Article 1 
A Guarantee Fund (hereinafter referred to as the ‘Fund’) shall be established, the resources of which shall be used to repay the Communities’ creditors in the event of default by the beneficiary of a loan granted or guaranteed by the Communities or of a loan guarantee issued by the European Investment Bank (hereinafter referred to as the ‘EIB’) for which the Communities provide a guarantee. The lending and guarantee operations referred to in the first paragraph (hereinafter referred to as operations) shall be those carried out for the benefit of a third country or for the purpose of financing projects in third countries. All operations carried out for the benefit of a third country or for the purpose of financing projects in a third country shall fall outside the scope of this Regulation, with effect from the date on which that country accedes to the European Union.
Article 2 
The Fund shall be endowed by: — one annual payment from the general budget of the European Union pursuant to Articles 5 and 6, — interest on Fund resources invested, — amounts recovered from defaulting debtors where the Fund has already honoured the guarantee.
Article 3 
The Fund shall rise to an appropriate level (hereinafter referred to as the target amount). The target amount shall be 9 % of the Communities’ total outstanding capital liabilities arising from each operation, increased by unpaid interest due. On the basis of the year-end n–1 difference between the target amount and the value of the Fund’s net assets, calculated at the beginning of the year n , any surplus shall be paid in one transaction to a special heading in the statement of revenue in the general budget of the European Union of the year n + 1 .
Article 4 
Following the accession of a new Member State to the European Union, the target amount shall be reduced by an amount calculated on the basis of the operations referred to in the third paragraph of Article 1. In order to calculate the amount of the reduction, the percentage rate referred to in the second paragraph of Article 3 applicable on the date of accession shall be applied to the amount of those operations outstanding on that date. The surplus shall be paid back to a special heading in the statement of revenue in the general budget of the European Union.
Article 5 
Based on the year-end n–1 difference between the target amount and the value of the Fund’s net assets, calculated at the beginning of the year n , the required provisioning amount shall be paid into the Fund in one transaction in the year n + 1 from the general budget of the European Union.
Article 6 
1. If, as a result of one or more defaults, the activation of guarantees during year n–1 exceeds EUR 100 million, the amount exceeding EUR 100 million shall be paid back into the Fund in annual tranches starting in year n + 1 and continuing over the following years until full repayment (smoothing mechanism). The size of the annual tranche shall be the lesser of the following: — EUR 100 million, or, — the remaining amount due in accordance with the smoothing mechanism. Any amount resulting from the activation of guarantees in years preceding year n–1 , that has not yet been repaid in full due to the smoothing mechanism, shall be paid back before the smoothing mechanism for defaults occurring in year n–1 or subsequent years can take effect. Such remaining amounts shall continue to be deducted from the maximum annual amount to be recovered from the general budget of the European Union under the smoothing mechanism until such time as the full amount has been paid back into the Fund. 2. The calculations based on the smoothing mechanism shall be made separately from the calculations referred to in the third paragraph of Article 3 and in Article 5. Nevertheless, they shall together result in one annual transfer. The amounts to be paid from the general budget of the European Union under the smoothing mechanism shall be treated as net assets of the Fund for the calculation pursuant to Articles 3 and 5. 3. If, as a result of the activation of guarantees following one or more major defaults, resources in the Fund fall below 80 % of the target amount, the Commission shall inform the budgetary authority thereof. 4. If, as a result of the activation of guarantees following one or more major defaults, resources in the Fund fall below 70 % of the target amount, the Commission shall submit a report on exceptional measures that may be required to replenish the Fund.
Article 7 
The Commission shall entrust the financial management of the Fund to the EIB under a mandate on behalf of the Communities.
Article 8 
The Commission shall, by 31 May of the following financial year, send to the European Parliament, the Council and the Court of Auditors an annual report on the situation of the Fund and the management thereof in the previous year.
Article 9 
The revenue and expenditure account and the balance sheet relating to the Fund shall be attached to the Communities’ revenue and expenditure account and balance sheet.
Article 10 
Regulation (EC, Euratom) No 2728/94, is repealed. References to the repealed Regulation shall be construed as references to this Regulation and be read in accordance with the correlation table set out in Annex II.
Article 11 
This Regulation shall enter into force on the 20th day following its publication in the Official Journal of the European Union .