Article 202 Amount of the grant and extension of audit findings
1. The amount of the grant shall not become final until after the authorising officer responsible has approved the final reports and, where applicable, the accounts, without prejudice to subsequent audits, checks and investigations by the Union institution concerned, OLAF or the Court of Auditors. Article 131(4) shall apply also after the amount of the grant has become final. 2. Where controls or audits demonstrate systemic or recurrent irregularities, fraud or a breach of obligations attributable to the beneficiary and having a material impact on a number of grants awarded to that beneficiary under similar conditions, the authorising officer responsible may suspend the implementation of the grant agreement or payments under all the grants concerned or, where appropriate, terminate the grant agreements concerned with that beneficiary, having regard to the seriousness of the findings. The authorising officer responsible may, in addition, reduce the grants, reject ineligible costs and recover amounts unduly paid in respect of all the grants affected by the systemic or recurrent irregularities, fraud or breach of obligations referred to in the first subparagraph that may be subject to audits, checks and investigations in accordance with the grant agreements affected. 3. The authorising officer responsible shall determine the amounts to be reduced or recovered, wherever possible and practicable, on the basis of costs unduly declared as eligible for each grant concerned, following acceptance of the revised reports and financial statements submitted by the beneficiary. 4. Where it is not possible or practicable to quantify precisely the amount of ineligible costs for each grant concerned, the amounts to be reduced or recovered may be determined by extrapolating the reduction or recovery rate applied to the grants for which the systemic or recurrent irregularities, fraud or breach of obligations have been demonstrated, or, where ineligible costs cannot serve as a basis for determining the amounts to be reduced or recovered, by applying a flat rate, having regard to the principle of proportionality. The beneficiary shall be given the opportunity to propose a duly substantiated alternative method or rate before the reduction or recovery is made.
Article 203 Supporting documents for payment requests
1. The authorising officer responsible shall specify the supporting documents required to accompany payment requests. 2. For each grant, pre-financing may be split into several instalments in accordance with sound financial management. The request for a further pre-financing instalment shall be accompanied by a beneficiary’s statement on the consumption of previous pre-financing. The instalment shall be paid in full if at least 70 % of the total amount of any earlier pre-financing has been consumed. Otherwise, the instalment shall be reduced by the amounts still to be consumed until that threshold is reached. 3. The beneficiary shall, without prejudice to the obligation to provide supporting documents, certify on its honour that information contained in payment requests is full, reliable and true. The beneficiary shall also certify that the costs incurred are eligible in accordance with the grant agreement and that payment requests are substantiated by adequate supporting documents that may be checked. 4. A certificate on the financial statements of the action or the work programme and underlying accounts may be demanded by the authorising officer responsible in support of interim payments or payments of balances of any amount. Such a certificate shall be requested on the basis of a risk assessment taking into account, in particular, the amount of the grant, the amount of the payment, the nature of the beneficiary and the nature of the supported activities. The certificate shall be produced by an approved external auditor or, in the case of public bodies, by a competent and independent public officer. The certificate shall certify, in accordance with a methodology approved by the authorising officer responsible and on the basis of agreed-upon procedures compliant with international standards, that the costs declared by the beneficiary in the financial statements on which the payment request is based are real, accurately recorded and eligible in accordance with the grant agreement. In specific and duly justified cases, the authorising officer responsible may request the certificate in the form of an opinion or other format in accordance with international standards. 5. An operational verification report, produced by an independent third party approved by the authorising officer responsible, may be requested by the authorising officer responsible in support of any payment, on the basis of a risk assessment. The operational verification report shall state that the operational verification was done in accordance with a methodology approved by the authorising officer responsible and whether the action or work programme was actually implemented in accordance with the conditions set out in the grant agreement.
Article 204 Financial support to third parties
Where implementation of an action or a work programme requires the provision of financial support to third parties, the beneficiary may provide such financial support if the conditions for such provision are defined in the grant agreement between the beneficiary and the Commission, with no margin for discretion by the beneficiary. No margin for discretion shall be considered to exist if the grant agreement specifies the following: (a) the maximum amount of financial support that can be paid to a third party which shall not exceed EUR 60 000 and the criteria for determining the exact amount; (b) the different types of activities that may receive such financial support, on the basis of a fixed list; (c) the definition of the persons or categories of persons which may receive such financial support and the criteria for providing it. The threshold referred to in point (a) of the second paragraph may be exceeded where achieving the objectives of the actions would otherwise be impossible or overly difficult.
Article 205 Implementation contracts
1. Without prejudice to Directive 2014/24/EU and Directive 2014/25/EU of the European Parliament and of the Council ( 57 ) , where the implementation of the action or work programme requires the award of a public contract, the beneficiary may award the public contract in accordance with its usual purchasing practices provided that the public contract is awarded to the tender offering best value for money or, as appropriate, to the tender offering the lowest price, while avoiding any conflict of interests. 2. Where implementation of the action or work programme requires the award of a public contract with a value of more than EUR 60 000, the authorising officer responsible may, if duly justified, require the beneficiary to abide by special rules in addition to those referred to in paragraph 1. Those special rules shall be based on rules contained in this Regulation and shall be proportionate to the value of the public contracts concerned, the relative size of the Union contribution in relation to the total cost of the action and the risk. Such special rules shall be included in the grant agreement.
Article 206 General rules
1. Prizes shall be awarded in accordance with the principles of transparency and equal treatment and shall promote the achievement of policy objectives of the Union. 2. Prizes shall not be awarded directly without a contest. Contests for prizes with a unit value of EUR 1 000 000 or more may only be published where those prizes are mentioned in the financing decision referred to in Article 110 and after information on such prizes has been submitted to the European Parliament and to the Council. 3. The amount of the prize shall not be linked to costs incurred by the winner. 4. Where implementation of an action or work programme requires prizes to be awarded to third parties by a beneficiary, that beneficiary may award such prizes provided that the eligibility and award criteria, the amount of the prizes and the payment arrangements are defined in the grant agreement between the beneficiary and the Commission, with no margin for discretion.
Article 207 Rules of contest, award and publication
1. Rules of contests shall: (a) specify the eligibility criteria; (b) specify the arrangements and the final date for the registration of applicants, if required, and for the submission of applications; (c) specify the exclusion criteria as set out in Articles 136 and the grounds for rejection set out in Article 141; (d) provide for the sole liability of the applicant in the event of a claim relating to the activities carried out in the framework of the contest; (e) provide for acceptance by the winners of the obligations referred to in Article 129 and of the publicity obligations as specified in the rules of the contest; (f) specify the award criteria, which shall be such as to make possible to assess the quality of the applications with regard to the objectives pursued and the expected results and to determine objectively whether applications are successful; (g) specify the amount of the prize or prizes; (h) specify the arrangements for the payment of prizes to the winners after their award. For the purposes of point (a) of the first subparagraph, beneficiaries shall be eligible, unless stated otherwise in the rules of contest. Article 194(3) shall apply mutatis mutandis to the publication of contests. 2. Rules of contests may set the conditions for cancelling the contest, in particular where its objectives cannot be fulfilled. 3. Prizes shall be awarded by the authorising officer responsible following an evaluation by the evaluation committee referred to in Article 150. Article 200(4) and (6) shall apply mutatis mutandis to the award decision. 4. Applicants shall be informed as soon as possible of the outcome of the evaluation of their application and in any case within 15 calendar days after the award decision has been taken by the authorising officer. The decision to award the prize shall be notified to the winning applicant and shall serve as the legal commitment. 5. All prizes awarded in the course of a financial year shall be published in accordance with Article 38(1) to (4). When requested by the European Parliament and by the Council following the publication, the Commission shall forward them a report on: (a) the number of applicants in the past year; (b) the number of applicants and the percentage of successful applications per contest; (c) a list of the experts having taken part in evaluation committees in the past year, together with a reference to the procedure for their selection.
Article 208 Scope and implementation
1. Where it proves to be the most appropriate way to achieve policy objectives of the Union, the Union may establish financial instruments or provide budgetary guarantees or financial assistance backed by the budget by means of a basic act defining their scope and period of implementation. 2. Member States may contribute to the Union’s financial instruments, budgetary guarantees or financial assistance. If authorised by the basic act, third parties may also contribute. 3. Where financial instruments are implemented under shared management with Member States, sector-specific rules shall apply. 4. Where financial instruments or budgetary guarantees are implemented under indirect management, the Commission shall conclude agreements with entities pursuant to points (c)(ii), (iii), (v) and (vi) of the first subparagraph of Article 62(1). Where the systems, rules and procedures of those entities have been assessed pursuant to Article 154(4), they may fully rely on those systems, rules and procedures. Those entities may, when implementing financial instruments and budgetary guarantees under indirect management, conclude agreements with financial intermediaries which shall be selected in accordance with procedures equivalent to those applied by the Commission. Those entities shall transpose the requirements pursuant to Article 155(2) in those agreements. The Commission shall remain responsible for ensuring that the implementation framework for financial instruments complies with the principle of sound financial management and supports the attainment of defined and time-bound policy objectives, measurable in terms of outputs and/or results. The Commission shall be accountable for the implementation of financial instruments without prejudice to the entrusted entities’ legal and contractual responsibility in accordance with the applicable law and Article 129. Where third countries contribute to financial instruments or budgetary guarantees pursuant to paragraph 2, the basic act may allow for the designation of eligible implementing entities or counterparts from the countries concerned. 5. The Court of Auditors shall have full access to any information related to the financial instruments, budgetary guarantees and financial assistance, including by means of on-the-spot checks. The Court of Auditors shall be the external auditor responsible for the projects and programmes supported by a financial instrument, a budgetary guarantee or a financial assistance.
Article 209 Principles and conditions applicable to financial instruments and budgetary guarantees
1. Financial instruments and budgetary guarantees shall be used in accordance with the principles of sound financial management, transparency, proportionality, non-discrimination, equal treatment and subsidiarity, and in accordance with their objectives. 2. Financial instruments and budgetary guarantees shall: (a) address market failures or sub-optimal investment situations and provide support, in a proportionate manner, only to final recipients that are deemed economically viable according to internationally accepted standards at the time of the Union financial support; (b) achieve additionality by preventing the replacement of potential support and investment from other public or private sources; (c) not distort competition in the internal market and be consistent with State aid rules; (d) achieve a leverage and a multiplier effect, with a target range of values based on an ex ante evaluation for the corresponding financial instrument or budgetary guarantee, by mobilising a global investment exceeding the size of the Union contribution or guarantee, including, where appropriate, the maximisation of private investment; (e) be implemented in a way to ensure that there is a common interest of the implementing entities or counterparts involved in the implementation in achieving the policy objectives defined in the relevant basic act, with provisions on for example co-investment, risk sharing requirements or financial incentives, while preventing a conflict of interests with other activities of the entities or counterparts; (f) provide for remuneration of the Union that is consistent with the sharing of risk among financial participants and the policy objectives of the financial instrument or budgetary guarantee; (g) where remuneration of the implementing entities or the counterparts involved in the implementation is due, provide that such remuneration is performance-based and comprises: (i) administrative fees to remunerate the entity or counterpart for the work carried out in the implementation of a financial instrument or budgetary guarantee, which shall, to the extent possible, be based on the operations carried out or the amounts disbursed; and (ii) where appropriate, policy related incentives to promote the achievement of the policy objectives or incentivise the financial performance of the financial instrument or budgetary guarantee. Exceptional expenses may be reimbursed in duly justified cases; (h) be based on ex ante evaluations, individually or as part of a programme, in line with Article 34, containing explanations concerning the choice of the type of financial operation taking into account the policy objectives pursued and the associated financial risks and savings for the budget. The evaluations referred to in point (h) of the first subparagraph shall be reviewed and updated to take into account the effect of major socioeconomic changes on the rationale of the financial instrument or budgetary guarantee. 3. Without prejudice to sector-specific rules for shared management, revenue, including dividends, capital gains, guarantee fees and interest on loans and on amounts on fiduciary accounts paid back to the Commission or on fiduciary accounts opened for financial instruments or budgetary guarantees and attributable to the support from the budget under a financial instrument or a budgetary guarantee, shall be entered in the budget after deduction of management costs and fees. Annual repayments, including capital repayments, guarantees released, and repayments of the principal of loans, paid back to the Commission or to fiduciary accounts opened for financial instruments or budgetary guarantees and attributable to the support from the budget under a financial instrument or a budgetary guarantee, shall constitute internal assigned revenue in accordance with point (f) of Article 21(3) and shall be used for the same financial instrument or budgetary guarantee, without prejudice to Article 215(5), for a period not exceeding the period for the budgetary commitment plus two years, unless otherwise specified in a basic act. The Commission shall take into account such internal assigned revenue when proposing the amount for future allocations for financial instruments or budgetary guarantees. Notwithstanding the second subparagraph, the outstanding amount of assigned revenue authorised under a basic act that is to be repealed or terminates may also be assigned to another financial instrument pursuing similar objectives, where this is provided in the basic act establishing that financial instrument. 4. The authorising officer responsible for a financial instrument, a budgetary guarantee or a financial assistance shall produce a financial statement covering the period 1 January to 31 December, in accordance with Article 243 and in compliance with the accounting rules referred to in Article 80 and the International Public Sector Accounting Standards (IPSAS). For financial instruments and budgetary guarantees implemented under indirect management, the authorising officer responsible shall ensure that unaudited financial statements covering the period 1 January to 31 December prepared in compliance with the accounting rules referred to in Article 80 and with IPSAS, as well as any information necessary to produce financial statements in accordance with Article 82(2), be provided by the entities pursuant to points (c)(ii), (iii), (v) and (vi) of the first subparagraph of Article 62(1) by 15 February of the following financial year and that audited financial statements be provided by those entities by 15 May of the following financial year.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 209 Principles and conditions applicable to financial instruments and budgetary guarantees):
1. Financial instruments and budgetary guarantees shall be used in accordance with the principles of sound financial management, transparency, proportionality, non-discrimination, equal treatment and subsidiarity, and in accordance with their objectives. 2. Financial instruments and budgetary guarantees shall: (a) address market failures or sub-optimal investment situations and provide support, in a proportionate manner, only to final recipients that are deemed economically viable according to internationally accepted standards at the time of the Union financial support; (b) achieve additionality by preventing the replacement of potential support and investment from other public or private sources; (c) not distort competition in the internal market and be consistent with State aid rules; (d) achieve a leverage and a multiplier effect, with a target range of values based on an ex ante evaluation for the corresponding financial instrument or budgetary guarantee, by mobilising a global investment exceeding the size of the Union contribution or guarantee, including, where appropriate, the maximisation of private investment; (e) be implemented in a way to ensure that there is a common interest of the implementing entities or counterparts involved in the implementation in achieving the policy objectives defined in the relevant basic act, with provisions on for example co-investment, risk sharing requirements or financial incentives, while preventing a conflict of interests with other activities of the entities or counterparts; (f) provide for remuneration of the Union that is consistent with the sharing of risk among financial participants and the policy objectives of the financial instrument or budgetary guarantee; where remuneration of the implementing entities or the counterparts involved in the implementation is due, provide that such remuneration is performance-based and comprises: (i) administrative fees to remunerate the entity or counterpart for the work carried out in the implementation of a financial instrument or budgetary guarantee, which shall, to the extent possible, be based on the operations carried out or the amounts disbursed; and (ii) where appropriate, policy related incentives to promote the achievement of the policy objectives or incentivise the financial performance of the financial instrument or budgetary guarantee. Exceptional expenses may be reimbursed in duly justified cases; where remuneration of the implementing entities or the counterparts involved in the implementation is due, provide that such remuneration is performance-based and comprises: (i) administrative fees to remunerate the entity or counterpart for the work carried out in the implementation of a financial instrument or budgetary guarantee, which shall, to the extent possible, be based on the operations carried out or the amounts disbursed; and (ii) where appropriate, policy related incentives to promote the achievement of the policy objectives or incentivise the financial performance of the financial instrument or budgetary guarantee. Exceptional expenses may be reimbursed in duly justified cases; (h) be based on ex ante evaluations, individually or as part of a programme, in line with Article 34, containing explanations concerning the choice of the type of financial operation taking into account the policy objectives pursued and the associated financial risks and savings for the budget. The evaluations referred to in point (h) of the first subparagraph shall be reviewed and updated to take into account the effect of major socioeconomic changes on the rationale of the financial instrument or budgetary guarantee. be based on ex ante evaluations, individually or as part of a programme, in line with Article 34, containing explanations concerning the choice of the type of financial operation taking into account the policy objectives pursued and the associated financial risks and savings for the budget. The evaluations referred to in point (h) of the first subparagraph shall be reviewed and updated to take into account the effect of major socioeconomic changes on the rationale of the financial instrument or budgetary guarantee. 3. Without prejudice to sector-specific rules for shared management, revenue, including dividends, capital gains, guarantee fees and interest on loans and on amounts on fiduciary accounts paid back to the Commission or on fiduciary accounts opened for financial instruments or budgetary guarantees and attributable to the support from the budget under a financial instrument or a budgetary guarantee, shall be entered in the budget after deduction of management costs and fees. Annual repayments, including capital repayments, guarantees released, and repayments of the principal of loans, paid back to the Commission or to fiduciary accounts opened for financial instruments or budgetary guarantees and attributable to the support from the budget under a financial instrument or a budgetary guarantee, shall constitute internal assigned revenue in accordance with point (f) of Article 21(3) and shall be used for the same financial instrument or budgetary guarantee, without prejudice to Article 215(5), for a period not exceeding the period for the budgetary commitment plus two years, unless otherwise specified in a basic act. The Commission shall take into account such internal assigned revenue when proposing the amount for future allocations for financial instruments or budgetary guarantees. Notwithstanding the second subparagraph, the outstanding amount of assigned revenue authorised under a basic act that is to be repealed or terminates may also be assigned to another financial instrument pursuing similar objectives, where this is provided in the basic act establishing that financial instrument. 4. The authorising officer responsible for a financial instrument, a budgetary guarantee or a financial assistance shall produce a financial statement covering the period 1 January to 31 December, in accordance with Article 243 and in compliance with the accounting rules referred to in Article 80 and the International Public Sector Accounting Standards (IPSAS). For financial instruments and budgetary guarantees implemented under indirect management, the authorising officer responsible shall ensure that unaudited financial statements covering the period 1 January to 31 December prepared in compliance with the accounting rules referred to in Article 80 and with IPSAS, as well as any information necessary to produce financial statements in accordance with Article 82(2), be provided by the entities pursuant to points (c)(ii), (iii), (v) and (vi) of the first subparagraph of Article 62(1) by 15 February of the following financial year and that audited financial statements be provided by those entities by 15 May of the following financial year.
Article 210 Financial liability of the Union
1. The financial liability and aggregate net payments from the budget shall not exceed at any time: (a) for financial instruments: the amount of the relevant budgetary commitment made for it; (b) for budgetary guarantees: the amount of the budgetary guarantee authorised by the basic act; (c) for financial assistance: the maximum amount of funds that the Commission is empowered to borrow for funding the financial assistance as authorised by the basic act, and the relevant interest. 2. Budgetary guarantees and financial assistance may generate a contingent liability for the Union which shall only exceed the financial assets provided to cover the financial liability of the Union if provided for in a basic act establishing a budgetary guarantee or financial assistance and under the conditions set out therein. 3. For the purposes of the annual assessment provided for in point (j) of Article 41(5), the contingent liabilities arising from budgetary guarantees or financial assistance borne by the budget shall be deemed sustainable, if their forecast multiannual evolution is compatible with the limits set by the regulation laying down the multiannual financial framework provided for in Article 312(2) TFEU and the ceiling on annual payment appropriations set out in Article 3(1) of Decision 2014/335/EU, Euratom.
Article 211 Provisioning of financial liabilities
1. For budgetary guarantees and financial assistance to third countries, a basic act shall set out a provisioning rate as a percentage of the amount of the financial liability authorised. That amount shall exclude the contributions referred to in Article 208(2). The basic act shall provide for the review of the provisioning rate at least every three years. 2. The setting of a provisioning rate shall be guided by a qualitative and quantitative assessment by the Commission of the financial risks arising from a budgetary guarantee or a financial assistance to a third country in accordance with the principle of prudence, whereby assets and profits shall not be overestimated and liabilities and losses shall not be underestimated. Unless otherwise specified in the basic act establishing the budgetary guarantee or financial assistance to a third country, the provisioning rate shall be based on the global provisioning needed in advance to cover the net expected losses and, in addition, an adequate safety buffer. Without prejudice to the powers of the European Parliament and of the Council, the global provisioning shall be constituted over the period of time foreseen in the relevant financial statement as referred to in Article 35. 3. For a financial instrument provision shall be made, where appropriate, to respond to future payments related to a budgetary commitment of that financial instrument. 4. The following resources shall contribute to the provisioning: (a) contributions from the budget, while fully respecting the regulation laying down the multiannual financial framework and after examination of the possibilities for redeployments; (b) returns on investments of the resources held in the common provisioning fund; (c) amounts recovered from defaulting debtors in accordance with the recovery procedure laid down in the guarantee or the loan agreement; (d) revenue and any other payments received by the Union in accordance with the guarantee or the loan agreement; (e) where applicable, contributions in cash by Member States and third parties pursuant to Article 208(2). Only the resources referred to in points (a) to (d) of the first subparagraph of this paragraph shall be taken into account for calculating the provisioning resulting from the provisioning rate referred to in paragraph 1. 5. Provisions shall be used for the payment of: (a) calls on the budgetary guarantee; (b) payment obligations related to a budgetary commitment for a financial instrument; (c) financial obligations arising from the borrowing of funds pursuant to Article 220(1); (d) where applicable, other expenses associated to the implementation of financial instruments, budgetary guarantees and financial assistance to third countries. 6. Where the provisions for a budgetary guarantee exceed the amount of provisioning resulting from the provisioning rate referred to in paragraph 1 of this Article, resources referred to in points (b), (c) and (d) of the first subparagraph of paragraph 4 of this Article related to that guarantee shall be used within the limits of the eligible period provided for in the basic act, however, not beyond the constitution phase of the provisioning, and without prejudice to Article 213(4), to restore the budgetary guarantee up to its initial amount. 7. The Commission shall immediately inform the European Parliament and the Council and may propose adequate replenishment measures or an increase of the provisioning rate where: (a) as a result of calls on a budgetary guarantee, the level of provisions for that budgetary guarantee falls below 50 % of the provisioning rate referred to in paragraph 1, and again where it falls below 30 % of that provisioning rate, or where it could fall below any of those percentages within a year according to a risk assessment by the Commission; (b) a country benefitting from financial assistance by the Union fails to pay on a maturity.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 211 Provisioning of financial liabilities):
1. For budgetary guarantees and financial assistance to third countries, a basic act shall set out a provisioning rate as a percentage of the amount of the financial liability authorised. That amount shall exclude the contributions referred to in Article 208(2). The basic act shall provide for the review of the provisioning rate at least every three years. 2. The setting of a provisioning rate shall be guided by a qualitative and quantitative assessment by the Commission of the financial risks arising from a budgetary guarantee or a financial assistance to a third country in accordance with the principle of prudence, whereby assets and profits shall not be overestimated and liabilities and losses shall not be underestimated. Unless otherwise specified in the basic act establishing the budgetary guarantee or financial assistance to a third country, the provisioning rate shall be based on the global provisioning needed in advance to cover the net expected losses and, in addition, an adequate safety buffer. Without prejudice to the powers of the European Parliament and of the Council, the global provisioning shall be constituted over the period of time foreseen in the relevant financial statement as referred to in Article 35. 3. For a financial instrument provision shall be made, where appropriate, to respond to future payments related to a budgetary commitment of that financial instrument. The following resources shall contribute to the provisioning: (a) contributions from the budget, while fully respecting the regulation laying down the multiannual financial framework and after examination of the possibilities for redeployments; (b) returns on investments of the resources held in the common provisioning fund; (c) amounts recovered from defaulting debtors in accordance with the recovery procedure laid down in the guarantee or the loan agreement; (d) revenue and any other payments received by the Union in accordance with the guarantee or the loan agreement; (e) where applicable, contributions in cash by Member States and third parties pursuant to Article 208(2). Only the resources referred to in points (a) to (d) of the first subparagraph of this paragraph shall be taken into account for calculating the provisioning resulting from the provisioning rate referred to in paragraph 1. 5. Provisions shall be used for the payment of: (a) calls on the budgetary guarantee; (b) payment obligations related to a budgetary commitment for a financial instrument; (c) financial obligations arising from the borrowing of funds pursuant to Article 220(1); (d) where applicable, other expenses associated to the implementation of financial instruments, budgetary guarantees and financial assistance to third countries. 7. The Commission shall immediately inform the European Parliament and the Council and may propose adequate replenishment measures or an increase of the provisioning rate where: (a) as a result of calls on a budgetary guarantee, the level of provisions for that budgetary guarantee falls below 50 % of the provisioning rate referred to in paragraph 1, and again where it falls below 30 % of that provisioning rate, or where it could fall below any of those percentages within a year according to a risk assessment by the Commission; (b) a country benefitting from financial assistance by the Union fails to pay on a maturity. The Commission shall immediately inform the European Parliament and the Council and may propose adequate replenishment measures or an increase of the provisioning rate where: (a) as a result of calls on a budgetary guarantee, the level of provisions for that budgetary guarantee falls below 50 % of the provisioning rate referred to in paragraph 1, and again where it falls below 30 % of that provisioning rate, or where it could fall below any of those percentages within a year according to a risk assessment by the Commission; (b) a country benefitting from financial assistance by the Union fails to pay on a maturity.
Article 212 Common provisioning fund
1. The provisions made to cover the financial liabilities arising from financial instruments, budgetary guarantees or financial assistance shall be held in a common provisioning fund. By 30 June 2019, the Commission shall submit to the European Parliament and to the Council an independent external evaluation of the advantages and disadvantages of entrusting the financial management of the assets of the common provisioning fund to the Commission, to the EIB, or to a combination of the two, taking into account the relevant technical and institutional criteria used in comparing asset management services, including the technical infrastructure, a comparison of costs for the services provided, the institutional set-up, reporting, performance, accountability and expertise of the Commission and the EIB and the other asset management mandates for the budget. The evaluation shall, where appropriate, be accompanied by a legislative proposal. 2. Global profits or losses from the investment of the resources held in the common provisioning fund shall be allocated proportionately among the respective financial instruments, budgetary guarantees or financial assistance. The financial manager of the resources of the common provisioning fund shall keep a minimum amount of resources of the fund in cash or cash equivalents in accordance with prudential rules and the forecasts for payments provided by the authorising officers of the financial instruments, budgetary guarantees or financial assistance. The financial manager of the resources of the common provisioning fund may enter into repurchase agreements, with the resources of the common provisioning fund as collateral, to make payments out of the fund where this procedure is reasonably expected to be more beneficial for the budget than the divestment of resources within the timeframe of the payment request. The duration or roll-over period of repurchase agreements related to a payment shall be limited to the minimum necessary to minimise a loss for the budget. 3. Pursuant to point (d) of the first subparagraph of Article 77(1) and Article 86(1) and (2), the accounting officer shall set up the procedures to be applied to the revenue and expenditure operations and, in agreement with the financial manager of the resources of the common provisioning fund, to the assets and liabilities related to the common provisioning fund. 4. In the exceptional cases where the Commission has made a transfer as referred to in point (g) of the first subparagraph of Article 30(1), the Commission shall immediately inform the European Parliament and the Council thereof, and shall urgently propose the measures necessary to restore the budgetary item of the guarantee from which the transfer was made, while fully respecting the ceilings provided for in the regulation laying down the multiannual financial framework.
Article 213 Effective provisioning rate
1. The provisioning of budgetary guarantees and financial assistance to third countries in the common provisioning fund shall be based on an effective provisioning rate. That rate shall provide a level of protection against the financial liabilities of the Union equivalent to the level that would be provided by the respective provisioning rates if the resources where held and managed separately. 2. The effective provisioning rate applicable shall be a percentage of each initial provisioning rate determined in accordance with the second subparagraph of Article 211(2). It shall apply only to the amount of resources in the common provisioning fund foreseen for the payment of guarantee calls over a one year period. It shall provide for a ratio, in the form of a percentage, between the amount of cash and cash equivalents in the common provisioning fund required to honour guarantee calls and the total amount of cash and cash equivalents that would be required in each guarantee fund to honour guarantee calls, if the resources were held and managed separately, where both amounts represent an equivalent liquidity risk. That ratio shall not fall below 95 %. The calculation of the effective provisioning rate shall take into account: (a) the forecast of inflows and outflows in the common provisioning fund, having regard to the initial phase of constitution of global provisioning in accordance with the second subparagraph of Article 211(2); (b) the risk correlation among the budgetary guarantees and the financial assistance to third countries; (c) the market conditions. The Commission shall by 1 July 2020 adopt delegated acts in accordance with Article 269 to supplement this Regulation with detailed conditions for the calculation of the effective provisioning rate, including a methodology for that calculation. The Commission is empowered to adopt delegated acts in accordance with Article 269 to amend the minimum ratio referred to in the first subparagraph of this paragraph in the light of the experience gained with the operation of the common provisioning fund while maintaining a prudent approach in line with the principle of sound financial management. The minimum ratio shall not be set at a level lower than 85 %. 3. The effective provisioning rate shall be calculated annually by the financial manager of the resources of the common provisioning fund and shall be the reference for the Commission’s calculation of the contributions from the budget pursuant to point (a) of Article 211(4) and, subsequently, point (b) of paragraph 4 of this Article. 4. Following the calculation of the annual effective provisioning rate in accordance with paragraphs 1 and 2 of this Article, the following operations in the context of the budgetary procedure shall be made and presented in the working document referred to in point (h) of Article 41(5): (a) any surplus of provisions for a budgetary guarantee or a financial assistance to a third country shall be returned to the budget; (b) any replenishment of the fund shall be carried out in annual tranches during a maximum period of three years, without prejudice to Article 211(6). 5. After having consulted the accounting officer, the Commission shall establish the guidelines applicable to the management of the resources in the common provisioning fund in accordance with appropriate prudential rules and excluding derivative operations for speculative purposes. Those guidelines shall be attached to the agreement with the financial manager of the resources of the common provisioning fund. An independent evaluation of the adequacy of the guidelines shall be carried out every three years and transmitted to the European Parliament and to the Council.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 213 Effective provisioning rate):
1. The provisioning of budgetary guarantees and financial assistance to third countries in the common provisioning fund shall be based on an effective provisioning rate. That rate shall provide a level of protection against the financial liabilities of the Union equivalent to the level that would be provided by the respective provisioning rates if the resources where held and managed separately. The effective provisioning rate applicable shall be a percentage of each initial provisioning rate determined in accordance with the second subparagraph of Article 211(2). It shall apply only to the amount of resources in the common provisioning fund foreseen for the payment of guarantee calls over a one year period. It shall provide for a ratio, in the form of a percentage, between the amount of cash and cash equivalents in the common provisioning fund required to honour guarantee calls and the total amount of cash and cash equivalents that would be required in each guarantee fund to honour guarantee calls, if the resources were held and managed separately, where both amounts represent an equivalent liquidity risk. That ratio shall not fall below 95 %. The calculation of the effective provisioning rate shall take into account: (a) the forecast of inflows and outflows in the common provisioning fund, having regard to the initial phase of constitution of global provisioning in accordance with the second subparagraph of Article 211(2); (b) the risk correlation among the budgetary guarantees and the financial assistance to third countries; (c) the market conditions. The Commission shall by 1 July 2020 adopt delegated acts in accordance with Article 269 to supplement this Regulation with detailed conditions for the calculation of the effective provisioning rate, including a methodology for that calculation. The Commission is empowered to adopt delegated acts in accordance with Article 269 to amend the minimum ratio referred to in the first subparagraph of this paragraph in the light of the experience gained with the operation of the common provisioning fund while maintaining a prudent approach in line with the principle of sound financial management. The minimum ratio shall not be set at a level lower than 85 %. 4. Following the calculation of the annual effective provisioning rate in accordance with paragraphs 1 and 2 of this Article, the following operations in the context of the budgetary procedure shall be made and presented in the working document referred to in point (h) of Article 41(5): (a) any surplus of provisions for a budgetary guarantee or a financial assistance to a third country shall be returned to the budget; (b) any replenishment of the fund shall be carried out in annual tranches during a maximum period of three years, without prejudice to Article 211(6). 5. After having consulted the accounting officer, the Commission shall establish the guidelines applicable to the management of the resources in the common provisioning fund in accordance with appropriate prudential rules and excluding derivative operations for speculative purposes. Those guidelines shall be attached to the agreement with the financial manager of the resources of the common provisioning fund. An independent evaluation of the adequacy of the guidelines shall be carried out every three years and transmitted to the European Parliament and to the Council.
Article 214 Annual reporting
1. In addition to the reporting obligation laid down in Article 250, the Commission shall report annually to the European Parliament and to the Council on the common provisioning fund. 2. The financial manager of the resources of the common provisioning fund shall report annually to the European Parliament and to the Council on the common provisioning fund.
Article 215 Rules and implementation
1. Notwithstanding Article 208(1), financial instruments may be established, in duly justified cases, without being authorised by means of a basic act, provided that such instruments are included in the draft budget in accordance with point (e) of the first subparagraph of Article 41(4). 2. Where financial instruments or budgetary guarantees are combined within a single agreement with ancillary support from the budget, including grants, this Title shall apply to the whole measure. The reporting shall be carried out in accordance with Article 250 and shall clearly identify which parts of the measure are financial instruments or budgetary guarantees. 3. The Commission shall ensure a harmonised and simplified management of financial instruments, in particular in the area of accounting, reporting, monitoring and financial risk management. 4. Where the Union participates in a financial instrument as a minority stakeholder, the Commission shall ensure compliance with this Title in accordance with the principle of proportionality, on the basis of the size and value of the participation of the Union in the instrument. However, irrespective of the size and value of the Union participation in the instrument, the Commission shall ensure compliance with Articles 129 and 155, Article 209(2) and (4), Article 250 and, insofar as the exclusion situations referred to in point (d) of Article 136(1) are concerned, Section 2 of Chapter 2 of Title V. 5. Where the European Parliament or the Council consider that a financial instrument has not achieved its objectives effectively, they may request that the Commission submit a proposal for a revised basic act with a view to winding down the instrument. In the event of the winding down of the financial instrument, any new amount paid back to that instrument pursuant to Article 209(3) shall be considered as general revenue and returned to the budget. 6. The purpose of the financial instruments or a grouping of financial instruments on a facility level and, where applicable, their specific legal form and place of registration shall be published on the Commission website. 7. Entities entrusted with the implementation of financial instruments may open fiduciary accounts within the meaning of Article 85(3) on behalf of the Union. Those entities shall send the corresponding account statements to the Commission’s responsible service. Payments to fiduciary accounts shall be made by the Commission on the basis of payment requests that are duly substantiated with disbursement forecasts, taking into account the balances available on the fiduciary accounts and the need to avoid excessive balances on such accounts.
Article 216 Financial instruments directly implemented by the Commission
1. Financial instruments may be directly implemented pursuant to point (a) of the first subparagraph of Article 62(1) through any of the following: (a) a dedicated investment vehicle in which the Commission participates together with other public or private investors with a view to increasing the leverage effect of the Union contribution; (b) loans, guarantees, equity participations and other risk-sharing instruments other than investments in dedicated investment vehicles, provided directly to final recipients or through financial intermediaries. 2. Dedicated investment vehicles referred to in point (a) of paragraph 1 shall be established pursuant to the laws of a Member State. In the field of external actions, they may also be established pursuant to the laws of a country other than a Member State. The managers of such vehicles shall be obliged by law or contractually to act with the diligence of a professional manager and in good faith. 3. The managers of dedicated investment vehicles referred to in point (a) of paragraph 1 and financial intermediaries or final recipients of financial instruments shall be selected with due account to the nature of the financial instrument to be implemented, the experience and the financial and operational capacity of the entities concerned, and the economic viability of projects of final recipients. The selection shall be transparent, justified on objective grounds and shall not give rise to a conflict of interests.
Article 217 Treatment of contributions from funds implemented under shared management
1. Separate records shall be kept for contributions to financial instruments established under this Section from funds implemented under shared management. 2. Contributions from funds implemented under shared management shall be placed in separate accounts and used in accordance with the objectives of the respective funds to actions and final recipients consistent with the programme or programmes from which contributions are made. 3. As regards contributions from funds implemented under shared management to financial instruments established under this Section, sector-specific rules shall apply. Notwithstanding the first sentence, managing authorities may rely on an existing ex ante evaluation, carried out in accordance with point (h) of the first subparagraph and the second subparagraph of Article 209(2), prior to contributing to an existing financial instrument.
Article 218 Rules for budgetary guarantees
1. The basic act shall define: (a) the amount of the budgetary guarantee that shall not be exceeded at any time, without prejudice to Article 208(2); (b) the types of operations covered by the budgetary guarantee. 2. Contributions from Member States to budgetary guarantees pursuant to Article 208(2) may be provided in the form of guarantees or cash. Contributions from third parties to budgetary guarantees pursuant to Article 208(2) may be provided in the form of cash. The budgetary guarantee shall be increased by the contributions referred to in the first and second subparagraph. Payments for guarantee calls shall be made, where necessary, by the contributing Member States or third parties on a pari passu basis. The Commission shall sign an agreement with the contributors that shall contain, in particular, provisions concerning the payment conditions.
Article 219 Implementation of budgetary guarantees
1. Budgetary guarantees shall be irrevocable, unconditional and on demand for the types of operations covered. 2. Budgetary guarantees shall be implemented pursuant to point (c) of the first subparagraph of Article 62(1) or, in exceptional cases, pursuant to point (a) of the first subparagraph of Article 62(1). 3. A budgetary guarantee shall only cover financing and investment operations which comply with points (a) to (d) of the first subparagraph of Article 209(2). 4. Counterparts shall contribute with their own resources to the operations covered by the budgetary guarantee. 5. The Commission shall conclude a guarantee agreement with the counterpart. The granting of the budgetary guarantee is subject to the entry into force of the guarantee agreement. 6. Counterparts shall provide the Commission annually with: (a) a risk assessment and grading information concerning the operations covered by the budgetary guarantee as well as expected defaults; (b) information on the outstanding financial obligation arising for the Union from the budgetary guarantee, broken down by individual operations, measured in compliance with the Union accounting rules as referred to in Article 80 or with IPSAS; (c) the total profits or losses deriving from the operations covered by the budgetary guarantee.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 219 Implementation of budgetary guarantees):
1. Budgetary guarantees shall be irrevocable, unconditional and on demand for the types of operations covered. 4. Counterparts shall contribute with their own resources to the operations covered by the budgetary guarantee. 5. The Commission shall conclude a guarantee agreement with the counterpart. The granting of the budgetary guarantee is subject to the entry into force of the guarantee agreement. 6. Counterparts shall provide the Commission annually with: (a) a risk assessment and grading information concerning the operations covered by the budgetary guarantee as well as expected defaults; (b) information on the outstanding financial obligation arising for the Union from the budgetary guarantee, broken down by individual operations, measured in compliance with the Union accounting rules as referred to in Article 80 or with IPSAS; (c) the total profits or losses deriving from the operations covered by the budgetary guarantee.
Article 220 Rules and implementation
1. Financial assistance by the Union to Member States or third countries shall be in accordance with pre-defined conditions and take the form of a loan or a credit line or any other instrument deemed appropriate to ensure the effectiveness of the support. To that end, the Commission shall be empowered, in the relevant basic act, to borrow the necessary funds on behalf of the Union on the capital markets or from financial institutions. 2. The borrowing and lending shall not involve the Union in the transformation of maturities, or expose it to any interest risk or to any other commercial risk. 3. The financial assistance shall be carried out in euro, except in duly justified cases. 4. The financial assistance shall be directly implemented by the Commission. 5. The Commission shall conclude an agreement with the beneficiary country that shall contain provisions: (a) ensuring that the beneficiary country regularly checks that the financing provided has been properly used in accordance with the pre-defined conditions, takes appropriate measures to prevent irregularities and fraud, and, if necessary, takes legal action to recover any funds provided under the financial assistance that have been misappropriated; (b) ensuring the protection of the financial interests of the Union; (c) expressly authorising the Commission, OLAF and the Court of Auditors, to exert their rights as foreseen by Article 129; (d) ensuring that the Union is entitled to early repayment of the loan where it has been established that, in relation to the management of the financial assistance, the beneficiary country has engaged in any act of fraud or corruption or any other illegal activity detrimental to the financial interests of the Union; (e) ensuring that all costs incurred by the Union that relate to a financial assistance shall be borne by the beneficiary country. 6. The Commission shall release the loans, where possible in instalments, subject to the fulfilment of the conditions attached to the financial assistance. Where those conditions are not fulfilled, the Commission shall temporarily suspend or cancel the disbursement of the financial assistance. 7. Funds raised but not yet disbursed cannot be used for any other goal than to provide financial assistance to the corresponding beneficiary country. Pursuant to Article 86(1) and (2), the accounting officer shall set up the procedures for the safekeeping of the funds.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 220 Rules and implementation):
1. Financial assistance by the Union to Member States or third countries shall be in accordance with pre-defined conditions and take the form of a loan or a credit line or any other instrument deemed appropriate to ensure the effectiveness of the support. To that end, the Commission shall be empowered, in the relevant basic act, to borrow the necessary funds on behalf of the Union on the capital markets or from financial institutions. 3. The financial assistance shall be carried out in euro, except in duly justified cases. 4. The financial assistance shall be directly implemented by the Commission. The Commission shall conclude an agreement with the beneficiary country that shall contain provisions: (a) ensuring that the beneficiary country regularly checks that the financing provided has been properly used in accordance with the pre-defined conditions, takes appropriate measures to prevent irregularities and fraud, and, if necessary, takes legal action to recover any funds provided under the financial assistance that have been misappropriated; (b) ensuring the protection of the financial interests of the Union; (c) expressly authorising the Commission, OLAF and the Court of Auditors, to exert their rights as foreseen by Article 129; (d) ensuring that the Union is entitled to early repayment of the loan where it has been established that, in relation to the management of the financial assistance, the beneficiary country has engaged in any act of fraud or corruption or any other illegal activity detrimental to the financial interests of the Union; (e) ensuring that all costs incurred by the Union that relate to a financial assistance shall be borne by the beneficiary country. 6. The Commission shall release the loans, where possible in instalments, subject to the fulfilment of the conditions attached to the financial assistance. Where those conditions are not fulfilled, the Commission shall temporarily suspend or cancel the disbursement of the financial assistance.
Article 221 General provisions
Direct financial contributions from the budget may be awarded to European political parties as defined in point (3) of Article 2 of Regulation (EU, Euratom) No 1141/2014 (‘European political parties’) in view of their contribution to forming European political awareness and to expressing the political will of the citizens of the Union in accordance with that Regulation.
Article 222 Principles
1. Contributions shall be used to reimburse only the percentage set out in Article 17(4) of Regulation (EU, Euratom) No 1141/2014 of the operating costs of European political parties directly linked to objectives of those parties, as specified in Article 17(5) of that Regulation and Article 21 of that Regulation. 2. Contributions may be used to reimburse expenditure relating to contracts concluded by European political parties, provided that there were no conflicts of interests when they were awarded. 3. Contributions shall not be used to directly or indirectly grant any personal advantage, in cash or in kind, to any individual member or member of staff of a European political party. Contributions shall not be used to directly or indirectly finance activities of third parties, in particular national political parties or political foundations at European or national level, whether in the form of grants, donations, loans or any other similar agreements. For the purposes of this paragraph, associated entities of European political parties shall not be regarded as third parties, where such entities are part of the administrative organisation of European political parties as set out in the statutes of the latter. Contributions shall not be used for any of the purposes excluded by Article 22 of Regulation (EU, Euratom) No 1141/2014. 4. Contributions shall be subject to the principles of transparency and equal treatment, in accordance with the criteria laid down in Regulation (EU, Euratom) No 1141/2014. 5. Contributions shall be awarded by the European Parliament on an annual basis and shall be published in accordance with Article 38(1) to (4) of this Regulation and with Article 32(1) of Regulation (EU, Euratom) No 1141/2014. 6. European political parties receiving a contribution shall not directly or indirectly receive other funding from the budget. In particular, donations from the budgets of political groups in the European Parliament shall be prohibited. In no circumstances shall the same expenditure be financed twice by the budget. Contributions shall be without prejudice to the ability of the European political parties to build up reserves with amounts from their own resources in accordance with Regulation (EU, Euratom) No 1141/2014. 7. If a European political foundation as defined in point (4) of Article 2 of Regulation (EU, Euratom) No 1141/2014 realises a surplus of income over expenditure at the end of a financial year in which it received an operating grant, the part of that surplus corresponding to up to 25 % of the total income for that year may be carried over to the following year provided that it is used before the end of the first quarter of that following year.
Article 223 Budgetary aspects
Contributions, as well as appropriations set aside for independent external audit bodies or experts referred to in Article 23 of Regulation (EU, Euratom) No 1141/2014, shall be paid from the section of the budget relating to the European Parliament.
Article 224 Call for contributions
1. Contributions shall be awarded through a call for contributions published each year, at least on the website of the European Parliament. 2. A European political party may be awarded only one contribution per year. 3. A European political party may receive a contribution only if it applies for funding on the terms and conditions laid down in the call for contributions. 4. The call for contributions shall determine the conditions under which the applicant may receive a contribution in accordance with Regulation (EU, Euratom) No 1141/2014, as well as the exclusion criteria. 5. The call for contributions shall determine, at least, the nature of the expenditure that may be reimbursed by the contribution. 6. The call for contributions shall require an estimated budget.
Article 225 Award procedure
1. Applications for contributions shall be duly submitted within the time limit, in writing, including, where appropriate, in a secure electronic format. 2. Contributions shall not be awarded to applicants who, at the time of the award procedure, are in one or more of the situations referred to in Articles 136(1) and 141(1) and those who are registered as excluded in the database referred to in Article 142. 3. Applicants shall be required to certify that they are not in one of the situations referred to in paragraph 2. 4. The authorising officer responsible may be assisted by a committee to evaluate the applications for contributions. The authorising officer responsible shall specify the rules regarding the composition, appointment and functioning of such committee, and the rules to prevent any conflict of interests. 5. Applications that comply with the eligibility and exclusion criteria shall be selected on the basis of the award criteria set out in Article 19 of Regulation (EU, Euratom) No 1141/2014. 6. The decision of the authorising officer responsible on the applications shall state at least: (a) the subject and the overall amount of the contributions; (b) the name of the selected applicants and the amounts accepted for each of them; (c) the names of any applicants rejected and the reasons for that rejection. 7. The authorising officer responsible shall inform applicants in writing of the decision on their applications. If the application for funding is rejected or the amounts requested are not awarded in part or in full, the authorising officer responsible shall give the reasons for either the rejection of the application or the non-award of the amounts requested, with reference in particular to the eligibility and award criteria referred to in paragraph 5 of this Article and Article 224(4). If the application is rejected, the authorising officer responsible shall inform the applicant of the available means of administrative and/or judicial redress as provided for in Article 133(2). 8. Contributions shall be covered by a written agreement.
Article 226 Form of contributions
1. Contributions may take any of the following forms: (a) reimbursement of a percentage of the reimbursable expenditure actually incurred; (b) reimbursement on the basis of unit costs; (c) lump sums; (d) flat-rate financing; (e) a combination of the forms referred to in points (a) to (d). 2. Only expenditure which meets the criteria established in the calls for contributions and which has not been incurred prior to the date of submission of the application may be reimbursed. 3. The agreement referred to in Article 225(8) shall include provisions that allow verifying that the conditions for the award of lump sums, flat-rate financing or unit costs have been complied with. 4. The contributions shall be paid out in full through one single pre-financing payment, unless, in duly justified cases, the authorising officer responsible decides otherwise.
Article 227 Guarantees
The authorising officer responsible may, if he or she deems it appropriate and proportionate, on a case-by-case basis and subject to a risk analysis, require a European political party to lodge a guarantee in advance in order to limit the financial risks connected with the pre-financing payment only when, in the light of the risk analysis, the European political party is at imminent risk of being in one of the exclusion situations referred to in points (a) and (d) of Article 136(1) of this Regulation or when a decision of the Authority for European political parties and European political foundations established under Article 6 of Regulation (EU, Euratom) No 1141/2014 (‘the Authority’) has been communicated to the European Parliament and to the Council in accordance with Article 10(4) of that Regulation. Article 153 shall apply mutatis mutandis to guarantees which may be required in the cases foreseen in the first paragraph of this Article to pre-financing payments made to European political parties.
Article 228 Use of contributions
1. Contributions shall be spent in accordance with Article 222. 2. Any part of the contribution not used within the financial year covered by that contribution (year n) shall be spent on any reimbursable expenditure incurred by 31 December of year n+1. Any remaining part of the contribution that is not spent within that time limit shall be recovered in accordance with Chapter 6 of Title IV. 3. European political parties shall respect the maximum co-financing rate laid down in Article 17(4) of Regulation (EU, Euratom) No 1141/2014. Remaining amounts of the contributions from the previous year shall not be used to finance the part which European political parties are to provide from their own resources. Contributions by third parties to joint events shall not be considered to be part of the own resources of a European political party. 4. European political parties shall use the part of the contribution that has not been used within the financial year covered by that contribution before using contributions awarded after that year. 5. Any interest yielded by the pre-financing payments shall be considered as part of the contribution.
Article 229 Report on the use of the contributions
1. A European political party shall, in accordance with Article 23 of Regulation (EU, Euratom) No 1141/2014, submit its annual report on the use of the contribution and its annual financial statements for approval to the authorising officer responsible. 2. The annual activity report referred to in Article 74(9) shall be drafted by the authorising officer responsible on the basis of the annual report and the annual financial statements referred to in paragraph 1 of this Article. Other supporting documents may be used for the purposes of drafting that report.
Article 230 Amount of the contribution
1. The amount of the contribution shall not become final until the annual report and the annual financial statements referred to in Article 229(1) have been approved by the authorising officer responsible. Approval of the annual report and the annual financial statements shall be without prejudice to subsequent checks by the Authority. 2. Any unspent amount of pre-financing shall not become final until it has been used by the European political party to pay reimbursable expenditure which meets the criteria defined in the call for contributions. 3. Where the European political party fails to comply with its obligations related to the use of contributions, the contributions shall be suspended, reduced or terminated after the European political party has been given the opportunity to present its observations. 4. The authorising officer responsible shall verify before making a payment that the European political party is still registered in the Register referred to in Article 7 of Regulation (EU, Euratom) No 1141/2014 and has not been the subject of any of the penalties provided for in Article 27 of that Regulation between the date of its application and the end of the financial year covered by the contribution. 5. Where the European political party is no longer registered in the Register referred to in Article 7 of Regulation (EU, Euratom) No 1141/2014 or has been the subject of any of the penalties provided for in Article 27 of that Regulation, the authorising officer responsible may suspend, reduce or terminate the contribution and recover amounts unduly paid under the agreement referred to in Article 225(8) of this Regulation, in proportion to the seriousness of the errors, irregularities, fraud or other breach of obligations related to the use of contribution, after the European political party has been given the opportunity to present its observations.
Article 231 Control and penalties
1. Each agreement referred to in Article 225(8) shall provide expressly for the European Parliament to exercise its powers of control on documents and on the premises, as well as for OLAF and the Court of Auditors to exercise their respective competences and powers, referred to in Article 129, over all European political parties that have received Union funding, their contractors and subcontractors. 2. Administrative and financial penalties which are effective, proportionate and dissuasive may be imposed by the authorising officer responsible, in accordance with Articles 136 and 137 of this Regulation and with Article 27 of Regulation (EU, Euratom) No 1141/2014. 3. Penalties referred to in paragraph 2 may also be imposed on European political parties which, at the moment of the submission of the application for contribution or after having received the contribution, made false declarations in supplying the information requested by the authorising officer responsible or failed to supply such information.
Article 232 Record keeping
1. European political parties shall keep all records and supporting documents pertaining to the contribution for five years following the last payment related to the contribution. 2. Records related to audits, appeals, litigation, the settlement of claims arising out of the use of the contribution or to OLAF investigations, if notified to the recipient, shall be retained until the end of such audits, appeals, litigation, settlement of claims or investigations.
Article 233 Selection of external audit bodies or experts
The independent external audit bodies or experts referred to in Article 23 of Regulation (EU, Euratom) No 1141/2014 shall be selected through a procurement procedure. The term of their contract shall be no longer than five years. After two consecutive terms, they shall be deemed to have conflicting interests which may negatively affect the performance of the audit.
Article 234 Union trust funds for external actions
1. For emergency and post-emergency actions necessary to react to a crisis, or for thematic actions, the Commission may establish Union trust funds for external actions (‘Union trust funds’) under an agreement concluded with other donors. Union trust funds shall only be established where agreements with other donors have secured contributions from other sources than the budget. The Commission shall consult the European Parliament and the Council on its intention to establish a Union trust fund for emergency and post-emergency actions. The establishment of a Union trust fund for thematic actions shall be subject to the approval of the European Parliament and of the Council. For the purposes of the third and fourth subparagraphs of this paragraph, the Commission shall make available to the European Parliament and to the Council its draft decisions concerning the establishment of a Union trust fund. Such draft decisions shall include a description of the objectives of the Union trust fund, the justification for its establishment in accordance with paragraph 3, an indication of its duration and the preliminary agreements with other donors. The draft decisions shall also include a draft constitutive agreement to be concluded with other donors. 2. The Commission shall submit its draft decisions concerning the financing of a Union trust fund to the competent committee where provided for in the basic act under which the Union contribution to the Union trust fund is provided. The competent committee shall not be invited to pronounce itself on the aspects which have already been submitted to the European Parliament and to the Council for consultation or for approval under the third, fourth and fifth subparagraphs of paragraph 1 respectively. 3. Union trust funds shall only be established and implemented subject to the following conditions: (a) there is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union; (b) Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions; (c) Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality; (d) the objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded. 4. A board chaired by the Commission shall be established for each Union trust fund to ensure a fair representation of the donors and to decide upon the use of the funds. The board shall include a representative of each non-contributing Member State as an observer. The rules for the composition of the board and its internal rules shall be laid down in the constitutive agreement of the Union trust fund. Those rules shall include the requirement that a vote in favour by the Commission is needed for the final adoption of the decision on the use of the funds. 5. Union trust funds shall be established for a limited duration as determined in their constitutive agreement. That duration may be extended by a decision of the Commission subject to the procedure set out in paragraph 1 upon request of the board of the Union trust fund concerned and upon presentation by the Commission of a report justifying the extension, confirming, in particular, that the conditions set out in paragraph 3 are complied with. The European Parliament and/or the Council may request the Commission to discontinue appropriations for a Union trust fund or to revise the constitutive agreement with a view to the liquidation of a Union trust fund, where appropriate in particular on the basis of the information submitted in the working document referred to in Article 41(6). In such an event, any remaining funds shall be returned on a pro rata basis to the budget as general revenue and to the contributing Member States and other donors.
Article 235 Implementation of Union trust funds for external actions
1. Union trust funds shall be implemented in accordance with the principles of sound financial management, transparency, proportionality, non-discrimination and equal treatment, and in accordance with the specific objectives defined in each constitutive agreement and in full respect of the rights of scrutiny and control of the Union contribution of the European Parliament and of the Council. 2. Actions financed under Union trust funds may be implemented directly by the Commission pursuant to point (a) of the first subparagraph of Article 62(1) and indirectly with the entities implementing Union funds pursuant to points (c)(i), (ii), (iii), (v), and (vi) of the first subparagraph of Article 62(1). 3. Funds shall be committed and paid by financial actors of the Commission, within the meaning of Chapter 4 of Title IV. The accounting officer of the Commission shall serve as the accounting officer of the Union trust funds. He or she shall be responsible for laying down accounting procedures and chart of accounts common to all Union trust funds. The Commission’s internal auditor, OLAF and the Court of Auditors shall exercise the same powers over Union trust funds as they do in respect of other actions carried out by the Commission. 4. The contributions of the Union and of other donors shall not be integrated in the budget and shall be lodged in a specific bank account. The specific bank account of the Union trust fund shall be opened and closed by the accounting officer. All transactions made on the specific bank account during the year shall be properly accounted for in the accounts of the Union trust fund. Union contributions shall be transferred to the specific bank account on the basis of payment requests that are duly substantiated with disbursement forecasts, taking into account the balance available on the account and the resulting need for additional payments. Disbursement forecasts shall be provided on an annual, or where appropriate on a semi-annual, basis. The contributions of other donors shall be taken into account when cashed in the specific bank account of the Union trust fund and for the amount in euro resulting from the conversion at their reception on the specific bank account. Interests accumulated on the specific bank account of the Union trust fund shall be invested in the Union trust fund except where otherwise provided in the constitutive agreement of the Union trust fund. 5. The Commission shall be authorised to use a maximum of 5 % of the amounts pooled into the Union trust fund to cover its management costs from the years in which the contributions referred to in paragraph 4 have started to be used. Notwithstanding the first sentence and in order to avoid the double charging of costs, management costs arising from the Union contribution to the Union trust fund shall only be covered by that contribution to the extent that those costs have not already been covered by other budget lines. For the duration of the Union trust fund, such management fees shall be assimilated to assigned revenue within the meaning of point (a)(ii) of Article 21(2). In addition to the annual report referred to in Article 252, financial reporting on the operations carried out by each Union trust fund shall be established twice every year by the authorising officer. The Commission shall also report monthly on the state of implementation of each Union trust fund. The Union trust funds shall be subject to an independent external audit every year.
Article 236 Use of budget support
1. Where provided for in the relevant basic acts, the Commission may provide budget support to a third country where the following conditions are met: (a) the third country’s management of public finances is sufficiently transparent, reliable and effective; (b) the third country has put in place sufficiently credible and relevant sectoral or national policies; (c) the third country has put in place stability-oriented macroeconomic policies; (d) the third country has put in place sufficient and timely access to comprehensive and sound budgetary information. 2. The payment of the Union contribution shall be based on the fulfilment of the conditions referred to in paragraph 1, including the improvement of the management of public finances. In addition, some payments may also be conditional on the achievement of milestones, measured by objective performance indicators, reflecting results and reform progress over time in the respective sector. 3. In third countries, the Commission shall support the respect for the rule of law, the development of parliamentary control and audit and anti-corruption capacities and the increase of transparency and public access to information. 4. The corresponding financing agreements concluded with the third country shall contain: (a) an obligation for the third country to provide the Commission with reliable and timely information which allows the Commission to evaluate the fulfilment of the conditions referred to in paragraph 2; (b) a right for the Commission to suspend the financing agreement if the third country breaches an obligation relating to respect for human rights, democratic principles and the rule of law and in serious cases of corruption; (c) appropriate provisions pursuant to which the third country is to commit to immediately reimburse all or part of the relevant operation funding, in the event that it is established that the payment of the relevant Union funds has been vitiated by serious irregularities attributable to that country. In order to process the reimbursement referred to in point (c) of the first subparagraph of this paragraph, the second subparagraph of Article 101(1) may be applied.
Article 237 Remunerated external experts
1. For values below the thresholds referred to in Article 175(1) and on the basis of the procedure laid down in paragraph 3 of this Article, Union institutions may select remunerated external experts to assist them in the evaluation of grant applications, projects and tenders, and to provide opinions and advice in specific cases. 2. Remunerated external experts shall be remunerated on the basis of a fixed amount announced in advance and shall be chosen on the basis of their professional capacity. The selection shall be done on the basis of selection criteria respecting the principles of non-discrimination, equal treatment and absence of conflict of interests. 3. A call for expression of interest shall be published on the website of the Union institution concerned. The call for expression of interest shall include a description of the tasks, their duration and the fixed conditions of remuneration. A list of experts shall be drawn up following the call for expression of interest. It shall be valid for no more than five years from its publication or for the duration of a multiannual programme related to the tasks. 4. Any interested natural person may submit an application at any time during the period of validity of the call for expression of interest, with the exception of the last three months of that period. 5. Experts paid from research and technological development appropriations shall be recruited in accordance with the procedures laid down by the European Parliament and by the Council when they adopt each research framework programme or in accordance with the corresponding rules for participation. For the purpose of Section 2 of Chapter 2 of Title V, such experts shall be treated as recipients.
Article 238 Non-remunerated experts
Union institutions may reimburse travel and subsistence expenses incurred by, or where appropriate pay any other indemnities to, persons invited or mandated by them.
Article 239 Membership fees and other payments of subscriptions
The Union may pay contributions as subscriptions to bodies of which it is a member or an observer.
Article 240 Expenditure on the members and staff of Union institutions
Unions institutions may pay expenditure on the members and staff of Union institutions, including contributions to associations of current and former members of the European Parliament, and contributions to the European schools.
Article 241 Structure of the accounts
The annual accounts of the Union shall be prepared for each financial year which shall run from 1 January to 31 December. Those accounts shall comprise the following: (a) the consolidated financial statements, which present, in accordance with the accounting rules referred to in Article 80, the consolidation of the financial information contained in the financial statements of Union institutions, of Union bodies referred to in Article 70 and of other bodies meeting the accounting consolidation criteria; (b) the aggregated budget implementation reports which present the information contained in the budget implementation reports of Union institutions.
Article 242 Supporting documents
Each entry in the accounts shall be based on appropriate supporting documents in accordance with Article 75.
Article 243 Financial statements
1. The financial statements shall be presented in millions of euro and in accordance with the accounting rules referred to in Article 80 and shall be comprised of: (a) the balance sheet which presents all assets and liabilities and the financial situation prevailing on 31 December of the preceding financial year; (b) the statement of financial performance, which presents the economic result for the preceding financial year; (c) the cash-flow statement showing amounts collected and disbursed during the financial year and the final treasury position; (d) the statement of changes in net assets presenting an overview of the movements during the financial year in reserves and accumulated results. 2. The notes to the financial statements shall supplement and comment on the information presented in the statements referred to in paragraph 1 and shall supply all the additional information prescribed by the accounting rules referred to in Article 80 and the internationally accepted accounting practice where such information is relevant to the activities of the Union. The notes shall contain at least the following information: (a) accounting principles, rules and methods; (b) explanatory notes supplying additional information not contained in the body of the financial statements, which is necessary for a fair presentation of the accounts. 3. The accounting officer shall, after the close of the financial year and up to the date of transmission of the general accounts, make any adjustments which, without involving disbursement or collection in respect of that year, are necessary for a true and fair view of those accounts.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 243 Financial statements):
The financial statements shall be presented in millions of euro and in accordance with the accounting rules referred to in Article 80 and shall be comprised of: (a) the balance sheet which presents all assets and liabilities and the financial situation prevailing on 31 December of the preceding financial year; (b) the statement of financial performance, which presents the economic result for the preceding financial year; (c) the cash-flow statement showing amounts collected and disbursed during the financial year and the final treasury position; (d) the statement of changes in net assets presenting an overview of the movements during the financial year in reserves and accumulated results. 2. The notes to the financial statements shall supplement and comment on the information presented in the statements referred to in paragraph 1 and shall supply all the additional information prescribed by the accounting rules referred to in Article 80 and the internationally accepted accounting practice where such information is relevant to the activities of the Union. The notes shall contain at least the following information: (a) accounting principles, rules and methods; (b) explanatory notes supplying additional information not contained in the body of the financial statements, which is necessary for a fair presentation of the accounts. The notes to the financial statements shall supplement and comment on the information presented in the statements referred to in paragraph 1 and shall supply all the additional information prescribed by the accounting rules referred to in Article 80 and the internationally accepted accounting practice where such information is relevant to the activities of the Union. The notes shall contain at least the following information: (a) accounting principles, rules and methods; (b) explanatory notes supplying additional information not contained in the body of the financial statements, which is necessary for a fair presentation of the accounts. 3. The accounting officer shall, after the close of the financial year and up to the date of transmission of the general accounts, make any adjustments which, without involving disbursement or collection in respect of that year, are necessary for a true and fair view of those accounts.
Article 244 Budget implementation reports
1. The budget implementation reports shall be presented in millions of euro and shall be comparable year by year. They shall consist of: (a) reports which aggregate all budgetary operations for the financial year in terms of revenue and expenditure; (b) the budget result, which is calculated on the basis of the annual budgetary balance referred to in Decision 2014/335/EU, Euratom; (c) explanatory notes, which shall supplement and comment on the information given in the reports. 2. The structure of the budget implementation reports shall be the same as that of the budget itself. 3. The budget implementation reports shall contain: (a) information on revenue, in particular changes in the revenue estimates, the revenue outturn and entitlements established; (b) information showing changes in the total commitment and payment appropriations available; (c) information showing the use made of the total commitment and payment appropriations available; (d) information showing commitments outstanding, those carried over from the preceding financial year and those made during the financial year. 4. As regards information on revenue, a statement shall be attached to the budget implementation report showing, for each Member State, the breakdown of amounts of own resources still to be recovered at the end of the financial year and covered by a recovery order.
Article 245 Provisional accounts
1. The accounting officers of the Union institutions other than the Commission and the bodies referred to in Article 241 shall, by 1 March of the following financial year, send their provisional accounts to the accounting officer of the Commission and to the Court of Auditors. 2. The accounting officers of the Union institutions other than the Commission and the bodies referred to in Article 241 shall, by 1 March of the following financial year, send the required accounting information for consolidation purposes to the accounting officer of the Commission, in the manner and format laid down by the latter. 3. The accounting officer of the Commission shall consolidate the provisional accounts referred to in paragraph 2 with the provisional accounts of the Commission and shall, by 31 March of the following financial year, send the provisional accounts of the Commission and the consolidated provisional accounts of the Union to the Court of Auditors by electronic means.
Article 246 Approval of the final consolidated accounts
1. The Court of Auditors shall, by 1 June, make its observations on the provisional accounts of the Union institutions other than the Commission, and of each of the bodies referred to in Article 241, and, by 15 June, make its observations on the provisional accounts of the Commission and the consolidated provisional accounts of the Union. 2. The accounting officers of the Union institutions other than the Commission and of the bodies referred to in Article 241 shall, by 15 June, send the required accounting information to the accounting officer of the Commission, in the manner and format laid down by the latter, with a view to drawing up the final consolidated accounts. The Union institutions other than the Commission, and each of the bodies referred to in Article 241, shall, by 1 July, send their final accounts to the European Parliament, to the Council, to the Court of Auditors and to the accounting officer of the Commission. 3. The accounting officer of each Union institution and of each body referred to in Article 241 shall send to the Court of Auditors, with a copy to the accounting officer of the Commission, at the same date as the transmission of his or her final accounts, a representation letter covering those final accounts. The final accounts shall be accompanied by a note drawn up by the accounting officer, in which the latter declares that the final accounts were prepared in accordance with this Title and with the applicable accounting principles, rules and methods set out in the notes to the financial statements. 4. The accounting officer of the Commission shall draw up the final consolidated accounts on the basis of the information presented pursuant to paragraph 2 of this Article by the Union institutions other than the Commission, and by the bodies referred to in Article 241. The final consolidated accounts shall be accompanied by a note drawn up by the accounting officer of the Commission, in which the latter declares that the final consolidated accounts were prepared in accordance with this Title and with the applicable accounting principles, rules and methods set out in the notes to the financial statements. 5. After approving the final consolidated accounts and its own final accounts, the Commission shall, by 31 July, send them by electronic means to the European Parliament, to the Council and to the Court of Auditors. By the same date, the accounting officer of the Commission shall transmit a representation letter covering the final consolidated accounts to the Court of Auditors. 6. The final consolidated accounts shall be published by 15 November in the Official Journal of the European Union together with the statement of assurance given by the Court of Auditors in accordance with Article 287 TFEU and Article 106a of the Euratom Treaty.
Article 247 Integrated financial and accountability reporting
1. By 31 July of the following financial year the Commission shall communicate to the European Parliament and to the Council an integrated set of financial and accountability reports which includes: (a) the final consolidated accounts as referred to in Article 246; (b) the annual management and performance report providing for a clear and concise summary of the internal control and financial management achievements referred to in the annual activity reports of each authorising officer by delegation and including information on key governance arrangements in the Commission as well as: (i) an estimation of the level of error in Union expenditure based on a consistent methodology and an estimate of future corrections; (ii) information on the preventive and corrective actions covering the budget, which shall present the financial impact of the actions taken to protect the budget from expenditure in breach of law; (iii) information on the implementation of the Commission’s anti-fraud strategy; (c) a long-term forecast of future inflows and outflows covering the next five years, based on the applicable multiannual financial frameworks and Decision 2014/335/EU, Euratom; (d) the annual internal audit report as referred to in Article 118(4); (e) the evaluation on the Union’s finances based on the results achieved, as referred to in Article 318 TFEU, assessing in particular the progress towards the achievement of policy objectives taking into account the performance indicators referred to in Article 33 of this Regulation; (f) the report on the follow-up to the discharge as referred to in Article 261(3). 2. The integrated financial and accountability reporting referred to in paragraph 1 shall present each report in a separate and clearly identifiable manner. Each individual report shall be made available to the European Parliament, to the Council and to the Court of Auditors by 30 June, with the exception of the final consolidated accounts.
Article 248 Monthly reporting on budget implementation
In addition to the annual statements and reports provided for in Articles 243 and 244, the accounting officer of the Commission shall send once a month to the European Parliament and to the Council figures, aggregated at chapter level at least, as well as separately broken down by chapter, article and item, on budget implementation, both for revenue and for expenditure covering all available appropriations. Those figures shall also provide details of the use of appropriations carried over. The figures shall be made available within 10 working days of the end of each month via the Commission’s website.
Article 249 Annual report on budgetary and financial management
1. Each Union institution and each body referred to in Article 241 shall prepare a report on budgetary and financial management for the financial year. They shall make the report available to the European Parliament, to the Council and to the Court of Auditors, by 31 March of the following financial year. 2. The report referred to in paragraph 1 shall provide summary information on the transfers of appropriations among the various budgetary items.
Article 250 Annual report on financial instruments, budgetary guarantees and financial assistance
The Commission shall report annually to the European Parliament and to the Council on financial instruments, budgetary guarantees, financial assistance and contingent liabilities in accordance with Article 41(4) and (5) and with points (d) and (e) of Article 52(1). That information shall be made available to the Court of Auditors at the same time.
Article 251 Status report on accounting issues
By 15 September of each financial year, the accounting officer of the Commission shall send to the European Parliament and to the Council a report containing information on current risks noted, general trends observed, new accounting issues encountered and progress on accounting matters, including where identified by the Court of Auditors, as well as information on recoveries.
Article 252 Reporting on Union trust funds for external actions
In accordance with Article 41(6), the Commission shall report annually to the European Parliament and to the Council on the activities supported by Union trust funds referred to in Article 234, on their implementation and performance, as well as on their accounts. The Board of the Union trust fund concerned shall approve the annual report of the Union trust fund drawn up by the authorising officer. It shall also approve the final accounts drawn up by the accounting officer. The final accounts shall be presented by the Board to the European Parliament and Council in the context of the discharge procedure for the Commission.
Article 253 Publication of information on recipients
The Commission shall publish information on recipients in accordance with Article 38.
Article 254 External audit by the Court of Auditors
The European Parliament, the Council and the Commission shall inform the Court of Auditors, as soon as possible, of all decisions and rules adopted pursuant to Articles 12, 16, 21, 29, 30, 32 and 43.
Article 255 Rules and procedure on the audit
1. The examination by the Court of Auditors of whether all revenue has been received and all expenditure incurred in a lawful and proper manner shall have regard to the Treaties, the budget, this Regulation, the delegated acts adopted pursuant to this Regulation and all other relevant acts adopted pursuant to the Treaties. That examination may take account of the multiannual character of programmes and related supervisory and control systems. 2. In the performance of its task, the Court of Auditors shall be entitled to consult, in the manner provided for in Article 257, all documents and information relating to the financial management by departments or bodies with regard to operations financed or co-financed by the Union. It shall have the power to hear any official responsible for a revenue or expenditure operation and to use any of the auditing procedures appropriate to those departments or bodies. The audit in Member States shall be carried out in liaison with the national audit institutions or, where they do not have the necessary powers, with the competent national departments. The Court of Auditors and the national audit institutions of Member States shall cooperate in a spirit of trust while maintaining their independence. In order to obtain all the necessary information for the performance of the task entrusted to it by the Treaties or by acts adopted pursuant to them, the Court of Auditors may be present, at its request, during the audit operations carried out within the framework of budget implementation by, or on behalf of, any Union institution. At the request of the Court of Auditors, each Union institution shall authorise financial institutions holding Union deposits to enable the Court of Auditors to ensure that external data tally with the accounts. 3. In order to perform its task, the Court of Auditors shall notify Union institutions and the authorities to which this Regulation applies of the names of the members of its staff who are empowered to audit them.
Article 256 Checks on securities and cash
The Court of Auditors shall ensure that all securities and cash on deposit or in hand are checked against vouchers signed by the depositories or against official memoranda of cash and securities held. It may carry out such checks itself.