Article 116 Time limits for payments
1. Payments shall be made within: (a) 90 calendar days for contribution agreements, contracts and grant agreements involving technical services or actions which are particularly complex to evaluate and for which payment depends on the approval of a report or a certificate; (b) 60 calendar days for all other contribution agreements, contracts and grant agreements for which payment depends on the approval of a report or a certificate; (c) 30 calendar days for all other contribution agreements, contracts and grant agreements. 2. The time allowed for making payments shall be understood to include validation, authorisation and the payment of expenditure. It shall begin to run from the date on which a payment request is received. 3. A payment request shall be registered by the authorised department of the authorising officer responsible as soon as possible and is deemed to be received on the date it is registered. The date of payment is deemed to be the date on which the Union institution’s account is debited. A payment request shall include the following essential elements: (a) the creditor’s identification; (b) the amount; (c) the currency; (d) the date. Where at least one essential element is missing, the payment request shall be rejected. The creditor shall be informed in writing of a rejection and the reasons for it as soon as possible and in any case within 30 calendar days from the date on which the payment request was received. 4. The authorising officer responsible may suspend the time limit for payment where: (a) the amount of the payment request is not due; or (b) the appropriate supporting documents have not been produced. If information comes to the notice of the authorising officer responsible which puts in doubt the eligibility of expenditure in a payment request, he or she may suspend the time limit for payment for the purpose of verifying, including by means of on-the-spot-checks, that the expenditure is eligible. The remaining time allowed for payment shall begin to run from the date on which the requested information or revised documents are received or the necessary further verification, including on-the-spot checks, is carried out. The creditors concerned shall be informed in writing of the reasons for a suspension. 5. Except in the case of Member States, the EIB and the EIF, on the expiry of the time limits laid down in paragraph 1, the creditor shall be entitled to interest in accordance with the following conditions: (a) the interest rates shall be those referred to in Article 99(2); (b) the interest shall be payable for the period elapsing from the calendar day following expiry of the time limit for payment laid down in paragraph 1 up to the day of payment. However, in the event that the interest calculated in accordance with the first subparagraph is lower than or equal to EUR 200, it shall be paid to the creditor only on a request submitted within two months of receiving late payment. 6. Each Union institution shall submit to the European Parliament and Council a report on the compliance with and the suspension of the time limits laid down in paragraphs 1 to 4 of this Article. The report of the Commission shall be annexed to the summary of the annual activity reports referred to in Article 74(9).
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 116 Time limits for payments):
1. Payments shall be made within: (a) 90 calendar days for contribution agreements, contracts and grant agreements involving technical services or actions which are particularly complex to evaluate and for which payment depends on the approval of a report or a certificate; 90 calendar days for contribution agreements, contracts and grant agreements involving technical services or actions which are particularly complex to evaluate and for which payment depends on the approval of a report or a certificate; (b) 60 calendar days for all other contribution agreements, contracts and grant agreements for which payment depends on the approval of a report or a certificate; 60 calendar days for all other contribution agreements, contracts and grant agreements for which payment depends on the approval of a report or a certificate; (c) 30 calendar days for all other contribution agreements, contracts and grant agreements. 30 calendar days for all other contribution agreements, contracts and grant agreements. 2. The time allowed for making payments shall be understood to include validation, authorisation and the payment of expenditure. It shall begin to run from the date on which a payment request is received. 3. A payment request shall be registered by the authorised department of the authorising officer responsible as soon as possible and is deemed to be received on the date it is registered. The date of payment is deemed to be the date on which the Union institution’s account is debited. A payment request shall include the following essential elements: (a) the creditor’s identification; (b) the amount; (c) the currency; (d) the date. Where at least one essential element is missing, the payment request shall be rejected. The creditor shall be informed in writing of a rejection and the reasons for it as soon as possible and in any case within 30 calendar days from the date on which the payment request was received. 4. The authorising officer responsible may suspend the time limit for payment where: (a) the amount of the payment request is not due; or (b) the appropriate supporting documents have not been produced. The authorising officer responsible may suspend the time limit for payment where: (a) the amount of the payment request is not due; or (b) the appropriate supporting documents have not been produced. If information comes to the notice of the authorising officer responsible which puts in doubt the eligibility of expenditure in a payment request, he or she may suspend the time limit for payment for the purpose of verifying, including by means of on-the-spot-checks, that the expenditure is eligible. The remaining time allowed for payment shall begin to run from the date on which the requested information or revised documents are received or the necessary further verification, including on-the-spot checks, is carried out. The creditors concerned shall be informed in writing of the reasons for a suspension. 5. Except in the case of Member States, the EIB and the EIF, on the expiry of the time limits laid down in paragraph 1, the creditor shall be entitled to interest in accordance with the following conditions: (a) the interest rates shall be those referred to in Article 99(2); (b) the interest shall be payable for the period elapsing from the calendar day following expiry of the time limit for payment laid down in paragraph 1 up to the day of payment. However, in the event that the interest calculated in accordance with the first subparagraph is lower than or equal to EUR 200, it shall be paid to the creditor only on a request submitted within two months of receiving late payment. 6. Each Union institution shall submit to the European Parliament and Council a report on the compliance with and the suspension of the time limits laid down in paragraphs 1 to 4 of this Article. The report of the Commission shall be annexed to the summary of the annual activity reports referred to in Article 74(9).
Article 117 Appointment of the internal auditor
1. Each Union institution shall establish an internal audit function which shall be performed in compliance with the relevant international standards. The internal auditor appointed by the Union institution concerned shall be accountable to the latter for verifying the proper operation of budget implementation systems and procedures. The internal auditor shall not be the authorising officer or the accounting officer. 2. For the purposes of the internal auditing of the EEAS, Heads of Union delegations, acting as authorising officers by subdelegation in accordance with Article 60(2), shall be subject to the verifying powers of the internal auditor of the Commission for the financial management subdelegated to them. The internal auditor of the Commission shall also act as the internal auditor of the EEAS in respect of the implementation of the section of the budget relating to the EEAS. 3. Each Union institution shall appoint its internal auditor in accordance with arrangements adapted to its specific features and requirements. Each Union institution shall inform the European Parliament and the Council of the appointment of its internal auditor. 4. Each Union institution shall determine, in accordance with its specific features and its requirements, the scope of the mission of its internal auditor and shall lay down in detail the objectives and procedures for the exercise of the internal audit function with due respect for international internal audit standards. 5. Each Union institution may appoint as internal auditor, by virtue of their particular competence, an official or other servant covered by the Staff Regulations selected from nationals of Member States. 6. If two or more Union institutions appoint the same internal auditor they shall make the necessary arrangements for the internal auditor to be declared liable for his or her actions as laid down in Article 121. 7. Each Union institution shall inform the European Parliament and Council when the duties of its internal auditor are terminated.
Article 118 Powers and duties of the internal auditor
1. The internal auditor shall advise his or her Union institution on dealing with risks, by issuing independent opinions on the quality of management and control systems and by issuing recommendations for improving the conditions of implementation of operations and promoting sound financial management. The internal auditor shall in particular be responsible for: (a) assessing the suitability and effectiveness of internal management systems and the performance of departments in implementing policies, programmes and actions by reference to the risks associated with them; (b) assessing the efficiency and effectiveness of the internal control and audit systems applicable to each budget implementation operation. 2. The internal auditor shall perform his or her duties in relation to all the activities and departments of the Union institution concerned. He or she shall enjoy full and unlimited access to all information required to perform his or her duties, if necessary also on-the-spot access, including in Member States and in third countries. The internal auditor shall take note of the annual report of the authorising officers and any other pieces of information identified. 3. The internal auditor shall report to the Union institution concerned on his or her findings and recommendations. The Union institution concerned shall ensure that action is taken with regard to recommendations resulting from audits. Each Union institution shall consider whether the recommendations made in the reports of its internal auditor are suitable for an exchange of best practices with other Union institutions. 4. The internal auditor shall submit to the Union institution concerned an annual internal audit report indicating the number and type of internal audits carried out, the principal recommendations made and the action taken with regard to those recommendations. That annual internal audit report shall mention any systemic problems detected by the panel set up pursuant to Article 143 where it gives the opinion referred to in Article 93. 5. The internal auditor shall, during the elaboration of the report, particularly focus on the overall compliance with the principles of sound financial management and performance, and shall ensure that appropriate measures have been taken in order to steadily improve and enhance their application. 6. Each year, the Commission shall, in the context of the discharge procedure and in accordance with Article 319 TFEU, forward on request its annual internal audit report with due regard to confidentiality requirements. 7. Each Union institution shall make available the contact details of its internal auditor to any natural or legal person involved in expenditure operations, for the purposes of confidentially contacting the internal auditor. 8. Each year each Union institution shall draft a report containing a summary of the number and type of internal audits carried out, a synthesis of the recommendations made and the action taken on those recommendations and forward it to the European Parliament and to the Council as provided for in Article 247. 9. The reports and findings of the internal auditor, as well as the report of the Union institution concerned, shall be accessible to the public only after validation by the internal auditor of the action taken for their implementation. 10. Each Union institution shall provide its internal auditor with the resources required for the proper performance of the internal audit function and a mission charter detailing the tasks, rights and obligations of its internal auditor.
Article 119 Work programme of the internal auditor
1. The internal auditor shall adopt the work programme and shall submit it to the Union institution concerned. 2. Each Union institution may ask its internal auditor to carry out audits not included in the work programme referred to in paragraph 1.
Article 120 Independence of the internal auditor
1. The internal auditor shall enjoy complete independence in the conduct of the audits. Special rules applicable to the internal auditor shall be laid down by the Union institution concerned and shall be such as to guarantee that the internal auditor is totally independent in the performance of his or her duties, and to establish the internal auditor’s responsibility. 2. The internal auditor shall not be given any instructions nor be restricted in any way as regards the performance of the functions which, by virtue of his or her appointment, are assigned to him or her under this Regulation. 3. If the internal auditor is a member of staff, he or she shall exercise exclusive audit functions in full independence and shall assume responsibility as laid down in the Staff Regulations.
Article 121 Liability of the internal auditor
Each Union institution alone, proceeding in accordance with this Article, may act to have its internal auditor, as a member of staff, declared liable for his or her actions. Each Union institution shall take a reasoned decision to open an investigation. That decision shall be communicated to the interested party. The Union institution concerned may put in charge of the investigation, under its direct responsibility, one or more officials of a grade equal to or higher than that of the member of staff concerned. In the course of the investigation, the views of the interested party shall be heard. The investigation report shall be communicated to the interested party, who shall then be heard by the Union institution concerned on the subject of that report. On the basis of the report and the hearing, the Union institution concerned shall adopt either a reasoned decision terminating the proceedings or a reasoned decision in accordance with Articles 22 and 86 of and Annex IX to the Staff Regulations. Decisions imposing disciplinary measures or financial penalties shall be notified to the interested party and communicated, for information purposes, to other Union institutions and the Court of Auditors. The interested party may bring an action in respect of such decisions before the Court of Justice of the European Union, as provided for in the Staff Regulations.
Article 122 Action before the Court of Justice of the European Union
Without prejudice to the remedies allowed by the Staff Regulations, the internal auditor may bring an action directly before the Court of Justice of the European Union in respect of any act relating to the performance of his or her duties as internal auditor. He or she shall lodge such an action within three months running from the calendar day on which the act in question came to his or her knowledge Such actions shall be investigated and heard in accordance with Article 91(5) of the Staff Regulations.
Article 123 Internal audit progress committees
1. Each Union institution shall establish an internal audit progress committee tasked with ensuring the independence of the internal auditor, monitoring the quality of the internal audit work and ensuring that internal and external audit recommendations are properly taken into account and followed up by its services. 2. The composition of the internal audit progress committee shall be decided by each Union institution taking into account its organisational autonomy and the importance of independent expert advice.
Article 124 Scope
With the exception of Article 138, references in this Title to legal commitments shall be construed as references to legal commitments, framework contracts and financial framework partnership agreements.
Article 125 Forms of Union contribution
1. Union contributions under direct, shared and indirect management shall help achieve a Union policy objective and the results specified and may take any of the following forms: (a) financing not linked to the costs of the relevant operations based on: (i) the fulfilment of conditions set out in sector-specific rules or Commission decisions; or (ii) the achievement of results measured by reference to previously set milestones or through performance indicators; (b) reimbursement of eligible costs actually incurred; (c) unit costs, which cover all or certain specific categories of eligible costs which are clearly identified in advance by reference to an amount per unit; (d) lump sums, which cover in global terms all or certain specific categories of eligible costs which are clearly identified in advance; (e) flat-rate financing, which covers specific categories of eligible costs, which are clearly identified in advance, by applying a percentage; (f) a combination of the forms referred to in points (a) to (e). Union contributions under point (a) of the first subparagraph of this paragraph shall, in direct and indirect management, be established in accordance with Article 181, sector-specific rules or a Commission decision and, in shared management, in accordance with sector-specific rules. Union contributions under points (c), (d) and (e) of the first subparagraph of this paragraph shall, in direct and indirect management, be established in accordance with Article 181 or sector-specific rules and, in shared management, in accordance with sector-specific rules. 2. When determining the appropriate form of a contribution, the potential recipients’ interests and accounting methods shall be taken into account to the greatest extent possible. 3. The authorising officer responsible shall report on financing not linked to costs pursuant to points (a) and (f) of the first subparagraph of paragraph 1 of this Article in the annual activity report referred to in Article 74(9).
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 125 Forms of Union contribution):
1. Union contributions under direct, shared and indirect management shall help achieve a Union policy objective and the results specified and may take any of the following forms: financing not linked to the costs of the relevant operations based on: (i) the fulfilment of conditions set out in sector-specific rules or Commission decisions; or (ii) the achievement of results measured by reference to previously set milestones or through performance indicators; financing not linked to the costs of the relevant operations based on: (i) the fulfilment of conditions set out in sector-specific rules or Commission decisions; or (ii) the achievement of results measured by reference to previously set milestones or through performance indicators; (b) reimbursement of eligible costs actually incurred; (c) unit costs, which cover all or certain specific categories of eligible costs which are clearly identified in advance by reference to an amount per unit; (d) lump sums, which cover in global terms all or certain specific categories of eligible costs which are clearly identified in advance; (e) flat-rate financing, which covers specific categories of eligible costs, which are clearly identified in advance, by applying a percentage; (f) a combination of the forms referred to in points (a) to (e). Union contributions under point (a) of the first subparagraph of this paragraph shall, in direct and indirect management, be established in accordance with Article 181, sector-specific rules or a Commission decision and, in shared management, in accordance with sector-specific rules. Union contributions under points (c), (d) and (e) of the first subparagraph of this paragraph shall, in direct and indirect management, be established in accordance with Article 181 or sector-specific rules and, in shared management, in accordance with sector-specific rules. 2. When determining the appropriate form of a contribution, the potential recipients’ interests and accounting methods shall be taken into account to the greatest extent possible. 3. The authorising officer responsible shall report on financing not linked to costs pursuant to points (a) and (f) of the first subparagraph of paragraph 1 of this Article in the annual activity report referred to in Article 74(9).
Article 126 Cross-reliance on assessments
The Commission may rely in full or in part on assessments made by itself or other entities, including donors, insofar as such assessments were made on the compliance with conditions equivalent to those set out in this Regulation for the applicable method of implementation. To that end, the Commission shall promote the recognition of internationally accepted standards or international best practices.
Article 127 Cross-reliance on audits
Without prejudice to existing possibilities for carrying out further audits, where an audit based on internationally accepted audit standards providing reasonable assurance has been conducted by an independent auditor on the financial statements and reports setting out the use of a Union contribution, that audit shall form the basis of the overall assurance, as further specified, where appropriate, in sector-specific rules, provided that there is sufficient evidence of the independence and competence of the auditor. To that end, the report of the independent auditor and the related audit documentation shall be made available on request to the European Parliament, the Commission, the Court of Auditors and the audit authorities of Member States.
Article 128 Use of already available information
In order to avoid asking persons and entities receiving Union funds for the same information more than once, information already available at Union institutions, managing authorities or other bodies and entities implementing the budget shall be used to the extent possible.
Article 129 Cooperation for protection of the financial interests of the Union
1. Any person or entity receiving Union funds shall fully cooperate in the protection of the financial interests of the Union and shall, as a condition for receiving the funds, grant the necessary rights and access required for the authorising officer responsible, for EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, for OLAF, for the Court of Auditors, and, where appropriate, for the relevant national authorities, to comprehensively exert their respective competences. In the case of OLAF, such rights shall include the right to carry out investigations, including on-the-spot checks and inspections, in accordance with Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council ( 43 ) . 2. Any person or entity receiving Union funds under direct and indirect management shall agree in writing to grant the necessary rights as referred to in paragraph 1 and shall ensure that any third parties involved in the implementation of Union funds grant equivalent rights.
Article 130 Financial framework partnerships
1. The Commission may establish financial framework partnership agreements for a long-term cooperation with persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or with beneficiaries. Without prejudice to point (c) of paragraph 4 of this Article, financial framework partnership agreements shall be reviewed at least once during the term of every multiannual financial framework. Contribution agreements or grant agreements may be signed under such agreements. 2. The purpose of a financial framework partnership agreement shall be to facilitate the achievement of policy objectives of the Union by stabilising the contractual terms of the cooperation. The financial framework partnership agreement shall specify the forms of financial cooperation and shall include an obligation to set out, in the specific agreements signed under the financial framework partnership agreement, arrangements for monitoring the achievement of specific objectives. Those agreements shall also, on the basis of the results of an ex ante assessment, indicate whether the Commission may rely on the systems and the procedures of the persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or of beneficiaries, including audit procedures. 3. With a view to optimising costs and benefits of audits and facilitate coordination, audit or verification agreements may be concluded with persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or with beneficiaries. Such agreements shall be without prejudice to Articles 127 and 129. 4. In the case of financial framework partnerships implemented through specific grants: (a) the financial framework partnership agreement shall, in addition to paragraph 2, specify: (i) the nature of the actions or work programmes foreseen; (ii) the procedure for awarding specific grants, in compliance with the principles and procedural rules in Title VIII; (b) the financial framework partnership agreement and the specific grant agreement taken as a whole shall comply with the requirements of Article 201; (c) the duration of the financial framework partnership shall not exceed four years save in duly justified cases which are clearly indicated in the annual activity report referred to in Article 74(9); (d) the financial framework partnership shall be implemented in compliance with the principles of transparency and equal treatment of applicants; (e) the financial framework partnership shall be treated as a grant with regard to programming, ex ante publication and award; (f) specific grants based on the financial framework partnership shall be subject to the ex post publication procedures set out in Article 38. 5. A financial framework partnership agreement implemented through specific grants may provide for the reliance on the systems and the procedures of the beneficiary in accordance with paragraph 2 of this Article, where those systems and procedures have been assessed in accordance with Article 154(2), (3) and (4). In such a case, point (d) of Article 196(1) shall not apply. Where the procedures of the beneficiary for providing financing to third parties referred to in point (d) of the first subparagraph of Article 154(4) were positively assessed by the Commission, Articles 204 and 205 shall not apply. 6. In the case of financial framework partnership agreement implemented through specific grants the verification of the financial and operational capacity referred to in Article 198 shall be performed before signature of the financial framework partnership agreement. The Commission may rely on an equivalent verification of the financial and operational capacity carried out by other donors. 7. In the case of financial framework partnerships implemented through contribution agreements, the financial framework partnership agreement and the contribution agreement taken as a whole shall comply with Article 129 and Article 155(6).
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 130 Financial framework partnerships):
2. The purpose of a financial framework partnership agreement shall be to facilitate the achievement of policy objectives of the Union by stabilising the contractual terms of the cooperation. The financial framework partnership agreement shall specify the forms of financial cooperation and shall include an obligation to set out, in the specific agreements signed under the financial framework partnership agreement, arrangements for monitoring the achievement of specific objectives. Those agreements shall also, on the basis of the results of an ex ante assessment, indicate whether the Commission may rely on the systems and the procedures of the persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or of beneficiaries, including audit procedures. 3. With a view to optimising costs and benefits of audits and facilitate coordination, audit or verification agreements may be concluded with persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or with beneficiaries. Such agreements shall be without prejudice to Articles 127 and 129. In the case of financial framework partnerships implemented through specific grants: the financial framework partnership agreement shall, in addition to paragraph 2, specify: (i) the nature of the actions or work programmes foreseen; (ii) the procedure for awarding specific grants, in compliance with the principles and procedural rules in Title VIII; the financial framework partnership agreement shall, in addition to paragraph 2, specify: (i) the nature of the actions or work programmes foreseen; (ii) the procedure for awarding specific grants, in compliance with the principles and procedural rules in Title VIII; (b) the financial framework partnership agreement and the specific grant agreement taken as a whole shall comply with the requirements of Article 201; (c) the duration of the financial framework partnership shall not exceed four years save in duly justified cases which are clearly indicated in the annual activity report referred to in Article 74(9); (d) the financial framework partnership shall be implemented in compliance with the principles of transparency and equal treatment of applicants; (e) the financial framework partnership shall be treated as a grant with regard to programming, ex ante publication and award; (f) specific grants based on the financial framework partnership shall be subject to the ex post publication procedures set out in Article 38. 5. A financial framework partnership agreement implemented through specific grants may provide for the reliance on the systems and the procedures of the beneficiary in accordance with paragraph 2 of this Article, where those systems and procedures have been assessed in accordance with Article 154(2), (3) and (4). In such a case, point (d) of Article 196(1) shall not apply. Where the procedures of the beneficiary for providing financing to third parties referred to in point (d) of the first subparagraph of Article 154(4) were positively assessed by the Commission, Articles 204 and 205 shall not apply. 6. In the case of financial framework partnership agreement implemented through specific grants the verification of the financial and operational capacity referred to in Article 198 shall be performed before signature of the financial framework partnership agreement. The Commission may rely on an equivalent verification of the financial and operational capacity carried out by other donors. 7. In the case of financial framework partnerships implemented through contribution agreements, the financial framework partnership agreement and the contribution agreement taken as a whole shall comply with Article 129 and Article 155(6).
Article 131 Suspension, termination and reduction
1. Where an award procedure has been subject to irregularities or fraud, the authorising officer responsible shall suspend the procedure and may take any necessary measures, including the cancellation of the procedure. The authorising officer responsible shall inform OLAF immediately of suspected cases of fraud. 2. Where, after the award, the award procedure proves to have been subject to irregularities or fraud, the authorising officer responsible may: (a) refuse to enter into the legal commitment or cancel the award of a prize; (b) suspend payments; (c) suspend the implementation of the legal commitment; (d) where appropriate, terminate the legal commitment in whole or with regard to one or more recipients. 3. The authorising officer responsible may suspend payments or the implementation of the legal commitment where: (a) the implementation of the legal commitment proves to have been subject to irregularities, fraud or breach of obligations; (b) it is necessary to verify whether presumed irregularities, fraud or breach of obligations have actually occurred; (c) irregularities, fraud or breach of obligations call into question the reliability or effectiveness of the internal control systems of a person or entity implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or the legality and regularity of the underlying transactions. Where the presumed irregularities, fraud or breach of obligations referred to in point (b) of the first subparagraph are not confirmed, the implementation or payments shall resume as soon as possible. The authorising officer responsible may terminate the legal commitment in whole or with regard to one or more recipients in the cases referred to in points (a) and (c) of the first subparagraph. 4. In addition to measures referred to in paragraph 2 or 3, the authorising officer responsible may reduce the grant, the prize, the contribution under the contribution agreement or the price due under a contract in proportion to the seriousness of the irregularities, fraud or of the breach of obligations, including where the activities concerned were not implemented or were implemented poorly, partially or late. In the case of financing referred to in point (a) of the first subparagraph of Article 125(1) the authorising officer responsible may reduce the contribution proportionally if the results have been achieved poorly, partially or late or the conditions have not been fulfilled. 5. Points (b), (c) and (d) of paragraph 2 and paragraph 3 shall not apply to applicants in a contest for prizes.
Article 132 Record-keeping
1. Recipients shall keep records and supporting documents, including statistical records and other records pertaining to the funding, as well as records and documents in an electronic format, for five years following the payment of the balance or, in the absence of such payment, the transaction. This period shall be three years where the funding is of an amount lower than or equal to EUR 60 000. 2. Records and documents pertaining to audits, appeals, litigation, the pursuit of claims relating to legal commitments or pertaining to OLAF investigations shall be retained until such audits, appeals, litigation, pursuit of claims or investigations have been closed. For records and documents pertaining to OLAF investigations, the obligation to retain shall apply once those investigations have been notified to the recipient. 3. Records and documents shall be kept either in the form of the originals, or certified true copies of the originals, or on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only. Where electronic versions exist, no originals shall be required where such documents meet the applicable legal requirements in order to be considered as equivalent to originals and to be relied on for audit purposes.
Article 133 Adversarial procedure and means of redress
1. Before adopting any measure adversely affecting the rights of a participant or a recipient the authorising officer responsible shall ensure that the participant or the recipient has been given the opportunity to submit observations. 2. Where a measure of an authorising officer adversely affects the rights of a participant or a recipient, the act establishing that measure shall contain an indication of the available means of administrative and/or judicial redress for challenging it.
Article 134 Interest rate rebates and guarantee fee subsidies
1. Interest rate rebates and guarantee fee subsidies shall be provided in accordance with Title X where they are combined in a single measure with financial instruments. 2. Where interest rate rebates and guarantee fee subsidies are not combined in a single measure with financial instruments they may be provided in accordance with Title VI or VIII.
Article 135 Protection of the financial interests of the Union by means of detection of risks, exclusion and imposition of financial penalties
1. In order to protect the financial interests of the Union, the Commission shall set up and operate an early-detection and exclusion system. The purpose of such a system shall be to facilitate: (a) the early detection of persons or entities referred to in paragraph 2, which pose a risk to the financial interests of the Union; (b) the exclusion of persons or entities referred to in paragraph 2, which are in one of the exclusion situations referred to in Article 136(1); (c) the imposition of a financial penalty on a recipient pursuant to Article 138. 2. The early-detection and exclusion system shall apply to: (a) participants and recipients; (b) entities on whose capacity the candidate or tenderer intends to rely or subcontractors of a contractor; (c) any person or entity receiving Union funds where the budget is implemented pursuant to point (c) of the first subparagraph of Article 62(1) and to Article 154(4) on the basis of information notified in accordance with Article 155(6); (d) any person or entity receiving Union funds under financial instruments exceptionally implemented in accordance with point (a) of the first subparagraph of Article 62(1); (e) participants or recipients on which entities implementing the budget in accordance with Article 63 have provided information, as transmitted by Member States in accordance with sector-specific rules, in accordance with point (d) of Article 142(2); (f) sponsors as referred to in Article 26. 3. The decision to register information concerning an early detection of the risks referred to in point (a) of the second subparagraph of paragraph 1 of this Article, to exclude persons or entities referred to in paragraph 2 and/or to impose a financial penalty on a recipient shall be taken by the authorising officer responsible. Information related to such decisions shall be registered in the database referred to in Article 142(1). Where such decisions are taken on the basis of Article 136(4), the information registered in the database shall include the information concerning the persons referred to in that paragraph. 4. The decision to exclude persons or entities referred to in paragraph 2 of this Article or to impose financial penalties on a recipient shall be based on a final judgment or, in the exclusion situations referred to in Article 136(1), on a final administrative decision, or on a preliminary classification in law by the panel referred to in Article 143 in the situations referred to in Article 136(2) in order to ensure a centralised assessment of those situations. In the cases referred to in Article 141(1), the authorising officer responsible shall reject a participant from a given award procedure. Without prejudice to Article 136(5), the authorising officer responsible may take a decision to exclude a participant or recipient and/or to impose a financial penalty on a recipient and a decision to publish the related information, on the basis of a preliminary classification as referred to in Article 136(2), only after having obtained a recommendation of the panel referred to in Article 143.
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 135 Protection of the financial interests of the Union by means of detection of risks, exclusion and imposition of financial penalties):
1. In order to protect the financial interests of the Union, the Commission shall set up and operate an early-detection and exclusion system. The purpose of such a system shall be to facilitate: (a) the early detection of persons or entities referred to in paragraph 2, which pose a risk to the financial interests of the Union; (b) the exclusion of persons or entities referred to in paragraph 2, which are in one of the exclusion situations referred to in Article 136(1); (c) the imposition of a financial penalty on a recipient pursuant to Article 138. The early-detection and exclusion system shall apply to: (a) participants and recipients; (b) entities on whose capacity the candidate or tenderer intends to rely or subcontractors of a contractor; any person or entity receiving Union funds under financial instruments exceptionally implemented in accordance with point (a) of the first subparagraph of Article 62(1); participants or recipients on which entities implementing the budget in accordance with Article 63 have provided information, as transmitted by Member States in accordance with sector-specific rules, in accordance with point (d) of Article 142(2); (f) sponsors as referred to in Article 26. 3. The decision to register information concerning an early detection of the risks referred to in point (a) of the second subparagraph of paragraph 1 of this Article, to exclude persons or entities referred to in paragraph 2 and/or to impose a financial penalty on a recipient shall be taken by the authorising officer responsible. Information related to such decisions shall be registered in the database referred to in Article 142(1). Where such decisions are taken on the basis of Article 136(4), the information registered in the database shall include the information concerning the persons referred to in that paragraph. 4. The decision to exclude persons or entities referred to in paragraph 2 of this Article or to impose financial penalties on a recipient shall be based on a final judgment or, in the exclusion situations referred to in Article 136(1), on a final administrative decision, or on a preliminary classification in law by the panel referred to in Article 143 in the situations referred to in Article 136(2) in order to ensure a centralised assessment of those situations. In the cases referred to in Article 141(1), the authorising officer responsible shall reject a participant from a given award procedure. Without prejudice to Article 136(5), the authorising officer responsible may take a decision to exclude a participant or recipient and/or to impose a financial penalty on a recipient and a decision to publish the related information, on the basis of a preliminary classification as referred to in Article 136(2), only after having obtained a recommendation of the panel referred to in Article 143.
Article 136 Exclusion criteria and decisions on exclusions
1. The authorising officer responsible shall exclude a person or entity referred to in Article 135(2) from participating in award procedures governed by this Regulation or from being selected for implementing Union funds where that person or entity is in one or more of the following exclusion situations: (a) the person or entity is bankrupt, subject to insolvency or winding-up procedures, its assets are being administered by a liquidator or by a court, it is in an arrangement with creditors, its business activities are suspended, or it is in any analogous situation arising from a similar procedure provided for under Union or national law; (b) it has been established by a final judgment or a final administrative decision that the person or entity is in breach of its obligations relating to the payment of taxes or social security contributions in accordance with the applicable law; (c) it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct by having violated applicable laws or regulations or ethical standards of the profession to which the person or entity belongs, or by having engaged in any wrongful conduct which has an impact on its professional credibility where such conduct denotes wrongful intent or gross negligence, including, in particular, any of the following: (i) fraudulently or negligently misrepresenting information required for the verification of the absence of grounds for exclusion or the fulfilment of eligibility or selection criteria or in the implementation of the legal commitment; (ii) entering into agreement with other persons or entities with the aim of distorting competition; (iii) violating intellectual property rights; (iv) attempting to influence the decision-making of the authorising officer responsible during the award procedure; (v) attempting to obtain confidential information that may confer upon it undue advantages in the award procedure; (d) it has been established by a final judgment that the person or entity is guilty of any of the following: (i) fraud, within the meaning of Article 3 of Directive (EU) 2017/1371 of the European Parliament and of the Council ( 44 ) and Article 1 of the Convention on the protection of the European Communities’ financial interests, drawn up by the Council Act of 26 July 1995 ( 45 ) ; (ii) corruption, as defined in Article 4(2) of Directive (EU) 2017/1371 or active corruption within the meaning of Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, drawn up by the Council Act of 26 May 1997 ( 46 ) , or conduct referred to in Article 2(1) of Council Framework Decision 2003/568/JHA ( 47 ) , or corruption as defined in other applicable laws; (iii) conduct related to a criminal organisation as referred to in Article 2 of Council Framework Decision 2008/841/JHA ( 48 ) ; (iv) money laundering or terrorist financing within the meaning of Article 1(3), (4) and (5) of Directive (EU) 2015/849 of the European Parliament and of the Council ( 49 ) ; (v) terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA ( 50 ) , respectively, or inciting, aiding, abetting or attempting to commit such offences, as referred to in Article 4 of that Decision; (vi) child labour or other offences concerning trafficking in human beings as referred to in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council ( 51 ) ; (e) the person or entity has shown significant deficiencies in complying with main obligations in the implementation of a legal commitment financed by the budget which has: (i) led to the early termination of a legal commitment; (ii) led to the application of liquidated damages or other contractual penalties; or (iii) been discovered by an authorising officer, OLAF or the Court of Auditors following checks, audits or investigations; (f) it has been established by a final judgment or final administrative decision that the person or entity has committed an irregularity within the meaning of Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 ( 52 ) ; (g) it has been established by a final judgment or final administrative decision that the person or entity has created an entity in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations in the jurisdiction of its registered office, central administration or principal place of business; (h) it has been established by a final judgment or final administrative decision that an entity has been created with the intent referred to in point (g). 2. In the absence of a final judgment or, where applicable, a final administrative decision in the cases referred to in points (c), (d), (f), (g) and (h) of paragraph 1 of this Article, or in the case referred to in point (e) of paragraph 1 of this Article, the authorising officer responsible shall exclude a person or entity referred to in Article 135(2) on the basis of a preliminary classification in law of a conduct as referred to in those points, having regard to established facts or other findings contained in the recommendation of the panel referred to in Article 143. The preliminary classification referred to in the first subparagraph of this paragraph does not prejudge the assessment of the conduct of the person or entity referred to in Article 135(2) concerned by the competent authorities of Member States under national law. The authorising officer responsible shall review his or her decision to exclude the person or entity referred to in Article 135(2) and/or to impose a financial penalty on a recipient without delay following the notification of a final judgment or a final administrative decision. In cases where the final judgment or the final administrative decision does not set the duration of the exclusion, the authorising officer responsible shall set that duration on the basis of established facts and findings and having regard to the recommendation of the panel referred to in Article 143. Where such final judgment or final administrative decision holds that the person or entity referred to in Article 135(2) is not guilty of the conduct subject to a preliminary classification in law, on the basis of which that person or entity has been excluded, the authorising officer responsible shall, without delay, bring an end to that exclusion and/or reimburse, as appropriate, any financial penalty imposed. The facts and findings referred to in the first subparagraph shall include, in particular: (a) facts established in the context of audits or investigations carried out by EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, the Court of Auditors, OLAF or the internal auditor, or any other check, audit or control performed under the responsibility of the authorising officer; (b) non-final administrative decisions which may include disciplinary measures taken by the competent supervisory body responsible for the verification of the application of standards of professional ethics; (c) facts referred to in decisions of persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1); (d) information transmitted in accordance with point (d) of Article 142(2) by entities implementing Union funds pursuant to point (b) of the first subparagraph of Article 62(1); (e) decisions of the Commission relating to the infringement of Union competition law or of a national competent authority relating to the infringement of Union or national competition law. 3. Any decision of the authorising officer responsible taken under Articles 135 to 142 or, where applicable, any recommendation of the panel referred to in Article 143, shall be made in compliance with the principle of proportionality, in particular taking into account: (a) the seriousness of the situation, including the impact on the financial interests and image of the Union; (b) the time which has elapsed since the relevant conduct; (c) the duration of the conduct and its recurrence; (d) whether the conduct was intentional or the degree of negligence shown; (e) in the cases referred to in point (b) of paragraph 1, whether a limited amount is at stake; (f) any other mitigating circumstances, such as: (i) the degree of collaboration of the person or entity referred to in Article 135(2) concerned with the relevant competent authority and the contribution of that person or entity to the investigation as recognised by the authorising officer responsible; or (ii) the disclosure of the exclusion situation by means of a declaration as referred to in Article 137(1). 4. The authorising officer responsible shall exclude a person or entity referred to in Article 135(2) where: (a) a natural or legal person who is a member of the administrative, management or supervisory body of the person or entity referred to in Article 135(2), or who has powers of representation, decision or control with regard to that person or entity, is in one or more of the situations referred to in points (c) to (h) of paragraph 1 of this Article; (b) a natural or legal person that assumes unlimited liability for the debts of the person or entity referred to in Article 135(2) is in one or more of the situations referred to in point (a) or (b) of paragraph 1 of this Article; (c) a natural person who is essential for the award or for the implementation of the legal commitment is in one or more of the situations referred to in points (c) to (h) of paragraph 1. 5. In the cases referred to in paragraph 2 of this Article, the authorising officer responsible may exclude a person or entity referred to in Article 135(2) provisionally without the prior recommendation of the panel referred to in Article 143, where their participation in an award procedure or their selection for implementing Union funds would constitute a serious and imminent threat to the financial interests of the Union. In such cases, the authorising officer responsible shall immediately refer the case to the panel referred to in Article 143 and shall take a final decision no later than 14 days after having received the recommendation of the panel. 6. The authorising officer responsible, having regard, where applicable, to the recommendation of the panel referred to in Article 143, shall not exclude a person or entity referred to in Article 135(2) from participating in an award procedure or from being selected for implementing Union funds where: (a) the person or entity has taken remedial measures as specified in paragraph 7 of this Article, to an extent that is sufficient to demonstrate its reliability. This point shall not apply in the case referred to in point (d) of paragraph 1 of this Article; (b) it is indispensable to ensure the continuity of service, for a limited duration and pending the adoption of remedial measures specified in paragraph 7 of this Article; (c) such an exclusion would be disproportionate on the basis of the criteria referred to in paragraph 3 of this Article. In addition, point (a) of paragraph 1 of this Article shall not apply in the case of the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities or the liquidators in an insolvency procedure, an arrangement with creditors, or a similar procedure under Union or national law. In the cases of non-exclusion referred to in the first and second subparagraphs of this paragraph, the authorising officer responsible shall specify the reasons for not excluding the person or entity referred to in Article 135(2) and inform the panel referred to in Article 143 of those reasons. 7. The remedial measures referred to in point (a) of the first subparagraph of paragraph 6 shall include, in particular: (a) measures to identify the origin of the situations giving rise to exclusion and concrete technical, organisational and personnel measures within the relevant business or activity area of the person or entity referred to in Article 135(2), appropriate to correct the conduct and prevent its further occurrence; (b) proof that the person or entity referred to in Article 135(2) has undertaken measures to compensate or redress the damage or harm caused to the financial interests of the Union by the underlying facts giving rise to the exclusion situation; (c) proof that the person or entity referred to in Article 135(2) has paid or secured the payment of any fine imposed by the competent authority or of any taxes or social security contributions referred to in point (b) of paragraph 1 of this Article. 8. The authorising officer responsible, having regard, where applicable, to the revised recommendation of the panel referred to in Article 143, shall, without delay, revise its decision to exclude a person or entity referred to in Article 135(2) ex officio or on request from that person or entity, where the latter has taken remedial measures sufficient to demonstrate its reliability or has provided new elements demonstrating that the exclusion situation referred to in paragraph 1 of this Article no longer exists. 9. In the case referred to in point (b) of Article 135(2), the authorising officer responsible shall require that the candidate or tenderer replaces an entity or a subcontractor on whose capacity it intends to rely, which is in an exclusion situation referred to in paragraph 1 of this Article.
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 136 Exclusion criteria and decisions on exclusions):
The authorising officer responsible shall exclude a person or entity referred to in Article 135(2) from participating in award procedures governed by this Regulation or from being selected for implementing Union funds where that person or entity is in one or more of the following exclusion situations: (a) the person or entity is bankrupt, subject to insolvency or winding-up procedures, its assets are being administered by a liquidator or by a court, it is in an arrangement with creditors, its business activities are suspended, or it is in any analogous situation arising from a similar procedure provided for under Union or national law; (b) it has been established by a final judgment or a final administrative decision that the person or entity is in breach of its obligations relating to the payment of taxes or social security contributions in accordance with the applicable law; it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct by having violated applicable laws or regulations or ethical standards of the profession to which the person or entity belongs, or by having engaged in any wrongful conduct which has an impact on its professional credibility where such conduct denotes wrongful intent or gross negligence, including, in particular, any of the following: (i) fraudulently or negligently misrepresenting information required for the verification of the absence of grounds for exclusion or the fulfilment of eligibility or selection criteria or in the implementation of the legal commitment; (ii) entering into agreement with other persons or entities with the aim of distorting competition; (iii) violating intellectual property rights; (iv) attempting to influence the decision-making of the authorising officer responsible during the award procedure; (v) attempting to obtain confidential information that may confer upon it undue advantages in the award procedure; it has been established by a final judgment that the person or entity is guilty of any of the following: (i) fraud, within the meaning of Article 3 of Directive (EU) 2017/1371 of the European Parliament and of the Council ( 13 ) and Article 1 of the Convention on the protection of the European Communities’ financial interests, drawn up by the Council Act of 26 July 1995 ( 14 ); (iii) conduct related to a criminal organisation as referred to in Article 2 of Council Framework Decision 2008/841/JHA ( 17 ); (v) terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA ( 19 ), respectively, or inciting, aiding, abetting or attempting to commit such offences, as referred to in Article 4 of that Decision; (vi) child labour or other offences concerning trafficking in human beings as referred to in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council ( 20 ); the person or entity has shown significant deficiencies in complying with main obligations in the implementation of a legal commitment financed by the budget which has: (i) led to the early termination of a legal commitment; (ii) led to the application of liquidated damages or other contractual penalties; or (iii) been discovered by an authorising officer, OLAF or the Court of Auditors following checks, audits or investigations; (f) it has been established by a final judgment or final administrative decision that the person or entity has committed an irregularity within the meaning of Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 ( 21 ); (g) it has been established by a final judgment or final administrative decision that the person or entity has created an entity in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations in the jurisdiction of its registered office, central administration or principal place of business; (h) it has been established by a final judgment or final administrative decision that an entity has been created with the intent referred to in point (g). The preliminary classification referred to in the first subparagraph of this paragraph does not prejudge the assessment of the conduct of the person or entity referred to in Article 135(2) concerned by the competent authorities of Member States under national law. The authorising officer responsible shall review his or her decision to exclude the person or entity referred to in Article 135(2) and/or to impose a financial penalty on a recipient without delay following the notification of a final judgment or a final administrative decision. In cases where the final judgment or the final administrative decision does not set the duration of the exclusion, the authorising officer responsible shall set that duration on the basis of established facts and findings and having regard to the recommendation of the panel referred to in Article 143. Where such final judgment or final administrative decision holds that the person or entity referred to in Article 135(2) is not guilty of the conduct subject to a preliminary classification in law, on the basis of which that person or entity has been excluded, the authorising officer responsible shall, without delay, bring an end to that exclusion and/or reimburse, as appropriate, any financial penalty imposed. The facts and findings referred to in the first subparagraph shall include, in particular: (a) facts established in the context of audits or investigations carried out by EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, the Court of Auditors, OLAF or the internal auditor, or any other check, audit or control performed under the responsibility of the authorising officer; (b) non-final administrative decisions which may include disciplinary measures taken by the competent supervisory body responsible for the verification of the application of standards of professional ethics; facts referred to in decisions of persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1); (e) decisions of the Commission relating to the infringement of Union competition law or of a national competent authority relating to the infringement of Union or national competition law. Any decision of the authorising officer responsible taken under Articles 135 to 142 or, where applicable, any recommendation of the panel referred to in Article 143, shall be made in compliance with the principle of proportionality, in particular taking into account: (a) the seriousness of the situation, including the impact on the financial interests and image of the Union; (b) the time which has elapsed since the relevant conduct; (c) the duration of the conduct and its recurrence; (d) whether the conduct was intentional or the degree of negligence shown; (e) in the cases referred to in point (b) of paragraph 1, whether a limited amount is at stake; any other mitigating circumstances, such as: (i) the degree of collaboration of the person or entity referred to in Article 135(2) concerned with the relevant competent authority and the contribution of that person or entity to the investigation as recognised by the authorising officer responsible; or (ii) the disclosure of the exclusion situation by means of a declaration as referred to in Article 137(1). The authorising officer responsible shall exclude a person or entity referred to in Article 135(2) where: a natural person who is essential for the award or for the implementation of the legal commitment is in one or more of the situations referred to in points (c) to (h) of paragraph 1. 5. In the cases referred to in paragraph 2 of this Article, the authorising officer responsible may exclude a person or entity referred to in Article 135(2) provisionally without the prior recommendation of the panel referred to in Article 143, where their participation in an award procedure or their selection for implementing Union funds would constitute a serious and imminent threat to the financial interests of the Union. In such cases, the authorising officer responsible shall immediately refer the case to the panel referred to in Article 143 and shall take a final decision no later than 14 days after having received the recommendation of the panel. The authorising officer responsible, having regard, where applicable, to the recommendation of the panel referred to in Article 143, shall not exclude a person or entity referred to in Article 135(2) from participating in an award procedure or from being selected for implementing Union funds where: (a) the person or entity has taken remedial measures as specified in paragraph 7 of this Article, to an extent that is sufficient to demonstrate its reliability. This point shall not apply in the case referred to in point (d) of paragraph 1 of this Article; (b) it is indispensable to ensure the continuity of service, for a limited duration and pending the adoption of remedial measures specified in paragraph 7 of this Article; (c) such an exclusion would be disproportionate on the basis of the criteria referred to in paragraph 3 of this Article. In addition, point (a) of paragraph 1 of this Article shall not apply in the case of the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities or the liquidators in an insolvency procedure, an arrangement with creditors, or a similar procedure under Union or national law. In the cases of non-exclusion referred to in the first and second subparagraphs of this paragraph, the authorising officer responsible shall specify the reasons for not excluding the person or entity referred to in Article 135(2) and inform the panel referred to in Article 143 of those reasons. The remedial measures referred to in point (a) of the first subparagraph of paragraph 6 shall include, in particular: (a) measures to identify the origin of the situations giving rise to exclusion and concrete technical, organisational and personnel measures within the relevant business or activity area of the person or entity referred to in Article 135(2), appropriate to correct the conduct and prevent its further occurrence; (b) proof that the person or entity referred to in Article 135(2) has undertaken measures to compensate or redress the damage or harm caused to the financial interests of the Union by the underlying facts giving rise to the exclusion situation; (c) proof that the person or entity referred to in Article 135(2) has paid or secured the payment of any fine imposed by the competent authority or of any taxes or social security contributions referred to in point (b) of paragraph 1 of this Article. 8. The authorising officer responsible, having regard, where applicable, to the revised recommendation of the panel referred to in Article 143, shall, without delay, revise its decision to exclude a person or entity referred to in Article 135(2) ex officio or on request from that person or entity, where the latter has taken remedial measures sufficient to demonstrate its reliability or has provided new elements demonstrating that the exclusion situation referred to in paragraph 1 of this Article no longer exists. 9. In the case referred to in point (b) of Article 135(2), the authorising officer responsible shall require that the candidate or tenderer replaces an entity or a subcontractor on whose capacity it intends to rely, which is in an exclusion situation referred to in paragraph 1 of this Article.
Article 137 Declaration and evidence of absence of an exclusion situation
1. A participant shall declare whether it is in one of the situations referred to in Articles 136(1) and 141(1), and, where applicable, whether it has taken any remedial measures referred to in point (a) of the first subparagraph of Article 136(6). A participant shall also declare whether the following persons or entities are in one of the exclusion situations referred to in points (c) to (h) of Article 136(1): (a) natural or legal persons that are members of the administrative, management or supervisory body of the participant or that have powers of representation, decision or control with regard to that participant; (b) beneficial owners, as defined in point (6) of Article 3 of Directive (EU) 2015/849, of the participant. The participant or the recipient shall without delay inform the authorising officer responsible of any changes in the situations as declared. Where appropriate, the candidate or tenderer shall provide the same declarations referred to in the first and second subparagraphs signed by a subcontractor or by any other entity on whose capacity it intends to rely, as the case may be. The authorising officer responsible shall not request the declarations referred to in the first and second subparagraph when such declarations have already been submitted for the purposes of another award procedure, provided that the situation has not changed, and that the time that has elapsed since the issuing date of the declarations does not exceed one year. The authorising officer responsible may waive the requirements under the first and second subparagraphs for very low value contracts the value of which does not exceed the amount referred to in point 14.4 of Annex I. 2. Whenever requested by the authorising officer responsible and where this is necessary to ensure the proper conduct of the procedure, the participant, the subcontractor or the entity on whose capacity a candidate or tenderer intends to rely shall provide: (a) appropriate evidence that it is not in one of the exclusion situations referred to in Article 136(1); (b) information on natural or legal persons that are members of the administrative, management or supervisory body of the participant or that have powers of representation, decision or control with regard to that participant, including persons and entities within the ownership and control structure and beneficial owners, and appropriate evidence that none of those persons are in one of the exclusion situations referred to in points (c) to (f) of Article 136(1). (c) appropriate evidence that natural or legal persons that assume unlimited liability for the debts of that participant are not in an exclusion situation referred to in point (a) or (b) of Article 136(1). 3. Where applicable and in accordance with national law, the authorising officer responsible may accept as appropriate evidence that a participant or an entity referred to in paragraph 2 is not in one of the exclusion situations referred to in points (a), (c), (d), (f), (g) and (h) of Article 136(1), a recent extract from the judicial record or, failing that, an equivalent document recently issued by a judicial or administrative authority in its country of establishment showing that those requirements are satisfied. The authorising officer responsible may accept as appropriate evidence that a participant or an entity referred to in paragraph 2 is not in one of the exclusion situations referred to in points (a) and (b) of Article 136(1), a recent certificate issued by the competent authority of the country of establishment. Where such types of certificates are not issued in the country of establishment, the participant may provide a sworn statement made before a judicial authority or notary or, failing that, a solemn statement made before an administrative authority or a qualified professional body in its country of establishment. 4. The authorising officer responsible shall waive the obligation of a participant or an entity referred to in paragraph 2 to submit the documentary evidence referred to in paragraphs 2 and 3: (a) if he or she can access such evidence on a national database free of charge; (b) if such evidence has already been submitted for the purposes of another procedure and provided that any submitted documents are still valid and that the time that has elapsed since the issuing date of the documents does not exceed one year; (c) if he or she recognises that there is a material impossibility to provide such evidence. 5. Paragraphs 1 to 4 of this Article shall not apply to persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or to Union bodies referred to in Articles 70 and 71. For financial instruments and in the absence of rules and procedures fully equivalent to those referred to in point (d) of the first subparagraph of Article 154(4), final recipients and intermediaries shall provide the person or entity implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a) to (d), (g) and (h) of Article 136(1) or points (b) and (c) of the first subparagraph of Article 141(1) or in a situation deemed equivalent following the assessment carried out in accordance with Article 154(4). Where, exceptionally, financial instruments are implemented pursuant to point (a) of the first subparagraph of Article 62(1), final recipients shall provide financial intermediaries with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a) to (d), (g) and (h) of Article 136(1) or points (b) and (c) of the first subparagraph of Article 141(1).
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 137 Declaration and evidence of absence of an exclusion situation):
(a) natural or legal persons that are members of the administrative, management or supervisory body of the participant or that have powers of representation, decision or control with regard to that participant; beneficial owners, as defined in point (6) of Article 3 of Directive (EU) 2015/849, of the participant. The participant or the recipient shall without delay inform the authorising officer responsible of any changes in the situations as declared. Where appropriate, the candidate or tenderer shall provide the same declarations referred to in the first and second subparagraphs signed by a subcontractor or by any other entity on whose capacity it intends to rely, as the case may be. The authorising officer responsible shall not request the declarations referred to in the first and second subparagraph when such declarations have already been submitted for the purposes of another award procedure, provided that the situation has not changed, and that the time that has elapsed since the issuing date of the declarations does not exceed one year. The authorising officer responsible may waive the requirements under the first and second subparagraphs for very low value contracts the value of which does not exceed the amount referred to in point 14.4 of Annex I. 2. Whenever requested by the authorising officer responsible and where this is necessary to ensure the proper conduct of the procedure, the participant, the subcontractor or the entity on whose capacity a candidate or tenderer intends to rely shall provide: (a) appropriate evidence that it is not in one of the exclusion situations referred to in Article 136(1); The authorising officer responsible shall waive the obligation of a participant or an entity referred to in paragraph 2 to submit the documentary evidence referred to in paragraphs 2 and 3: (a) if he or she can access such evidence on a national database free of charge; (b) if such evidence has already been submitted for the purposes of another procedure and provided that any submitted documents are still valid and that the time that has elapsed since the issuing date of the documents does not exceed one year; (c) if he or she recognises that there is a material impossibility to provide such evidence. 5. Paragraphs 1 to 4 of this Article shall not apply to persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or to Union bodies referred to in Articles 70 and 71. For financial instruments and in the absence of rules and procedures fully equivalent to those referred to in point (d) of the first subparagraph of Article 154(4), final recipients and intermediaries shall provide the person or entity implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a) to (d), (g) and (h) of Article 136(1) or points (b) and (c) of the first subparagraph of Article 141(1) or in a situation deemed equivalent following the assessment carried out in accordance with Article 154(4). Where, exceptionally, financial instruments are implemented pursuant to point (a) of the first subparagraph of Article 62(1), final recipients shall provide financial intermediaries with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a) to (d), (g) and (h) of Article 136(1) or points (b) and (c) of the first subparagraph of Article 141(1).
Article 138 Financial penalties
1. In order to ensure a deterrent effect, the authorising officer responsible may, having regard, where applicable, to the recommendation of the panel referred to in Article 143, impose a financial penalty on a recipient with whom a legal commitment has been entered into and who is in an exclusion situation referred to in point (c), (d), (e) or (f) of Article 136(1). Regarding the exclusion situations referred to in points (c) to (f) of Article 136(1), the financial penalty may be imposed as an alternative to a decision to exclude a recipient, where such an exclusion would be disproportionate on the basis of the criteria referred to in Article 136(3). Regarding the exclusion situations referred to in points (c), (d) and (e) of Article 136(1), the financial penalty may be imposed in addition to an exclusion where this is necessary to protect the financial interests of the Union, due to the systemic and recurrent conduct engaged in by the recipient with the intention to unduly obtain Union funds. Notwithstanding the first, second and third subparagraphs of this paragraph, a financial penalty shall not be imposed on a recipient who in accordance with Article 137 has disclosed that it is in an exclusion situation. 2. The amount of the financial penalty shall not exceed 10 % of the total value of the legal commitment. In the event of a grant agreement signed with a number of beneficiaries the financial penalty shall not exceed 10 % of the grant amount the beneficiary concerned is entitled to in accordance with the grant agreement.
Article 139 Duration of exclusion and limitation period
1. The duration of exclusion shall not exceed any of the following: (a) the duration, if any, set by the final judgement or the final administrative decision of a Member State; (b) in the absence of a final judgment or a final administrative decision: (i) five years for the cases referred to in point (d) of Article 136(1); (ii) three years for the cases referred to in points (c) and (e) to (h) of Article 136(1). A person or entity referred to in Article 135(2) shall be excluded as long as it is in one of the exclusion situations referred to in points (a) and (b) of Article 136(1). 2. The limitation period for excluding and/or imposing financial penalties on a person or entity referred to Article 135(2) shall be five years calculated from any of the following: (a) the date of the conduct giving rise to exclusion or, in the case of continued or repeated acts, the date on which the conduct ceases, in the cases referred to in points (b) to (e) and (g) and (h) of Article 136(1); (b) the date of the final judgment of a national jurisdiction or of the final administrative decision in the cases referred to in points (b), (c), (d), (g) and (h) of Article 136(1). The limitation period shall be interrupted by an act of a national authority, of the Commission, of OLAF, of EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, of the panel referred to in Article 143 of this Regulation or of any entity involved in budget implementation, if such an act is notified to the person or entity referred to in Article 135(2) of this Regulation and is relating to investigations or judicial proceedings. A new limitation period shall begin to run on the day following the interruption. For the purpose of point (f) of Article 136(1) of this Regulation, the limitation period to exclude a person or entity referred to in Article 135(2) of this Regulation and/or impose financial penalties on a recipient provided for in Article 3 of Regulation (EC, Euratom) No 2988/95 shall apply. Where the conduct of a person or entity referred to in Article 135(2) of this Regulation concerned qualifies under several of the grounds listed in Article 136(1) of this Regulation, the limitation period applicable to the most serious of those grounds shall apply.
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 139 Duration of exclusion and limitation period):
The duration of exclusion shall not exceed any of the following: (a) the duration, if any, set by the final judgement or the final administrative decision of a Member State; in the absence of a final judgment or a final administrative decision: five years for the cases referred to in point (d) of Article 136(1); The limitation period for excluding and/or imposing financial penalties on a person or entity referred to Article 135(2) shall be five years calculated from any of the following: (b) the date of the final judgment of a national jurisdiction or of the final administrative decision in the cases referred to in points (b), (c), (d), (g) and (h) of Article 136(1). The limitation period shall be interrupted by an act of a national authority, of the Commission, of OLAF, of EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, of the panel referred to in Article 143 of this Regulation or of any entity involved in budget implementation, if such an act is notified to the person or entity referred to in Article 135(2) of this Regulation and is relating to investigations or judicial proceedings. A new limitation period shall begin to run on the day following the interruption. For the purpose of point (f) of Article 136(1) of this Regulation, the limitation period to exclude a person or entity referred to in Article 135(2) of this Regulation and/or impose financial penalties on a recipient provided for in Article 3 of Regulation (EC, Euratom) No 2988/95 shall apply. Where the conduct of a person or entity referred to in Article 135(2) of this Regulation concerned qualifies under several of the grounds listed in Article 136(1) of this Regulation, the limitation period applicable to the most serious of those grounds shall apply.