COUNCIL REGULATION (EC, EURATOM) No 2728/94 of 31 October 1994 establishing a Guarantee Fund for external actions
THE COUNCIL OF THE EUROPEAN UNION
,
Having regard to the Treaty establishing the European Community, and in particular Article 235 thereof,
Having regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 203 thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the European Parliament (2),
Having regard to the opinion of the Court of Auditors (3),
Whereas the general budget of the European Communities is exposed to increased financial risk as a result of the guarantees covering loans to third countries;
Whereas the European Council on 11 and 12 December 1992 concluded that considerations of prudent budgetary management and financial discipline called for the establishment of a new financial mechanism, and that accordingly a Guarantee Fund should be set up in order to cover the risks related to loans and guarantees covering loans granted to third countries or for projects executed in third countries; whereas it is possible to meet this need by the establishment of a Guarantee Fund which may be drawn on to pay the Community's creditors direct;
Whereas the institutions have agreed, pursuant to the Interinstitutional Agreement of 29 October 1993, to enter into the budget a reserve relating to lending and guarantee operations for the benefit of and in third countries;
Whereas mechanisms currently exist for honouring guarantees when they are activated, in particular by drawing provisionally on cash resources, as provided for in Article 12 of Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of the Communities' own resources (4);
Whereas the Guarantee Fund should be constituted by the gradual payment of resources; whereas the Fund will subsequently also receive interest on its invested resources and amounts recovered from defaulting debtors where the Fund has already honoured the guarantee;
Whereas, by reference to the practice of international financial institutions, a ratio of 10 % between the Guarantee Fund's resources and guaranteed liabilities in principal, increased by unpaid interest due, would seem adequate;
Whereas payments to the Guarantee Fund equal to 14 % of the amount of each operation would seem appropriate to attain this target amount; whereas the arrangements for making such payments must be defined;
Whereas, once the target amount is attained, the provisioning rate will be reviewed, whereas if the Guarantee Fund exceeds the target amount the surplus will be paid back to the general budget of the European Communities;
Whereas the financial management of the Guarantee Fund should be entrusted to the European Investment Bank (EIB); whereas the financial management of the Fund should be subject to audit by the Court of Auditors in accordance with procedures to be agreed upon by the Court of Auditors, the Commission and the European Investment Bank;
Whereas the Treaties do not provide any powers other than those pursuant to Article 235 of the EC Treaty and Article 203 of the EAEC Treaty for the adoption of this Regulation,
A Guarantee Fund, hereinafter referred to as 'Fund`, shall be established, whose resources shall be used to repay the Comunity's creditors in the event of default by the beneficiary of a loan granted or guaranteed by the Community.
The lending and guarantee operations referred to in the first paragraph, hereinafter refered to as 'operations`, shall be those carried out for the benefit of a third country or for the purpose of financing projects in third countries.
The Fund shall be endowed by:
- payments from the general budget of the European Communities pursuant to Article 4,
- interest on Fund resources invested,
- amounts recovered from defaulting debtors where the Fund has already honoured the guarantee.
The Fund shall rise to an appropriate level, hereinafter referred to as 'the target amount`.
The target amount shall be 10 % of the Community's total outstanding capital liabilities arising from each operation, increased by unpaid interest due.
If, at the end of a year, the target amount is exceeded, the surplus shall be paid back to a special heading in the statement of revenue in the general budget of the European Communities.
1.  The payments provided for under the first indent of Article 2 shall be equivalent to 14 % of the capital value of the operations until the Fund reaches the target amount.
The provisioning rate shall be reviewed when the Fund reaches its target amount, and in any case no later than the end of 1999.
2.  Payments into the Fund shall be made in accordance with the arrangements indicated in the Annex.
If, as a result of the activation of guarantees following default, resources in the Fund stand below 75 % of the target amount, the rate of provisioning on new operations shall be raised to 15 % until the target amount has once more been reached or, if the default occurs before the target amount is reached, until the amount drawn under the activation of the guarantee has been fully restored.
If, as a result of the activation of guarantees on one or more major defaults, resources in the Fund fall below 50 % of the target amount, the Commission shall submit a report on exceptional measures that might be required to replenish the Fund.
The Commission shall entrust the financial management of the Fund to the EIB under a brief on the Community's behalf.
The Commission shall, by no later than 31 March of the following financial year, send to the European Parliament, the Council and the Court of Auditors an annual report on the situation of the Fund and the management thereof in the previous year.
The revenue and expenditure account and the balance sheet relating to the Fund shall be attached to the Communities' revenue and expenditure account and balance sheet.
The Commission shall, before 31 December 1998, submit a comprehensive report on the functioning of the Fund.
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This Regulation shall enter into force on the seventh day following its publication in the Official Journal of the European Communities.
shall apply to operations decided on and committed as from 1 January 1993.
This Regulation shall be binding in its entirety and directly applicable in all Member States.