent and sympathetic consideration should
be given to the establishment as quickly as possible of a European
Investment Fund, within the context of promoting economic recovery in
Europe,
AFFIRMING the benefits of close co-operation between the Community, the
European Investment Bank and other undertakings in the Member States
with an Interest In the objectives of the Fund,
HAVE DECIDED to empower the Board of Governors of the European
Investment Bank to establish the European Investment Fund and to this
end have designated as their plenipotentiaries :
WHO, having exchanged their full powers, found     in good and due form,
have agreed as follows :
                                                       ./.
                                                                          *>
 ---pagebreak---                                                       2.
                                ARTICLE A
The Protocol on the Statute of the European Investment Bank, attached
to the Treaty establishing the European Economic Community shaI I be
completed by the addition of the following article :
                               "Article 30
1.    The Board of Governors of the European Investment Bank may, acting
      unanimously, decide to create the European Investment Fund, with
       legal personality and financial autonomy, and of which the Bank
      will be a founding member.
2.    The Board Is empowered to establish the Statute of the Fund and
      thus to define Its objectives, structure, capital, membership,
      financial resources, means of intervention, auditing arrangements,
      as well as the relationship between the ruling bodies of the Bank
      and those of the Fund.
      The Protocol on the Privileges and Immunities of the European
      Communities, as well as the arrangements for and the content of
      amendments to the texts establishing It, shall apply to the Fund.
3.    Notwithstanding the provisions of Article 20.2, the Bank shall be
      entitled to contribute to the subscribed capital of the Fund up to
      the amount determined by the Board, following unanimous decision
      thereto.
4.    The European Economic Community, represented by the Commission,
      may become a member of the Fund and contribute to its subscribed
      capital. Other undertakings with an Interest In the objectives of
      the Fund shall be invited to become members."
                                ARTICLE B
1.    This addition to the Protocol on the Statute of the European
Investment Bank shall be ratified by the High Contracting Parties in
accordance with their respective constitutional requirements. The
instruments of ratification shall be deposited with the government of
the I ta I Ian Republic.
2.    This addition shall enter Into force following the deposit of the
instrument of ratification by the last signatory State to take this
step.
                                                      ./.
 ---pagebreak---                                 ARTICLE C
This addition to the Protocol on the Statute of the European Investment
Bank, drawn up in a single original In the Danish, Dutch, English,
French, German, Greek,      Irish,   Italian, Portuguese    and Spanish
languages, the texts in each of these languages being equally
authentic, shall be deposited in the archives of the government of the
Italian Republic, which will transmit a certified copy to each of the
governments of the other signatory States.
IN WITNESS WHEREOF the undersigned Plenipotentiaries have signed this
add it ion.
                   Done at              on               1993
                                                                        7
 ---pagebreak---                     PROPOSAL FOR A COUNCIL DECISION ON
           COMMUNITY MEMBERSHIP OF THE EUROPEAN INVESTMENT FUND
THE COUNCIL OF THE EUROPEAN COMMUNITIES
Having regard to the Treaty instituting the European Economic Community
and In particular Article 235 thereof;
Having regard to the proposal by the Commission*1) ;
Having regard to the opinion of Par I lament*2^ ;
Whereas the European Council in Edinburgh Invited the Council and the
European Investment Bank to give urgent and sympathetic consideration
to the establishment as quickly as possible of a European Investment
Fund (EIF);
Whereas the EIF should constitute a cost-effective and efficient means
whereby the Community, together with the Bank and other financial
 institutions, can provide a significant contribution to the accelerated
completion of large Infrastructure projects of Community interest and
can facilitate investment by small and medium-sized enterprises (SMEs),
especially in Community assisted areas;
Whereas Investments in large infrastructure projects of Community
 interest and In particular those belonging to transeuropean networks
are essential to the reinforcement of economic and social cohesion and
to the proper functioning of the internal market, and whereas some of
these investments might involve projects of mutual interest with third
countries ;
Whereas investment support for SMEs, especially In Community assisted
areas, Is an essential factor In the reinforcement of economic and
social cohesion;
Whereas the EIF will foster investment In both areas;
Whereas a speedy implementation of the EIF will stimulate sustained and
balanced growth within the Community;
Whereas Article 30 of the Statute of the EIB empowers the Bank's Board
of Governors to create the EIF and whereas the Board has decided to
create the EIF<3>;
Whereas the Community may become a member of the EIF;
Whereas appropriate co-ordination shall be assured between the
operations of the Fund and other Community financial and budgetary
Instruments;
                                                       ./.
(1)
(2)
(3)                                                                      7
 ---pagebreak---                                                      2.
Whereas In order to meet the objectives of the Fund, it would be
appropriate to consider It as a multilateral development bank for the
purposes of Council Directive 89/647 as amended by Commission Directive
91/31;
Whereas Article 24 of the Financial Regulation shall apply to the
contributions from the Community budget and the Commission shall
furnish all the Information necessary to the Court of Auditors for the
examination of the accounts of all Community revenue and expenditure
stemming from its membership of the EIF; and whereas the specific
provisions concerning the audit of the EIF itself are contained in the
Statute of the Fund;
HAS DECIDED AS FOLLOWS :
                              Sole Article
The European Economic Community, represented by the Commission,
becomes a member of the European Investment Fund and hereby approves
the Statute of the Fund, as annexed to the present Decision.
                 Done
                                                                        1
 ---pagebreak---                                                  ANNEX
                              EIF  STATUTE
(Document still at draft stage; will be Included as soon as available)
                                                                       s*
 ---pagebreak---                            FINANCIAL STATEMENT
                  SECTION 1      FINANCIAL IMPLICATIONS
1.  Title of operation
   European Investment Fund (EIF)
2. Budget heading Involved
   Section III (Commission), Part B (Operating appropriations),
   Article B2-400 and       Article   B5-730 for  the   paid-in part of
   subscribed capital.
   Article B5-731 for the callable part of subscribed capital.
   These lines are to be created by SAB, as are the corresponding
   chapters and t it les.
3. Legal basis
   To be created by the proposed decision, on the basis of Article
   235 of the Treaty.
4. Description of operation
   4.1   Specific objectives of operation : the European Council of
         11, 12 December in Edinburgh approved the creation of the
         European    Investment Fund (EIF). The Community       (30% of
         capital), the European Investment Bank (40%) and financial
          institutions (30%) will be the members of the EIF.
   4.2   The duration of the Community's Involvement in the Fund is
         undefined and will in principle cover the whole life of the
         Fund. The Community's budgetary contribution to the paid-in
         capital of the Fund is spread out over 4 years (cf. point
         7.1).
   4.3   Target population : the EIF specifically aims to support the
         creation of transeuropean networks throughout the Community
         and the financing needs of small and medium-sized enterprises
         (SMEs), especially In Community assisted areas.
5. Classification of expenditure
   5.1   Non-compulsory expenditure.
   5.2   Differentiated appropriations.
   5.3   Type of revenue Involved : as a shareholder of the EIF, the
         Community will be entitled to receive dividend payments if
         and when the Fund's General Meeting decides to make dividends
         avallable.
6. Type of expenditure or revenue
   -   the Community's contribution will take the form of         a 30%
       participation in the subscribed capital of the Fund.
   -   the Community will receive dividend payments in proportion to
       its capital share.
                                                      ./.
                                                                        /K)
 ---pagebreak--- 7. Financial Impact on appropriations for operations
   7.1   Method of calculating total cost
       - The total subscribed capital of the EIF amounts to 2 billion
         ECU, of which the Community holds 30% (600 million ECU). 20%
         of this amount (120 million ECU) will be paid-in in 4 equal
         annual Instalments of 30 million ECU from 1993 onwards.
       - A token entry Is proposed for the callable part of the
         Community's capital, given that the amount and timing of any
         call on this budget line cannot be calculated in advance and
         furthermore it Is highly unlikely that this budget entry will
         be called on at any moment (similar treatment to that for the
         callable capital of EBRD).
   7.2   Indicative schedule of appropriations
       - the paid-in part of the Community's share in the subscribed
         capital will be paid to the EIF in four equal annual
         instalments of 30 million ECUs from 1993 onwards i.e. 120
         mi I I ion ECUs in total.
       - The callable part shall be subject to call only as and when
         required by the Fund to meet its liabilities.
   7.3   Financing
         In 1993, the 30 MECU contribution      to the paid-in capital
         could be financed as follows:
         - 14 MECU under Article B2-400 ,         corresponding   to  the
           available margin under category 2;
         - 16 MECU under Article B5-730, to be deducted from resources
           allocated to transeuropean networks (under category 3) In
           the 1993 budget.
         The choice of budgetary lines for 1993 is without prejudice
         to the decisions to be taken on which lines should finance
         the    capital  contributions   In subsequent     years;   these
         decisions will be taken In the framework of the annual
         budgetary procedure, taking account of the characteristics of
         the projects financed.
8. Anti-fraud measures
   Not applicab le.
               SECTION 2   :  ADMINISTRATIVE EXPENDITURE
   The proposed operation will not Involve any increase in the number
   of Commission staff or administrative expenditure
                                                      ./.
 ---pagebreak---                                                       3.
       SECTION 3   :    ELEMENTS OF COST-EFFECTIVENESS ANALYSIS
1. Objectives and coherence with financial programming
   The quantified objectives are to be defined by the ruling bodies
   of the EIF, once the Fund is established. The Fund Is expected to
   extend guarantees up to 5-10 billion ECUs In total.
                      !
2. Grounds for the operation
   The proposed operation is a cost-effective one and constitutes an
   efficient use of budget resources for the following reasons :
   a. The capital of the EIF will not only be provided by the
      Community, but also by the EIB as well as by other financial
      institutions.
   b. The EIF will        facilitate access to private capital     for
      Investments of considerable         Importance to the Community,
      notably through the extension of loan guarantees.
   c. The Fund will generate a substantial leverage effect. It is
      estimated that the Fund, whose total subscribed capital will
      amount to 2 billion ECUs, will be able to extend guarantees up
      to 5 - 1 0 billion ECUs; In total this could support up to 20
      billion ECUs of projects.
   d. Compared to loan guarantees directly extended by the Community
      budget (e.g. In favour of transeuropean network projects), the
      Fund provides a much better protection for the Community budget
      should a call be made upon those guarantees.
3. Monitoring and evaluation of the operation
   The EIF will operate on a commercial basis. It will generate
   income from Its activities as It will charge premiums and fees
   which are commensurate with the level of risk taken on by the
   Fund. The performance of the Fund will be measured by several
   indicators :
   -  the overall demand for Its services;
   -  the volume of its activities;
   -  the   volume      of    Investments   generated  by   the Fund's
      Intervent Ions;
      its financial performance in terms of yearly net Income;
   -  etc.
                                                                       />l
 ---pagebreak---                             IMPACT ASSESSMENT FORM
                  THE IMPACT OF THE PROPOSAL ON BUSINESS
             with special reference to small and medium-sized
                              enterprises (SMEs)
Title of proposal : European Investment Fund (EIF)
The proposal
1.   From a subsidiarity point of view, the EIF's activities are to be
     carried out at a Community level for the following reasons :
     a. The target sectors (transeuropean networks - TENs - and small
        and medium-sized enterprises - SMEs -, especially in Community
        assisted areas) are of direct Community interest.
     b. The Fund will be organically linked to the EIB, the Community's
         largest financial Instrument after the Community budget.
     c. The pooling at a Community level of large financial guarantees
        extended on a commercial basis greatly Improves diversification
        and hence lowers premium levels.
The impact on business
2.   a. The establishment of TENs (in the transport, telecommunications
        and energy transport sector) will be beneficial to Community
        business     in   general    and   will    facilitate    cross-border
        activities,
     b. Besides its support for networks, the EIF will also address the
        financing needs of SMEs, especially          In Community assisted
        areas, through the extension of guarantees and of equity
        through financial Intermédiaires.
3.   No specific action Is requested from business.
4.   The economic effects of the proposal are substantial :
     a. Employment :
        - the Implementation of TENs will generate a very substantial
           Investment effort (public works, high-tech and research,
           etc.) and will therefore result in the creation of an
           Important number of jobs, both for the execution of the
           Investment programmes and for the operation and maintenance
          of the networks.
        - financing support for SMEs, especially        in Community assisted
           areas, will help these firms to prosper and develop.
     b. Investment :
        considerable effect (cf. 4.a), concentrated In sectors with a
        high     economic      potential     (e.g.     high-speed     trains,
        telecommunications networks, etc.) as well as In regions which
        are catching up with the Community average.
                                                           ./.
                                                                              /)li
 ---pagebreak---                                                       2.
     c. Competitive position :
        will be Improved through the provision of high quality services
         in the transport, telecommunications and energy fields.
5.   The financing needs of SMEs, especially in Community assisted
     areas, are specifically taken Into account by the current
     proposa I.
Consultation
6.   The current proposal has been widely discussed with a large number
     of financial Institutions, some of which are likely to become
     shareholders of the EIF.
                                                                        V
 ---pagebreak---  ---pagebreak---                                                                       ISSN 0254-1475
                                                                COM(93) 3 final
                                                      DOCUMENTS
Ë N
                                                                                 0!
                                 Catalogue number : CB-CO-93-011-EN-C
                                                             ISBN 92-77-51912-6
Office for Official Publications of the European Communities
L -2985 Luxembourg