EUROPEAN FINANCIAL
STABILITY FACILITY
SOCIETE ANONYME
Financial Statements,
Management Report and Independent
Auditor’s Report

31 December 2021

6a Circuit de la Foire Internationale, L-1347, Luxembourg
R.C.S. Luxembourg : B 153 414
esm.europa.eu

CONTENTS
Independent Auditor’s report

3

Management report

8

Statement of financial position

20

Statement of comprehensive income

21

Statement of changes in equity

22

Statement of cash flows

23

Notes to the financial statements

24

Ernst & Young
Societe anonyme

EY

Building a better
working world

35E, Avenue john F. Kennedy
L-1855 Luxembourg

B.P.780

Tel: +352

R.C.S. Luxembourg
TVA LU 16063074

421241

www.ey.com/en_lu

L-2017

Luxembourg

Independent auditor's report
To the Shareholders of
European Financial Stability Facility S.A.

Report on the audit of the financial statements
Opinion
We have audited the financial statements of European Financial Stability Facility SA (the "Entity" or the
"EFSF"), which comprise the statement of financial position as at 31 December 2021, and the statement
of comprehensive income, the statement of changes in equity and the statement of cash flows for the
year then ended, and the notes to the financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position
of the Entity as at 31 December 2021, and of its financial performance and cash flows for the year then
ended in accordance with International Financial Reporting Standards ("IFRS") as adopted by the
European Union.
Basis for opinion
We conducted our audit in accordance with EU Regulation W 537/2014, the Law of 23 July 2016 on the
audit profession (the "Law of 23 July 2016") and with International Standards on Auditing ("ISAs") as
adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" ("CSSF"). Our
responsibilities under the EU Regulation N° 537/2014, the Law of 23 July 2016 and ISAs as adopted for
Luxembourg by the CSSF are further described in the « Responsibilities of the "reviseur d'entreprises
agree" for the audit of the financial statements}) section of our report. We are also independent of the
Entity in accordance with the International Code of Ethics for Professional Accountants, including
International Independence Standards, issued by the International Ethics Standards Board for
Accountants ("IESBA Code") as adopted for Luxembourg by the CSSF together with the ethical
requirements that are relevant to our audit of the financial statements, and have fulfilled our other ethical
responsibilities under those ethical requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of
the audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.

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firm

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Global Limited

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Impairment of loans and advances
As at 31 December 2021, loans and advances to euro area Member States amount to EUR 185.9 billion
and relate to financial assistance granted to Ireland, Portugal and Greece. As of 31 December 2021, all
these loans and advances are classified as "stage 1" under IFRS 9, and no Expected Credit Loss has
been recorded by EFSF on these outstanding loans.
We considered this as a key audit matter as EFSF applies complex judgments with respect to
-

the assessment as to whether some of these loans and advances have incurred, since their
origination, a significant increase in credit risk and should be reclassified to "stage 2" under IFRS 9.

To assess the existence or not of a significant increase in credit risk (which would trigger the recognition
of a lifetime Expected Credit Loss), the Entity has put in place a warning system. In that regard, EFSF
assesses individually each loan and advance granted to euro area Member States under the stability
support on a regular basis through the analysis of the main following indicators of the beneficiary
country:
-

the liquidity situation of the sovereign;

-

the market access;

-

the long-term sustainability of public debt;

-

the banking prospects, whenever relevant to assess repayment flows;

-

the review of the medium-term economic and financial outlook;

-

the identification of default events;

-

the assessment of the payment risk for twelve months.

In addition, the Entity has assessed to which extent the Covid-19 pandemic has caused a material
deterioration in the creditworthiness of its borrowers.
Refer to notes 2 and 8 to the financial statements.
How the matter was addressed in our audit
We assessed the design and implementation, and tested the operating effectiveness of the key controls
over EFSF's processes for assessing whether some loans to the euro area Member States have
incurred a significant increase in credit risk which would require a reclassification to stage 2 or even
stage 3 under IFRS 9. This includes:
-

the testing of the Entity level controls over the process, including review and approval of assumptions
made by the Management and the Board of Directors;

-

the testing of the quarterly Early Warning System reports issued per country and checking if restaging
or impairment recommendations have been adequately applied;

-

the testing of assumptions underlying judgments made by the Management and the Board of
Directors when an impairment event occurs on expected cash flows and estimated recovery from any
underlying collateral;

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-

the testing of a sample of loans to form our own assessment as to whether impairment events have
occurred and to assess whether impairment was identified and recorded in a timely manner, where
required;

-

the reading and assessment of the related contents of the major internal committee minutes;

-

checking that reimbursements and waivers granted are made in accordance with the terms and
conditions agreed.

Other information
The Board of Directors is responsible for the other information. The other information comprises the
information included in the Management report and the Corporate Governance Statement but does not
include the financial statements and our report of "reviseur d'entreprises agree" thereon.
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report this fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and of those charged with governance for the financial
statements
The Board of Directors is responsible for the preparation and fair presentation of the financial statements
in accordance with IFRS as adopted by the European Union and Luxembourg legal and regulatory
requirements relating to the preparation and presentation of the financial statements, and for such
internal control as the Board of Directors determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Entity's
ability to continue as a going concern, disclosing, as applicable, matters related to gOing concern and
using the going concern basis of accounting unless the Board of Directors either intends to liquidate the
Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial reporting process.

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Responsibilities of the "reviseur d'entreprises agree" for the audit of the financial statements
The objectives of our audit are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of
the "reviseur d'entreprises agree" that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with EU Regulation W
537/2014, the Law of 23 July 2016 and with the ISAs as adopted for Luxembourg by the CSSF will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with EU Regulation W 537/2014, the Law of 23 July 2016 and with
ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Entity's internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors.

•

Conclude on the appropriateness of Board of Directors' use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our report of the
"reviseur d'entreprises agree" to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our report of the "reviseur d'entreprises agree". However, future events or
conditions may cause the Entity to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards or "actions taken to eliminate threats or safeguards applied.

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From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our report unless law or regulation precludes public
disclosure about the matter.
Report on other legal and regulatory requirements
We were appointed as "reviseur d'entreprises agree" by the General Meeting of the Shareholders on 28
June 2017 for a three-year term, renewable once. We have been re-appointed as "reviseur d'entreprises
agree" by the General meeting of Shareholders on 24 June 2020 and the duration of our uninterrupted
engagement, including previous renewals and reappointments, is 5 years.
The Management report is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
The Corporate Governance Statement, included in the Management report, is the responsibility of the
Board of Directors. The information required by article 68ter paragraph (1) letters c) and d) of the law of
19 December 2002 on the commercial and companies register and on the accounting records and
annual accounts of undertakings, as amended, is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
We confirm that the audit opinion is consistent with the additional report to the audit committee or
equivalent.
We confirm that the prohibited non-audit services referred to in EU Regulation No 537/2014
provided and that we remained independent of the Entity in conducting the audit.

were not

Ernst & Young
Societe anonyme
Cabinet de revision agree

Papa Saliou Diop

Luxembourg, 28 March 2022

-7A member firm of Ernst & Young Global Limited

MANAGEMENT REPORT
Business review and results
THE COMPANY
The European Financial Stability Facility (hereafter referred to as “EFSF” or the “Company”) was created by
the euro area member states on 9 May 2010 as a temporary rescue mechanism. Incorporated on 7 June 2010
as a Société Anonyme based in Luxembourg, the EFSF’s mandate is to safeguard financial stability in Europe
by providing financial assistance to euro area member states.
The Treaty establishing the permanent crisis resolution mechanism – the European Stability Mechanism
(ESM) was signed in Brussels on 2 February 2012. The ESM Treaty entered into force on 27 September 2012
and the ESM was inaugurated on 8 October 2012, following ratification of the ESM Treaty by the then 17 euro
area member states.
The ESM is currently the only mechanism to finance new financial assistance programmes. As of 1 July 2013,
the EFSF may no longer engage in new financing programmes or enter into new loan facility agreements, but
it will continue to manage existing programmes and the repayment of any outstanding debt. The EFSF shall
be dissolved and liquidated when its purpose is fulfilled, in other words when the EFSF has received full
payment of the financing granted to the beneficiary Member States and has repaid its liabilities under the
financial instruments issued and financing arrangements entered into.
All EFSF financial assistance programmes were linked to appropriate economic reforms. To fulfil its mission,
the EFSF issues bonds or other debt instruments on the capital markets.
The last EFSF assistance programme was for Greece, and expired on 30 June 2015. The EFSF will not provide
any further financial assistance. However, the EFSF will continue its operations in order to:

•
•
•

receive loan repayments from beneficiary Member States;
make interest and principal payments to EFSF bondholders;
roll over outstanding EFSF bonds, as the maturity of loans provided to Ireland, Portugal, and Greece
is longer than the maturity of EFSF-issued bonds.

SERVICE LEVEL AGREEMENT WITH THE EUROPEAN STABILITY MECHANISM
To fulfil its ongoing activity, the EFSF asked the ESM to provide administrative services and other support
services. To formalise such cooperation, the ESM and the EFSF entered into a service level agreement dated
1 January 2013 and amended on 17 July 2020.

8

FUNDING STRATEGY
The EFSF initially used a simple back-to-back funding strategy. In November 2011, however, it adopted a
diversified funding strategy using a liquidity buffer as a key component. As part of this strategy, the EFSF
introduced a short-term bill programme. From the end of 2011 through January 2013, it held regular auctions
of 3- and 6-month bills.
One consequence of the diversified funding strategy is that funds raised were no longer attributed to specific
beneficiary Member State. The funds were pooled and then disbursed to programme countries upon
request. As in 2020, in 2021 the EFSF’s strategy continued to focus on standard benchmark and tap issues.
The EFSF responded to investor demand with flexibility, conducting special transactions such as the €2 billion
31-year bond, with books in excess of €30 billion and a yield of 0.126% which is an all-time low for EFSF bonds
with a such maturity. The €3 billion 10-year bond as well as the €4 billion 5-year bond were later both tapped.
The year was characterised by high and multiple coverage of the books for all issues.
As of 31 December 2021, the EFSF had been assigned an AA rating by Standard & Poor’s, an Aa1 rating by
Moody’s and an AA by Fitch Ratings. All three major credit rating agencies also gave the EFSF the highest
possible short-term rating – Standard and Poor’s (A1+); Moody’s (P-1) and Fitch Ratings (F1+).
In 2021, under the diversified funding strategy, the EFSF continued to issue long-term bonds with different
maturities. All 2021 bond issuances were successfully placed, raising a total of €16.7 billion.
On 31 December 2021, the nominal outstanding amount of bonds issued was €185.7 billion. The balance
includes bonds issued under the diversified funding strategy, which corresponds to €147.8 billion.

LENDING OPERATIONS
The EFSF programmes for Ireland, Portugal and Greece ended in December 2013, May 2014 and June 2015
respectively.

Financial assistance for Ireland
In January 2011, the EFSF commenced financial assistance activities by carrying out the first issue for the
programme for Ireland. Through the end of 2013, the EFSF contributed €17.7 billion to a joint external
financing package of €67.5 billion.
On 24 June 2013, the EFSF Board of Directors approved the extension of loan maturities. The Amendment
Agreement to the loan facility agreement was signed on 26 June 2013.
Under the financial assistance agreement, Ireland must repay the loans by 2042.
On 8 December 2013, Ireland officially exited the EFSF financial assistance programme. The EFSF loans
supported Ireland in the implementation of an economic adjustment programme whose main goals were:
restoring fiscal sustainability; carrying out structural reforms focusing on competitiveness and job creation;
and downsizing, restructuring, and recapitalising the banking sector. These reforms allowed Ireland to return
to sustainable economic growth, end reliance on external assistance, and resume long-term funding on the
financial markets.
The euro area member states exiting financial assistance fall under post-programme surveillance. The
countries will remain subject to monitoring until they have paid back a minimum of 75% of the assistance
received.
Ireland has, to date, met all its scheduled payment obligations to the EFSF.
The EFSF will continue to work closely with the Irish authorities in the framework of the EFSF’s Early Warning
System. The ESM Treaty provides for an Early Warning System procedure aimed at ensuring timely loan
repayments by beneficiary Member States. The EFSF has also adopted a similar procedure.
As of 31 December 2021, the EFSF has no outstanding commitments under this programme.

9

Financial assistance for Portugal
On 17 May 2011, an agreement concerning a financial assistance programme for Portugal was signed. The
EFSF placed its first issue for this programme in June 2011. Through April 2014, the EFSF contributed a total
of €26 billion to a joint external financing package of €78 billion.
On 24 June 2013, the EFSF Board of Directors approved the extensions of loan maturities. The Amendment
Agreement relating to the loan facility agreement was signed on 25 June 2013.
Under the financial assistance agreement, Portugal must repay the loans by 2040.
On 18 May 2014, Portugal officially exited the EFSF financial assistance programme. The loans the EFSF
provided have supported Portugal in the implementation of an economic adjustment programme. The
Portuguese reforms have laid the foundation for an economic recovery, enabling the country to end its
reliance on external financial assistance and resume long-term funding on financial markets.
The euro area member states exiting financial assistance fall under post-programme surveillance. The
countries will remain subject to monitoring until they have paid back a minimum of 75% of the assistance
received.
Portugal has, to date, met all its scheduled payment obligations to the EFSF.
The EFSF received a €2 billion early repayment request from the Portuguese authorities on 27 June 2019.
The EFSF Board of Directors approved this request on 5 September 2019. Portugal’s reimbursement to the
EFSF corresponds to a full repayment of a loan tranche maturing in August 2025 and partial repayment of a
tranche maturing in December 2025. The early repayment was carried out on 17 October 2019.
The EFSF will continue to work closely with the Portuguese authorities in the framework of the EFSF’s Early
Warning System.
As of 31 December 2021, the EFSF has no outstanding commitments under this programme.

Financial assistance for Greece
On 21 February 2012, the Eurogroup agreed the details of the second financial assistance programme for
Greece. The overall programme amount was set at €164.4 billion of which the EFSF committed up to
€144.6 billion. Of this amount, €35.5 billion was allocated to the Private Sector Involvement (PSI) for Greek
debt restructuring, and the remaining €109.1 billion to the rest of the financial assistance programme in a
Master Financial Assistance Facility Agreement.
In March 2012, the EFSF contributed to the PSI of Greece in several ways. The EFSF provided €35 billion in
1-year notes used as collateral for the Eurosystem. These notes were returned to the EFSF on 25 July 2012
and were cancelled on 3 August 2012. Additionally, €29.7 billion in 1- and 2-year EFSF notes were provided
to bondholders as part of the debt exchange under the PSI and €4.9 billion in 6-month bills for Greek bonds
to cover interest due under outstanding Greek bonds.
In May 2013, two floating rate notes for €7.2 billion were provided to Greece’s national bank recapitalisation
fund, the Hellenic Financial Stability Fund (HFSF), to recapitalise the Greek financial sector.
Also, in 2013, the EFSF disbursed an €18.1 billion cash loan to Greece for budgetary needs.
As part of the second economic adjustment programme, the EFSF disbursed a total of €141.8 billion in
financial assistance to Greece.
The EFSF assistance programme for Greece expired on 30 June 2015.
On 23 January 2017, the EFSF Board of Directors adopted the rules implementing a set of short-term debt
relief measures, which included the smoothing of Greece’s repayment profile.
In this context, the Board of Directors approved a bond exchange, where floating rate notes disbursed by the
EFSF to Greece were exchanged for fixed-coupon notes. In addition, the EFSF waived the step-up interest
rate margin for the year 2017 on the €11.3 billion EFSF loan tranche that was used to finance a debt buyback. A margin of 2% had originally been foreseen, starting from 2017. A further measure – the smoothing
of Greece’s EFSF repayment profile – was completed on 10 February 2017.

10

On 22 November 2018, the Board of Directors approved the implementation of a set of medium-term debt
relief measures for Greece. The measures are set out in a number of EFSF documents including the
Master Financial Assistance Facility Agreement between the EFSF and Greece. Euro area finance ministers
had endorsed the measures at the Eurogroup meeting on 22 June 2018. The measures include a further
deferral of interest and amortisation by 10 years and an extension of the maximum weighted average
maturity (WAM) by 10 years on €96.4 billion of EFSF loans to Greece. Following implementation of the
measures, the weighted average maturity for this part of Greece’s EFSF loans is now 42.3 years. The interest
deferral period, that was previously ending on 12 December 2022, was extended by 10 years until December
2032, i.e. interest accruing on €96.4 billion of EFSF loans to Greece is not due and payable but deferred.
The loans to Greece impacted by the medium-term measures were disbursed in many instalments and
tranches: 26 Greek EFSF loans were merged into 7 on the basis of common funding terms. The EFSF Greek
debt principal amount repayment schedule before and after the implementation of those measures is shown
on the following graph (the private sector involvement “PSI” and bond interest “BI” were not part of the
medium-term measures):

On 2 May 2019, the Board of Directors, following a Eurogroup agreement on 22 June 2018, decided to return
the €103.0 million step-up margin paid by Greece for the period between 1 January and 17 June 2018. The
EFSF also decided, for the period between 17 June 2018 and 17 June 2019, to reduce to zero the 2% step-up
margin that would otherwise be payable on certain EFSF loans amounting to €226.0 million. On 18 December
2019, the Board of Directors also decided to reduce to zero the step-up margin for the period from 17 June
2019 to 31 December 2019 amounting to a further €122.0 million. On 7 July 2020, the Board of Directors also
decided to reduce to zero the step-up margin for the period from 1 January 2020 to 17 June 2020 amounting
to a further €103.6 million. On 4 February 2021 the Board of Directors decided to reduce to zero the step-up
margin for the period from 17 June 2020 to 1 January 2021 amounting to €122.5 million. On 30 June 2021
the fifth successive reduction of step-up interest margin for Greece for the period between 1 January and 17
June 2021 was approved, amounting to €122.5 million. Furthermore, the Board of Directors decided to keep
the reduction of step-up margin to zero for the period from 17 June 2021 to 1 January 2022. All decisions
were part of medium-term debt relief measures and are based on a positive assessment of Greece’s
continued implementation of key reforms.
As of 31 December 2021, the EFSF has no outstanding commitments under this programme.

11

SIGNIFICANT EVENTS OF 2021
COVID-19 pandemic:
In 2021, the euro area countries showed a strong rebound in economic growth after the significant drop in
GDP in 2020 as a result of the pandemic and the global recession. Robust national and EU-level policy
responses have helped to contain the consequences of the pandemic. Moreover, progress in vaccinations
and the opening of economic sectors helped economies to grow again. In addition, all euro area countries
including the EFSF beneficiary Member States (BMS), continued to maintain favourable market access. Credit
rating agencies took positive rating actions on a number of BMS.

FINANCIAL OVERVIEW
Compared to 2020, the EFSF’s net loss increased by €16.4 million due to the continued and expected
decrease of service fee income from the lending activity.
The other comprehensive loss decreased by €14.5 million in 2021.
The total shareholders’ equity remained positive at the end of 2021.
The results of the EFSF as of 31 December 2021 are summarised in the table below:
Summary of the statement of comprehensive income
(in € '000)
Income
Expenses
Net loss for the year
Other comprehensive loss:
Net results on treasury financial assets (unrealised)
Net amount reclassified to the statement of comprehensive
income on sale of treasury financial assets portfolio
Total comprehensive loss for the year

2021
1,935,215
(1,956,126)
(20,911)

2020
2,341,213
(2,345,741)
(4,528)

-

(29,962)

(10,995)

(11,883)

(31,906)

(46,373)

In 2021, the total balance sheet decreased by €5.2 billion compared to year-end 2020. This is due to the
decrease of €4.5 billion in cash and cash equivalents and the decrease of €1.5 billion in treasury financial
assets, partially offset by an increase in loans to euro area member states of €0.8 billion mostly driven by
additional deferred interest on loans to Greece.
The balance sheet is summarised as follows:
Summary of the balance sheet
(in € '000)
TOTAL ASSETS
Of which:
Cash and cash equivalents
Loans to euro area member states
Treasury financial assets
TOTAL EQUITY AND LIABILITIES
Total liabilities
Of which:
Debt securities in issue
Liability against euro area member states
Total shareholders’ equity

12

31.12.2021
188,476,674

31.12.2020
193,721,150

2,585,075
185,891,476
-

7,103,441
185,066,378
1,551,117

188,476,674
187,701,815

193,721,150
192,914,385

187,214,745
478,700

191,350,731
1,553,915

774,859

806,765

OUTLOOK FOR 2022
For 2022, the EFSF’s long-term funding target is €19.5 billion. The EFSF will continue to finance the existing
debt until all the loans have been repaid by the BMS. The net loss will increase further, due to the decreasing
service fee income.

13

Risk Management
The EFSF has implemented a systematic process
for the management of the various types of risk
to which the organisation is exposed in
executing its mandate. The management of risk
at the EFSF is a four-step process that applies
equally to the management of both financial
(Credit, Market and Liquidity Risk) and nonfinancial risks:
Risk identification is the process for ensuring
the identification of all material risk exposures,
both financial and non-financial, faced by the
EFSF, together with relevant internal or external
indicators that support proactive, forwardlooking assessment of actual or potential
changes in risk exposure.
Risk assessment is the process for assessing all identified risk exposures to determine their materiality. For
financial risks, materiality is typically assessed on the basis of expert judgement and in consultation with
relevant internal stakeholders. For non-financial risks this is done by assessing the probability of occurrence
and the consequences/impact to the organisation in the event of occurrence.
Risk management is the process of determining and executing appropriate actions or the implementation of
specific policies to actively manage risk exposures. For financial risks, these management actions might
include elimination, mitigation, transfer or acceptance of the risk.
Risk monitoring is the set of processes, procedures, responsibilities and tools needed for ongoing monitoring
and reporting of material risk exposures and for triggering the active management of an unacceptable risk
exposure. This requires robust, auditable control processes, limit frameworks, breach escalation
mechanisms, dashboards, reports and other tools to ensure appropriate risk monitoring.
Certain financial risk exposures are monitored by setting appropriate limits on exposure. Credit risk limits are
set against individual obligors, such as issuers in the case of the EFSF’s treasury financial assets and deposits.
Liquidity risk limits are set against certain funding outcomes.
The EFSF was established to support the stability of the euro area and euro area member states. Effectively
fulfilling this mandate requires ensuring the highest creditworthiness to minimise the cost of borrowing to
support lending operations and ensure market access. In order to attain the highest credit rating, overall risk
tolerance is very conservative so as to minimise the risk of capital loss on investments, maintain access to
the funding market, and manage credit risk on investments.
As with all financial institutions, the EFSF remains subject to a number of financial and non-financial risks.
The types of risk to which the EFSF is exposed are a function of the nature of its mandate and operational
activities. Appropriate procedures and processes are implemented to identify, assess, monitor and manage
these risks.
The EFSF established an information security function within the Risk division to provide independent
oversight and monitoring of information technology operations and other ‘first line of defence’ divisions
managing information security. The aim is to strengthen the confidentiality, integrity, and availability of
valuable or sensitive information and enhance resilience to cyber security risks. The information security
function establishes risk guidelines for the ESM’s information security strategy and for the design of
information security controls. The function also maintains ESM’s information security policy and conducts
periodic reviews of user access to information.

14

CREDIT RISK
Credit risk is the potential for loss arising from the inability of a counterparty, issuer or other obligor to fulfil
its contractual obligations. Credit risk mainly arises from loans granted to the borrower euro area member
states. Quarterly reports are supplied to Shareholders detailing their guarantee consumption in respect of
each bond and bill issued by the EFSF.
Credit risk can also arise from investments in treasury financial assets, which are mitigated through strict
investment guidelines focusing on issuers with the highest credit ratings and through limits to mitigate the
maximum exposure per counterparty or issuer.

MARKET RISK
Market risk is the risk of losses arising from changes in the values of financial assets and liabilities due to
fluctuations in market factors such as interest rates, and prices of securities. Market risk can be structural (in
relation to assets and liabilities) or non-structural (in relation to investments). The EFSF has both types of
market risk: structural for the lending and funding activities, and non-structural in relation to the investment
portfolios.
At present, the EFSF’s loans are longer in maturity than its funding, hence there is a maturity mismatch,
where a higher borrowing cost could apply at future dates. This mismatch is managed by careful asset-liability
cash flow monitoring and a diversified funding strategy. This risk is not retained by the EFSF, due to the passthrough feature of the EFSF pricing policy.
The treasury financial assets are generally invested to maturity, so that although market risk is assumed on
the portfolio from one accounting period to the next, as reflected in the notes to the accounts, the impact
on the EFSF over the life of the investments is limited.

LIQUIDITY RISK
Liquidity risk is the risk of loss arising from the difficulty in securing the necessary funding, due to a
deterioration of the EFSF’s creditworthiness or needing to borrow at a time of unfavourable market
conditions (e.g. periods of high stress). Liquidity risk is addressed by holding adequate available funds to
cover short-term liquidity needs.
Liquidity risk is mitigated through:
•
•
•
•

available funds, with ability to call from Shareholders further funds if there is a shortfall;
a diversified funding strategy;
regular active monitoring of the cash position;
a regular presence in the market which keeps access to a wide and well diversified investor base.

OPERATIONAL RISK
Operational risk is defined as the potential loss, inability to fulfil the EFSF’s mandate or reputational damage
resulting from inadequate or failed internal processes, people and systems or from external events.
Operational risks are categorised in line with the guidance by the Basel Committee on Banking Supervision.
Management has no tolerance for material operational risks, including those originating from third
party/vendor engagements, which may result in the EFSF’s inability to effectively fulfil its mandate, or in
significant loss and/or reputational damage. No material operational risk losses were identified in 2021.

15

The ESM, on behalf of the EFSF, has processes, risk management tools and a control framework to ensure a
high level of control on the operational risks inherent to activities of the EFSF. The ESM, also on behalf of the
EFSF, maintains business continuity plans and has resources dedicated to the oversight and management of
specific types of operational risk of the EFSF such as fraud, risks pertaining to payment systems, and
information systems’ security risks.
All departments are responsible for the proactive mitigation of operational risks, and for the robustness of
the associated processes, in a “first line of defence” capacity. If operational risk events occur, they are
reported to the Risk Management through an internal operational risk register. Formal escalation procedures
have been established to ensure the active involvement of management, the EFSF Audit Committee and,
where necessary, the EFSF Board of Directors.
The EFSF was working in a full telework set-up since the beginning of the COVID-19 pandemic and had
operated smoothly thanks to the Business Continuity framework. During 2021, the EFSF has adopted a
hybrid work set-up, where employees are allowed to work partly from the office and partly from home. No
operational risk events had a direct link to this hybrid work set-up during 2021.
COVID-19 Pandemic impact and risk management response
In 2021, the euro area countries showed a strong rebound in economic growth after the significant drop in
GDP in 2020 as a result of the pandemic and the global recession. Robust national and EU-level policy
responses have helped to contain the consequences of the pandemic. Moreover, progress in vaccinations
and the opening of economic sectors helped economies to grow again. In addition, all euro area countries
including the EFSF BMS, continued to maintain favourable market access.
During 2021, the EFSF risk assessment and impairment assessment methodology duly captured (via its Early
Warning System) the severe impact from the pandemic, together with the related risks and the recent
developments. In particular, the assessment focused on whether the effects of the pandemic triggered a
significant increase in credit risk and if it would materialise in an expected credit loss (ECL). In that context, a
complete assessment of a wide range of inputs based on forward-looking information was performed, to
ensure a comprehensive assessment of all short-term and medium-to-long term factors and consequences.
As described above, inputs include short-term economic data, vulnerability indicators, liquidity balances and
market indicators, together with medium-to-long term risks, policy measures and mitigating factors.
All those factors, and in particular the strong liquidity position and market access of BMS, have and are
expected to continue to adequately balance the economic shock caused by the pandemic and address the
related risks. The liquidity risk can be a major concern in a crisis context, therefore the positive funding
performance of BMS, including the vulnerable ones, represent a remarkable balancing element. Considering
all these elements, as of 31 December 2021 the assessment did not identify a significant increase in credit
risk on the EFSF’s exposures to BMS. The overall credit quality of the EFSF loans portfolio remained stable.
Risk Management also continued to closely monitor credit risk developments of EFSF investment issuers, and
in particular those issuers whose ratings were identified to be more at risk of facing downward rating
pressures amid the COVID-19 pandemic. Risk Management reported on relevant credit risk developments,
which were discussed in risk committees on a quarterly basis.

Research and development
The Company has no research and development activity.

Share capital
The Company’s approved and issued share capital totals €28,513,396.92 consisting of 2,851,339,692 shares
with a face value of €0.01 each.

16

Shareholders
The shareholders of the Company are the euro area member states as of 31 December 2021 except for the
Republic of Latvia and the Republic of Lithuania. The following table shows the number of shares and
subscription amounts for each shareholder.
Member State

Number of shares

Federal Republic of Germany
French Republic
Italian Republic
Kingdom of Spain
Kingdom of the Netherlands
Kingdom of Belgium
Hellenic Republic(1)
Republic of Austria
Portuguese Republic(1)
Republic of Finland
Ireland(1)
Slovak Republic
Republic of Slovenia
Republic of Estonia
Grand Duchy of Luxembourg
Republic of Cyprus(1)
Republic of Malta
Total

771,706,294
579,522,400
509,243,918
338,392,963
162,521,534
98,844,650
80,070,849
79,125,435
71,329,846
51,097,174
45,261,689
28,256,464
13,398,796
7,294,357
7,119,129
5,578,757
2,575,437
2,851,339,692

Capital as of
31 December 2021 (in €)
7,717,062.94
5,795,224.00
5,092,439.18
3,383,929.63
1,625,215.34
988,446.50
800,708.49
791,254.35
713,298.46
510,971.74
452,616.89
282,564.64
133,987.96
72,943.57
71,191.29
55,787.57
25,754.37
28,513,396.92

(1) As at the effective date of the amendments, Ireland, the Portuguese Republic and the Hellenic Republic

had become Stepping-Out Guarantors. The Republic of Cyprus became a Stepping-Out Guarantor as of 29
April 2013.

17

Corporate governance
BOARD OF DIRECTORS
The Board of Directors is comprised of high-level representatives of each of the 17 EFSF Shareholders. The
European Commission and European Central Bank (ECB) are entitled to appoint an observer to the Board of
Directors’ meetings, who may present his or her observations but does not have voting rights.
The Directors are appointed by the shareholders’ general meeting for a period not exceeding six years and
are eligible for reappointment. They may be removed at any time by a resolution of the general meeting of
shareholders.
The Board of Directors is vested with the broadest powers to perform all acts of administration and
disposition in the Company’s interests. The Board of Directors is authorised to transfer, assign, and dispose
of the assets of the Company in such manner as it deems appropriate.
The Board of Directors may delegate its powers to conduct the daily management and affairs of the Company
and the representation of the Company for such daily management and affairs to any member or members
of the Board of Directors, managers, officers, or other agents who need not be shareholders of the Company,
under such terms and with such powers as the Board of Directors may determine.

GENERAL MEETING OF SHAREHOLDERS
The general meeting of shareholders represents the entire body of shareholders of the Company. It has the
broadest powers to order, carry out or ratify acts relating to the operations of the Company.
Each share is entitled to one vote. A shareholder may act at any general meeting, directly or by appointing a
proxy.

AUDIT COMMITTEE
The Audit Committee is a permanent sub-committee of the Board of Directors of the Company pursuant to
Article 52 of the Luxembourg Law of 23 July 2016 concerning the audit profession. The Audit Committee was
established by the Board of Directors on 17 December 2013. The Board of Directors approved the Terms of
Reference and Rules of Procedure of the Audit Committee on 24 March 2014 and they were subsequently
amended on 8 February 2018. The Audit Committee assists the Board of Directors in discharging its
responsibilities in financial reporting, internal control, risk management, internal audit and external audit of
the Company. The Audit Committee consists of five members who are appointed by the Board of Directors
from among Directors, for a renewable term of office of one year.
The Audit Committee meets whenever the affairs of the Company so require, at the time and place specified
in the notice of the meeting.

AUDIT
EFSF Management and Internal Audit signed a Charter for Audit and Control on 26 November 2010. It was
presented to the Board of Directors at its meeting on 3 December 2010. An updated Internal Audit Charter
was approved by the Board of Directors on 23 November 2020.
Internal Audit examines and evaluates the adequacy and effectiveness of the organisation's governance, risk
management process, and system of internal controls. It also analyses the organisation’s performance in
carrying out assigned responsibilities to achieve its stated goals and objectives.

18

Rules Governing Amendments to the Articles of Association
Amendments to the Articles of Association are approved by resolution at an Extraordinary General Meeting
of Shareholders subject to the EFSF Articles of Association and Luxembourg law.

Branches of the Company
The Company has no branch.

Main subsequent events
Please refer to Note 23 of the financial statements.

Future prospects
The EFSF was created as a temporary institution. In accordance with its Articles of Association, the EFSF will
be dissolved and liquidated when its purpose will be fulfilled, that being the moment when the EFSF will have
received full payment of the financing granted to the Member States and will have repaid all its liabilities
under the financial instruments issued and financing arrangements entered into. No new financing
programme and no new loan facility agreements may be established or entered into by the EFSF after
30 June 2015.
Currently the longest outstanding EFSF loan, following the implementation of the medium-term measures,
matures in 2070 for Greece.

For and on behalf of the Board of Directors.

Klaus Regling

Chief Executive Officer

19

STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
(In €’000)
Notes

31.12.2021

31.12.2020

7
8
9
10

2,585,075
185,891,476
123
188,476,674

7,103,441
185,066,378
1,551,117
214
193,721,150

11
12
13

187,214,745
478,700
8,370
187,701,815

191,350,731
1,553,915
9,739
192,914,385

14
15
9/15

28,513
2,894
764,363
(20,911)
774,859

28,513
2,894
10,995
768,891
(4,528)
806,765

188,476,674

193,721,150

ASSETS
Cash and cash equivalents
Loans to euro area member states
Treasury financial assets
Prepayments and other receivables
Total assets

LIABILITIES
Debt securities in issue
Liability against euro area member states
Trade and other payables
Total liabilities
SHAREHOLDERS’ EQUITY
Ordinary shares
Legal reserve
Fair value reserve
Retained earnings
Net loss for the year
Total shareholders’ equity
Total equity and liabilities

The accompanying notes form an integral part of these financial statements.

20

STATEMENT OF COMPREHENSIVE INCOME
For the financial year ending 31 December 2021
(In €’000)
Notes

2021

2020

16

1,927,121

2,340,273

16

(1,880,549)

(2,272,151)

8,094

940

(41,348)

(39,187)

13,318

29,875

(34,229)

(34,403)

Total operating expenses

(34,229)

(34,403)

Net loss for the year

(20,911)

(4,528)

9

-

(29,962)

9/15

(10,995)

(11,883)

(31,906)

(46,373)

Statement of Profit or Loss
Interest revenue calculated using the effective
interest method
Interest expense calculated using the effective
interest method
Result on financial operations on Treasury financial
assets portfolio
Other expenses

17

Net financial income
Administrative expenditures

18

Other comprehensive income
Items that may be subsequently reclassified in
statement of Profit or Loss
Change in fair value of Treasury financial assets
portfolio
Net amount reclassified to the statement of
comprehensive income on sale of treasury financial
assets portfolio
Total comprehensive loss for the year

The accompanying notes form an integral part of these financial statements.

21

STATEMENT OF CHANGES IN EQUITY
For the financial year ending 31 December 2021
(In €’000)
Ordinary
shares
28,513

Legal
reserve
2,894

Fair value
reserve
52,840

Retained
earnings
723,107

Net loss
45,784

Total
853,138

Allocation of the net income of
2019:
- to the retained earnings

-

-

-

45,784

(45,784)

-

Net loss for the year 2020
Change in fair value reserve

-

-

(29,962)

-

(4,528)
-

(4,528)
(29,962)

Net amount reclassified to the
statement of comprehensive
income on sale of treasury financial
assets portfolio
As at 31 December 2020

28,513

2,894

(11,883)
10,995

768,891

(4,528)

(11,883)
806,765

As at 1 January 2021

Ordinary
shares
28,513

Legal
reserve
2,894

Fair value
reserve
10,995

Retained
earnings
768,891

Net loss
(4,528)

Total
806,765

Comprehensive income
Allocation of the net income of
2020:
- to the retained earnings

-

-

-

(4,528)

4,528

-

Net loss for the year 2021
Change in fair value reserve

-

-

-

-

(20,911)
-

(20,911)
-

28,513

2,894

(10,995)
-

764,363

(20,911)

(10,995)
774,859

As at 1 January 2020
Comprehensive income

Net amount reclassified to the
statement of comprehensive
income on sale of treasury financial
assets portfolio
As at 31 December 2021

The accompanying notes form an integral part of these financial statements.

22

STATEMENT OF CASH FLOWS
For the financial year ending 31 December 2021
(In €’000)

2021

2020

Operating activities:
Net (loss) for the year
Interest receivable on loans to euro area member states
Interest receivable on treasury financial assets
Interest payable on debt securities in issue
Decrease in prepayments
(Decrease)/Increase of trade and other payables
Return of prepaid margin to beneficiary Member States

(20,911)
(1,745,478)
(2,374)
1,749,195
91
(1,369)
(1,114,214)

(4,528)
(2,131,327)
(25,973)
2,023,821
16
160
-

Net cash flow from operating activities

(1,135,060)

(137,831)

Investing activities
Interest received on loans to euro area member states
Net investment in treasury financial assets
Interest received on treasury financial assets

961,728
1,517,113
23,034

1,095,316
(235,551)
57,982

Net cash flow from investing activities

2,501,875

917,747

Financing activities
Issuance of debt instruments
Interest paid on debt securities in issue

(3,844,022)
(2,041,159)

(1,488,408)
(2,318,290)

Net cash flow from financing activities

(5,885,181)

(3,806,698)

Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year

(4,518,366)
7,103,441

(3,026,782)
10,130,223

Cash and cash equivalents at the end of the year

2,585,075

7,103,441

The accompanying notes form an integral part of these financial statements.

23

Financial Statements

NOTES TO THE FINANCIAL STATEMENTS
1. General information
The European Financial Stability Facility (the ‘’EFSF’’ or the ‘’Company’’) was incorporated on 7 June 2010
and is organised under the laws of Luxembourg as a Société anonyme. It has its registered office at 6a, Circuit
de la Foire Internationale, L-1347 Luxembourg.
The EFSF was created by the euro area member states following the decisions taken on 9 May 2010 within
the framework of the Ecofin Council and is owned by euro area member states.
The EFSF was initially designed to issue notes guaranteed by euro area member states for up to around €440
billion to lend on to euro area member states in financial difficulty. The assistance was subject to conditions
negotiated with the European Commission in liaison with the ECB and, where appropriate the IMF, which
the Eurogroup needed to approve.
On 24 June 2011, the Heads of State or Government agreed to increase the EFSF’s scope of activity and raised
its guarantee commitments to €780 billion from €440 billion. This included an over-guarantee of up to 165%,
which corresponded to a lending capacity of €440 billion in order to ensure the highest possible credit rating.
On 21 July 2011, the Heads of State or Governments agreed to further increase the EFSF’s scope of activity
to:
•
•
•
•
•

issue bonds or other debt instruments on the market to raise the funds needed to provide loans to
countries in financial difficulties;
intervene in the primary debt markets;
intervene in the secondary debt markets;
act on the basis of a precautionary programme;
finance recapitalisations and resolutions of financial institutions through loans to governments.

These amendments to the EFSF Framework came into force on 18 October 2011, following the conclusion of
all necessary national procedures.
On 26 October 2011, the Heads of State or Government of euro area member states agreed to maximise the
EFSF’s capacity without increasing the euro area member states’ guarantee commitments by adopting two
approaches, partial risk protection and the co-investment. The two options were designed to support the
continued market access of euro area member states in financial distress and safeguard the financial stability
of the euro area. By the balance sheet date, the options have not yet been used.
As of 1 July 2013, the Company may no longer engage in new financial assistance facilities, but it continues
to manage existing programmes and the repayment of any outstanding debt. The Company shall be dissolved
and liquidated when its purpose is fulfilled, in other words when the Company has received full repayment
of the financing granted to BMS and has repaid its liabilities under the financial instruments issued and
financing arrangements entered into.
At the beginning of 2013, the staff of the EFSF was transferred to the ESM. To carry out its ongoing activity,
the EFSF asked the ESM to provide it with certain administrative and other support services. To formalise
such cooperation, the ESM and the EFSF entered into a Service Level Agreement beginning on
1 January 2013. On 17 July 2020, the annex to the service level agreement detailing the fees calculation was
amended following a decision of the ESM Managing Director. The new applicable calculation method of the
fees was determined to better reflect the fair cost-sharing between the ESM and the EFSF compared to their
respective level of activity.
The present financial statements cover the period from 1 January 2021 to 31 December 2021.

24

Financial Statements
These financial statements were approved by the EFSF Board of Directors on 28 March 2022 and
subsequently approved by the Annual General Meeting of Shareholders on 29 June 2022.

1.1.

GENERAL OVERVIEW OF FINANCIAL ASSISTANCE PROGRAMMES

1.1.1. FINANCIAL ASSISTANCE UNDER THE FRAMEWORK AGREEMENT (“EFSF 1”)
Under the framework of EFSF 1, the Company participated in three financial assistance programme loans one for Ireland and two for Portugal, all of which started in 2011.
Initially, under these programmes, all issued debt was backed by an over-guarantee of 120% from the
Guarantee countries (Guarantors) of the euro area member states and by cash retentions from the proceeds
of the issued bonds. The cash retentions were calculated in a way that the guarantees from AAA rated
countries and the cash retained would be sufficient to cover all of the associated debt service if the
underlying loan was not paid in full (see below). These credit enhancements were designed to support the
AAA rating of the EFSF as an issuer.
The interest rate which the EFSF applied to each loan covered the cost of funding it incurred and included a
Margin which was intended to provide remuneration for the Guarantors. The Margin was deducted from the
loan disbursement amount as Prepaid Margin, plus the service fee which was used to cover the EFSF’s
operational costs and any costs and fees directly related to the issuance of funding instruments which had
not otherwise been charged to the relevant borrowing country.
For loans, a Loan Specific Cash Buffer was put aside to ensure that the principal amount of debt securities
issued to fund that loan (together with the interest which will accrue on such debt securities to scheduled
maturity) was, at their date of issuance fully covered by the sum of:
•
•
•
•
•

the aggregate amount of guarantees of Guarantors with the highest quality rating (taking into
account the 120% guarantee coverage);
the cash reserve retained in relation to such loans (financed out of the Prepaid Margin and the
service fee);
the Negative Carry payment retained in respect of such loans;
the applicable Loan Specific Cash Buffer; and
any other credit enhancement (if any) in the form of cash or credit enhancement with the highest
quality rating that is adopted pursuant to a Framework Agreement.

The Cash Reserve includes these retained amounts, together with all income and investments earned by
investing these amounts, net of any amounts representing investment losses or negative interest. The Cash
Reserve is invested in accordance with investment guidelines approved by the EFSF Board of Directors.
On 21 July 2011, the Heads of State or Government decided that the Margin, initially reserved to remunerate
the Guarantors, will no longer be applicable to new loans granted to Greece, Ireland and Portugal under EFSF
2.1. This has given rise to further decision in relation to the reimbursement of the Prepaid Margin already
charged to Ireland and Portugal under EFSF 1. According to the new mechanism, the Margin may be
reimbursed to the borrowing countries at the maturity of the bonds as a rebate. Such a rebate will be made
in accordance with the proportion share due after 21 July 2011. The proportional share of the margin before
21 July 2011 will be due to the Member State Guarantors.
Following the maturity of the EFSF 1 programme for Ireland on 18 July 2016, the EFSF returned to Ireland
€554.9 million of prepaid margin and accumulated investment returns. The portion of the prepaid margin,
accumulated investment returns and unused negative carry for the Member State Guarantors amounted to
€54.5 million, which has not been paid out at the balance sheet date.
Furthermore, following the maturity of the second EFSF 1 programme for Portugal, on 5 December 2016,
the EFSF returned €301.8 million of prepaid margin and accumulated investment returns to Portugal.

25

Financial Statements
On 4 July 2021 a further amount of €1.1 billion was returned to Portugal representing the return of the
prepaid margin and accumulated investment returns on the first EFSF 1 programme. The portion of the
prepaid margin, accumulated investment returns and unused negative carry for the Member State
Guarantors amounted to €11.2 million, which has not been paid out at the balance sheet date.

1.1.2. FINANCIAL ASSISTANCE UNDER THE AMENDED FRAMEWORK AGREEMENT
(“EFSF 2.1”)
The Board of Directors approved the new EFSF framework agreement on 27 October 2011. All new issues
after this date no longer operate with the cash reserve and only the irrevocable and unconditional guarantee
granted by euro area member states on the issued bonds remains in place.
All issues under the revised debt issuance programme are over-guaranteed by 165% from the Guarantee
countries of the euro area member states. Therefore, there was no need for new issues after this date to
benefit from the cash reserve as the irrevocable and unconditional guarantees granted by euro area member
states on the issued bonds are large enough to cover the entire amounts due.
The interest rate which the EFSF applies to each loan under EFSF 2.1 covers the cost of funding incurred plus
the service fee for the EFSF’s operational costs. The service fee has two components: an up-front service fee
(50 basis points) and an annual service fee (0.5 basis points). To provide the same cover for investors, the
amount of over-guarantee was increased to 165% from 120%. Under this amended framework agreement,
the EFSF is entitled to charge 10 basis points of guarantee commission fee for the loans granted to euro area
member states where such a fee provides remuneration for the guarantor Member States.
All loans granted in 2012, 2013 and 2014 under financial assistance programmes were concluded under the
amended framework agreement.
In November 2012, the Eurogroup took the political decision to change the lending terms of the support
programme for Greece. As a result, the Board of Directors decided to extend the maturities of the EFSF loans
to Greece by 15 years and deferred Greece’s interest payments on EFSF loans by 10 years. In addition, the
Board cancelled the guarantee commission fee.
To manage this loan maturity extension, the EFSF was required to allow repayments after 2048. To finance
these extended loans, the EFSF amended in 2013 the relevant Trust Deeds to allow for the issuance of
funding instruments after 2048. It introduced a similar amendment to the relevant Deeds of Guarantee,
extending the end year for the Deeds of Guarantee to 2070.
To support Ireland’s and Portugal’s efforts to regain full market access and successfully exit their
programmes, the EFSF decided, in line with a Eurogroup decision, to lengthen the maturities of their EFSF
loans by increasing the weighted average maturity limit by seven years. The extension smooths the debtredemption profile of both countries and lowers their refinancing needs in the post-programme period. The
European Financial Stabilisation Mechanism (EFSM), which committed €22.5 billion for Ireland and
€26 billion for Portugal, also extended its maturities by seven years.
Initially, the weighted average maturity of EFSF loan tranches was up to 15 years. The final weighted average
maturity of EFSF loans to Portugal and Ireland is 20.8 years.
On 8 December 2013, Ireland officially exited the EFSF financial assistance programme with the expiry of the
availability period under its Master FFA.
On 18 May 2014, Portugal exited the EFSF financial assistance programme.
On 19 December 2014, the Board of Directors decided to grant Greece a two-month technical extension of
its second economic adjustment programme financed by the EFSF until 28 February 2015. On
27 February 2015, the Board of Directors decided on a further four-month technical extension of the
programme until 30 June 2015.

26

Financial Statements
The EFSF assistance programme for Greece expired on 30 June 2015. The EFSF will not provide any further
financial assistance.
On 23 January 2017, the EFSF Board of Directors adopted the rules implementing a set of short-term debt
relief measures which included the smoothing of Greece’s repayment profile.
In this context, the Board of Directors approved a bond exchange, where floating rate notes disbursed by
the EFSF to Greece are exchanged for fixed coupon notes. In addition, the EFSF waived the step-up interest
rate margin for the year 2017 on the €11.3 billion EFSF loan tranche that was used to finance a debt buyback. A margin of 2% had originally been foreseen, starting from 2017. A further measure – the smoothing
of Greece’s EFSF repayment profile – was completed on 10 February 2017. Following the smoothing, Greece
must repay the loans by 2070 according to the terms of the relevant financial assistance agreement. The
above measures did not affect the profit and loss of the EFSF, as the net present value of the modified cash
flows approaches the carrying amount of the loans.
On 22 November 2018, the Board of Directors approved the implementation of a set of medium-term debt
relief measures for Greece. The measures are set out in a number of EFSF documents including the
Master Financial Assistance Facility Agreement between the EFSF and Greece. Euro area finance ministers
had endorsed the measures at the Eurogroup meeting on 22 June 2018.
The implementation of the EFSF medium-term measures for Greece consists of (i) a mechanism for the
conditional abolition of the step-up interest rate margin related to the debt buy-back instalment of the
second Greek programme from 2018 onwards; (ii) a further deferral of interest and amortisation by 10 years
on €96.4 billion of EFSF loans to Greece; and (iii) extension of the maximum weighted average maturity of
the above-mentioned loans by 10 years, respecting the programme authorised amount. Following
implementation of the measures, the weighted average maturity for this part of Greece’s EFSF loans is now
42.3 years. The interest deferral period, that was previously ending on 12 December 2022, was extended by
10 years until December 2032, i.e. interest accruing on €96.4 billion of EFSF loans to Greece is not due and
payable but deferred. The Deeds of Guarantee and the Trust Deed were also amended in 2018 in the context
of the medium-term debt measures and that the expiration date of the guarantees has been extended to 31
December 2082.
On 2 May 2019, as part of the medium-term debt relief, the Board of Directors decided to reimburse the
€103.0 million step-up margin paid by Greece for the period between 1 January and 17 June 2018. The EFSF
also decided, for the period between 17 June 2018 until 31 December 2020, to reduce to zero the 2% stepup margin that would otherwise be payable on certain EFSF loans. Furthermore, in 2021 the EFSF also decided
to reduce the step-up margin to zero during the period 1 January 2021 to 1 January 2022.
The EFSF received an early repayment request from the Portuguese authorities on 27 June 2019. The EFSF
Board of Directors approved this €2.0 billion early repayment request on 5 September 2019. Portugal’s
€2.0 billion reimbursement to the EFSF corresponds to a full repayment of a loan tranche maturing in August
2025 and partial repayment of a tranche maturing in December 2025. The early repayment did not
significantly affect the net present value of the corresponding loans.

27

Financial Statements
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1.

BASIS OF PRESENTATION

The accompanying standalone financial statements are prepared and presented on the accrual basis of
accounting and comply with International Financial Reporting Standards (“IFRS”) as adopted by the European
Union. The financial statements are presented in euro (“€”) which is also the functional currency of the
Company. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
The preparation of financial statements in conformity with the IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Company’s accounting policies. Areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimations are significant to the financial statements are disclosed in Notes 2.2, 5 and 6.

2.2.

USE OF ESTIMATES

Management may make estimates and assumptions that affect the reported amount of assets, liabilities,
revenues and expenses and disclosure of contingent liabilities on the date of the financial statements. Actual
results could differ from the estimates. Any revision to accounting estimates is recognised prospectively in
current and future periods.
Critical accounting estimates are detailed in Note 6.

2.3.

FOREIGN CURRENCY TRANSLATION

Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction.
Exchange differences, if any, arising out of transactions settled during the year are recognised in the
statement of comprehensive income as translation gains or losses.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated
at the closing exchange rates on that date. The exchange differences, if any, are recognised in the statement
of comprehensive income as translation gains or losses and related assets and liabilities are accordingly
revalued in the statement of financial position.

2.4.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand, demand deposits and other short-term highly liquid
investments with original maturities of three months or less with insignificant risk of change in fair value.
Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

28

Financial Statements
2.5.

FINANCIAL ASSETS AND LIABILITIES

In accordance with IFRS 9, all financial assets and liabilities, which include derivative financial instruments
have to be recognised in the statement of financial position and measured in accordance with their assigned
category.

2.5.1. FINANCIAL ASSETS
(a)

Classification and measurement – financial assets

IFRS 9 includes three classification categories for financial assets: measured at amortised cost, measured at
fair value through other comprehensive income (FVOCI), or measured at fair value through profit and loss
(FVTPL). All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL. In
addition, on initial recognition the EFSF may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise [IFRS9 § 4.1.5].
A financial asset is classified into one of these categories on initial recognition, based on the business model
assessment and the contractual cash flows [IFRS9 9.4.1.1].
i) Business model assessment
The EFSF assesses the objective of the business model in which a financial asset is held at a portfolio level,
because this best reflects the way each group of assets is managed, and information is provided to
management.
ii) Assessment whether the contractual cash flows are solely payments of principal and interest (SPPI
test)
In assessing whether the contractual cash flows are solely payments of principal and interest, the EFSF
considers the contractual terms of the instrument. This includes assessing whether the financial asset
contains a contractual term that could change the timing or amount of contractual cash flows such that it
would not be consistent with a basic lending arrangement.
iii) Financial assets classification
The classification and measurement of financial assets is as follows:
•

•

(b)

Loans to euro area member states are classified and measured at amortised cost under IFRS 9
because they are managed in a business model of collecting contractual cash flows and the EFSF
has no intention and expectation of selling these loans. The SPPI test has returned the eligibility
for amortised cost measurement of all the EFSF loans. The EFSF conducts tests to verify such
eligibility on each new exposure.
Treasury financial assets are classified and measured as financial assets at fair value through other
comprehensive income under IFRS 9 because both collecting contractual cash flows and selling the
financial assets are an integral part of the business model.
Credit risk and impairment – financial assets

IFRS 9 applies a forward-looking ‘expected credit loss’ (ECL) model. Following this model, a first assessment
is made to determine whether the credit risk attached to each financial asset has significantly increased and
a second assessment is made to determine the expected credit loss. This requires considerable judgement
on how changes in economic factors affect ECLs.

29

Financial Statements
i)

Significant increase in credit risk (SICR)

Under IFRS 9, the significant increase in credit risk (i.e. risk of default) on a financial asset is determined in
comparison to the initial recognition of the asset. This is a key aspect for determining ECL on loans granted
by the EFSF, especially in the context of crisis resolution and financial assistance to Member States, which
are also the shareholders of the entity.
The EFSF considers reasonable and supportable information that is relevant and available without undue
cost or effort, including both quantitative and qualitative information and analysis based on the EFSF’s
historical experience, monitoring systems and forward-looking information.
At each reporting date, the EFSF assesses whether the credit risk on a financial asset has increased
significantly since initial recognition in order to classify the financial asset as either Stage 1, Stage 2 or
Stage 3 (counterparty default – refer to sub note ‘v’ in the same section below).
When making the assessment, the EFSF evaluates the credit risk of each financial asset through a
combination of short-term and medium to long-term parameters, as detailed below:
•

•

in the case of EFSF loans to euro area member states, an approach based on qualitative and nonstatistical quantitative information available is deemed to be the most adequate to assess the
credit risk. The features of the EFSF’s loans, the lending conditionality and a unique access to
borrower’s information, enable the Company to follow a primarily qualitative approach in the
assessment of default risk over the lifetime of its exposures [IFRS9 9.B5.5.18];
on the Treasury financial assets, the EFSF assumes that the credit risk on a financial instrument has
not increased significantly since initial recognition if the financial instrument within the investment
portfolio is determined to have low credit risk at reporting date. An external rating of 'investment
grade' (BBB-/Baa3 and above) is considered as indicator of a low credit risk.

Qualitative measures of SICR
The idiosyncratic features of EFSF loans, their unique institutional status and all conditionality attached to
the financial assistance, make these loans a special type of financial assets. Direct access to relevant
information and the unique relationship with its Member States, enables the Company to follow a primarily
qualitative approach in the credit risk assessment of its exposures. In particular, EFSF’s financial assistance
to Member States is strictly linked to an adjustment programme that the beneficiary Member State (BMS)
commits to in order to overcome imbalances, restore sustainability, and repay the Company.
The EFSF is therefore able to rely on unique internal risk management and monitoring tools and on a large
array of information, which may not be publicly available.
The EFSF Management, through its Internal Risk Committee, reviews such information every quarter and
makes the final assessment about any significant increase in the credit risk attached to each lending
exposure.
Quantitative measures of SICR
The EFSF makes use of its internal risk monitoring tools together with other relevant sources of information
to identify any significant increase in credit risk and default status of its exposures.
The EFSF monitors the performance and economic condition of its borrowers and its vulnerabilities and
detects early warning signals about their repayment capacity. The monitoring is based on a wide set of
considerations, like the government borrowing needs and economic strength, debt structure, fiscal position,
financial sector and real estate developments, private sector leverage and credit flows.

30

Financial Statements
As such, the assessment reflects a wide range of macroeconomic variables relevant to credit risk in the
context of sovereign lending, including short-term liquidity risks, medium to long-term vulnerabilities and
debt sustainability. The results are used to produce an internal credit risk categorisation of the BMS, which
then links into the stage allocation as per IFRS 9.
As a result of this process, as of 31 December 2021, all exposures to BMS have been assessed in Stage 1
under IFRS 9. For all lending exposures, no SICR occurred compared to the credit risk level at inception of
the transactions. The EFSF has not identified any significant indicators that would contradict the conclusion
reached on stage allocation, neither on the opening balances nor as at reporting date.
For all three EFSF loan exposures, notwithstanding varying modalities, timing and context, the
implementation of the macroeconomic measures attached to the financial assistance and the successful
implementation of the programmes have contributed to lowering BMS’ credit risk since their respective loan
inceptions. The economic development of the BMS as compared to the inception of the EFSF programmes
further evidences that BMS do not exhibit a significant increase in credit risk since inception. All BMS have
regained full market access, which is one of the key goals of EFSF lending.
Treasury financial assets
For its investment portfolio (treasury financial assets), the EFSF performs an assessment of the instruments
held considering external ratings and any other information deemed relevant in the assessment of the issuer
credit risk.
Given its strict investment policy, the EFSF holds only highly rated instruments in its portfolios. Consequently,
the probability of significant credit losses on those portfolios is very low.
An external rating of 'investment grade' (BBB-/Baa3 or above) is considered as an indicator that the financial
instrument has low credit risk and thus serves as a criterion for determining SICR.
The EFSF considers that a significant increase in credit risk for a financial instrument occurs when there is a
downgrade of its issuer’s rating by three or more notches, unless the financial instrument within the EFSF’s
investment portfolio is considered to exhibit low credit risk at the reporting date as described above.
For determining if significant increase in credit risk occurred, the EFSF uses the lowest rating among the three
largest external rating agencies: Standard and Poor’s, Moody’s and Fitch.
During the pandemic crisis, Risk Management performed credit risk scenarios of EFSF investment
counterparties whose ratings are more likely to face downward rating pressures due to the COVID-19
pandemic. The analysis aimed to show the results of medium-term scenarios of how the credit rating of the
EFSF investment portfolio counterparties could change in the future. The scenarios were useful to see
where the current EFSF investment portfolio was particularly vulnerable from the perspective of potential
credit rating downgrades. The analysis did not identify significant increase in credit risk generated by the
impact of the COVID-19 pandemic on the EFSF investment portfolio. As of 31 December 2021, there were
no securities portfolios.

ii) Measurement of the expected credit loss (ECL)
The ECL is a probability-weighted estimate of credit losses and is measured as follows:
•

•

financial assets that are not credit-impaired at the reporting date: the present value of all cash
shortfalls – i.e. the difference between the cash flows due as per contract, and the cash flows that
the Institution expects to receive (discounted at the effective interest rate). This refers also to
assets that are not credit-impaired but for which significant increase in credit risk has occurred.
financial assets that are credit-impaired at the reporting date: the difference between the gross
carrying amount and the present value of estimated future cash flows;

31

Financial Statements
For financial assets not showing a SICR compared to inception (Stage 1), the ECL is measured over a 12-month
period. For financial assets showing a SICR (Stage 2) or a default status (Stage 3), the ECL is measured over
their lifetime.
iii) Inputs and assumptions for ECL measurement
Inputs
While assessing the ECL, lenders must use a wide range of information. Such information must be relevant
to the lender and specific to its environment and features.
Given the unique features of the EFSF loans, the attached conditionality and the limited number of exposures
(albeit significant in value) along with privileged access to a large array of borrowers’ information, the EFSF
adopts a primarily qualitative approach for the purpose of the estimation of the ECL. In particular, the EFSF
relies on the following sources of information:
•
•
•
•

•

Risk assessment of the short-term liquidity position of the country, its market access, the mediumterm economic and financial outlook and the long-term sustainability of public debt;
Analysis provided by other international financial institutions (IFIs) to the ESM. The use of several
different sources helps to better capture of the BMS’s ability to repay its financial obligations;
Consideration of the current political environment and the possible measures available to increase
the BMS repayment capacity, at both national and EU level;
Consideration of the BMS’s possible willingness to repay the loan or to enter into any remedy
actions should financial difficulties occur, based on the current and expected political
environment;
The combination of any available market information, to complement the estimation of the
lifetime expected credit losses.

Assumptions
A main feature of the approach used to measure the ECL in the EFSF environment, together with the selected
option of using a primarily qualitative approach, is that the probability of default of a BMS in the short-term
period (12 months) on the EFSF lending is nil. This is based on several institution-specific features:
•

•

•
•

The unique nature of the loans, also linked to the fact that such loans are granted at highly
favourable terms, with a view to boosting the recovery of the BMS. It is therefore an essential
priority for the BMS to maintain an accessible and active channel with the Company and preserve
a healthy relationship and a positive performance. Moreover, the difference compared to standard
lending activities must be underlined. The EFSF does not only lend money, it offers financial
assistance to BMS with the purpose of safeguarding financial stability within the euro area;
The ability of the EFSF to access all needed information about the BMS, which gives the Company
a higher predictive power compared to market indicators, reducing the degree of uncertainty over
the short-term period;
The constant interaction of the EFSF with the ESM and the possible support of other IFIs, which
are expected to address severe liquidity distress of euro area member states;
The post-programme surveillance that, with the support of other institutional creditors,
complements the EFSF monitoring system with insights on the economic and budgetary
developments of the countries, which is crucial to gauging its repayment capacity.

These elements and the specific context of the financial assistance to Member States bring the credit
monitoring of the EFSF to a level that other lenders may not reach and neutralise the risk on the short-term
horizon.

32

Financial Statements
Additional inputs into measurement of ECLs
For EFSF investment portfolios, external benchmark information (like credit ratings and associated
probabilities of default) is used as a supplement to the internally produced data and assumptions (e.g.
recovery rates).
iv) Forward-looking information
Under IFRS 9, the EFSF incorporates forward-looking information into both its assessment of whether the
credit risk of an instrument has increased significantly since initial recognition and its measurement date of
the ECL. The Company uses a combination of non-statistical quantitative and qualitative information in both
the stage allocation and the ECL measurement on the Loans to Member States. On the securities portfolio,
a model based on external credit ratings of quoted instruments is used to calculate probability of default
(PD) and loss given default (LGD) on the exposure at default (EAD) at reporting date.
The assessment of any increase in credit risk, which in turn leads to staging, includes the use of all relevant
information from processes used by the EFSF to measure and monitor credit risk. These processes are
regularly reviewed such that all exposures are allocated to a credit category on the most recent review or
other information. Similarly, the ECL estimation captures a wide range of forward-looking information linked
to the credit risk performance of the BMS and its overall economic conditions over the relevant time horizon.
v) Definition of default
Under IFRS 9, the EFSF considers a financial asset to be credit impaired (Stage 3) when default is considered
to have occurred with regard to a particular BMS, when either or both of the following criteria are met:
•

•

past due criterion, which is defined based on the unique characteristics of EFSF loans and
determines that, as foreseen by IFRS 9, the Institution can envisage the possibility of rebutting the
90 days presumptions of the standard to a maximum period of 180 days for its exposures to BMS.
For instance, when a delay is considered the consequence of a technical situation (as defined in
IFRS 9.B5.5.37 as well as in Article 178 1(b) of Regulation (EU) No 575/2013) or a longer than
expected completion of certain administrative procedures. In all cases, EFSF will duly assess
whether the past due indicates that the asset is credit impaired and whether a default should be
recognised;
unlikely to pay criterion, according to which the borrower is considered as unlikely to pay its credit
obligations in full, without realisation of collateral, regardless of the existence of any past-due
amount or of the number of days past due. Given the specific context of financial assistance to
sovereigns, the likelihood of default cannot be assessed with standard market indicators; hence, it
should be assessed in relation to the EFSF mandate.

The EFSF uses institution-specific elements (e.g. BMS performance in implementing the agreed
macroeconomic measures), as well as market information when applicable and relevant. Factual indicators
or events (e.g. breach of covenants) have a relevant impact on the assessment of the likelihood to default.
Other indicators, like the non-payment of an obligation to other creditors, are duly considered and assessed
on a case-by-case basis.
In general, a BMS is considered unlikely to pay when the exposure to the BMS shows a significant and nonrecoverable decrease in future cash flows compared to the contractual cash flows, or when the exposure to
the BMS is impaired as a result of creditors’ agreement following borrower’s difficulties (e.g. haircut granted).
Inputs into the assessment of whether a financial instrument is in default, and their significance, may vary
over time to reflect changes in circumstances.

33

Financial Statements
vi) Impact on expected credit loss and reconciliation
IFRS 9 requires a loss allowance to be recognised at an amount equal to either 12-month ECLs or lifetime
ECLs. The EFSF calculates 12-month ECLs, except when a significant increase in credit risk occurs on a financial
asset, which would then require the ECL calculation on a lifetime basis [IFRS9 9.5.5.4].
No expected credit loss was recorded on financial assets as of 31 December 2021.
(c) Contract modification and financial asset derecognition
The contractual terms of a loan may be modified for several reasons, including factors not related to a
current or potential credit deterioration of the borrower (e.g. the re-profiling of a loan to support the
financial recovery of the BMS in parallel with agreed macroeconomic measures). An existing loan whose
terms have been modified may be derecognised, with a renegotiated loan recognised as a new loan at fair
value.
Under IFRS 9, when the terms of a financial asset are modified and the modification does not result in
derecognition of the asset, the determination of whether the asset’s credit risk has increased significantly
reflects the difference between:
•
•

the remaining lifetime credit risk, based on the modified terms; and
the remaining lifetime credit risk based on parameters at initial recognition and original
contractual terms.

IFRS 9 contains specific guidance for the accounting when the modification of a financial instrument not
measured at FVTPL does not result in derecognition. Under IFRS 9, the lender recalculates the gross carrying
amount of the financial asset (or the amortised cost of the financial liability) by discounting the modified
contractual cash flows at the original effective interest rate and recognising any resulting adjustment as a
modification gain or loss in profit or loss.
When a contract modification occurs, the EFSF compares the initial terms with the amended contract and
assesses whether the modification:
•
•
•
•

is substantial,
requires derecognition,
is done in relation to a SICR,
impacts the ECL assessment on the financial asset.

As of 31 December 2021, no modification gain or loss related to the above requirements was identified. Any
re-profiling of lending contracts that occurred on existing exposures was made in the context of the financial
assistance and in response to agreed macroeconomic measures. There was no modification done in response
of any specific credit deterioration, borrower’s difficulty or SICR. Any re-profiling of an EFSF loan
reimbursement schedule is designed to be neutral for the Institution and therefore to have a non-substantial
effect when compared to the original contractual terms.
IFRS 9 does not specify thresholds for defining whether a modification is substantial, but it includes guidance
on such threshold for modification of a liability in [IFRS9.B3.3.6]. The EFSF follows that guidance to perform
the assessment.

34

Financial Statements
2.5.2. FINANCIAL LIABILITIES
The Company holds its financial liabilities at amortised cost. Financial liabilities are derecognised when
extinguished.
(a) Debt securities in issue
Debt securities in issue are recognised initially at fair value, net of transaction costs incurred, and are
subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and
the redemption value is recognised in the statement of comprehensive income over the period of the
borrowings using the effective interest rate method.
(b) Prepaid Margin
Prepaid Margin, deducted from the loan amount at disbursement date and held as cash reserve, has been
paid out to the borrowing countries and may be paid out to the Member State Guarantors. The proportional
share of the margin before 21 July 2011 is due to the Member State Guarantors as a remuneration; the
proportional share of the margin after 21 July 2011 has been fully reimbursed to the borrowing countries as
a rebate.
The Prepaid Margin amount paid out to the borrowing countries and the Member State Guarantors should
include the initial amount net of the return on investments made from the Prepaid Margin.
The EFSF reports the nominal amount of the Prepaid Margin as ‘Liability against euro area member states’
in the statement of financial position. The performance given by the underlying Treasury financial assets
portfolio invested from the proceeds of the Margin is also added in the same caption.
(c) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course
of business from suppliers. Trade payables are recognised initially at the transaction price and subsequently
measured at amortised cost using the effective interest rate method.

2.6.

PREPAYMENTS AND DEFERRED CHARGES

Prepayments are invoices received and paid in advance as the underlying expense is not or not exclusively
related to the reporting period. Deferred charges are composed of invoices received during the year but
relating in part to the subsequent year.

2.7.

PROVISIONS

Provisions are recognised when the Company has a present legal or constructive obligation as a result of
past events, and it is more likely than not that an outflow of resources will be required to settle the obligation
and the amount has been reliably estimated.
Where there are several similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a rate that reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to passage of time is recognised as interest
expense.

35

Financial Statements
2.8.

SHARE CAPITAL

Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as
a deduction, net of tax, from the proceeds.

2.9.

LEGAL RESERVE

In accordance with Luxembourg Company law, the Company is required to transfer a minimum of 5% of its
net profit for each financial year to a legal reserve. This requirement ends once the balance on the legal
reserve reaches 10% of the issued share capital. The legal reserve is not available for distribution to the
shareholders.

2.10.

INTEREST INCOME AND EXPENSE

Interest income and expense for all interest-bearing financial instruments are recognised within interest
income and interest expense in the statement of comprehensive income using the effective interest rate
method.
The effective interest rate method is a method of calculating the amortised cost of a financial asset or a
financial liability and of allocating the interest income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through
the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying
amount of the financial asset or financial liability. When calculating the effective interest rate, the Company
estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment
options) but does not consider future credit losses. The calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest rate, transaction
costs and all other premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an
impairment loss, interest income is recognised using the initial effective interest rate to discount the future
cash flows for the purpose of measuring the impairment loss.

2.11.

STAFF COST

On 31 December 2021 and 31 December 2020, the EFSF did not employ any staff and depends on the staff
of the ESM. The EFSF has entered into a Service Level Agreement (SLA) with the ESM for the provision of
administrative services and other support services to assist the EFSF in performing its activities.

2.12.

TAXATION

The Company is domiciled in Luxembourg. As per the law dated 9 July 2010, there is no corporate income
tax, net wealth tax, indirect tax or capital gains tax payable by the Company in Luxembourg.

36

Financial Statements
3. Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year, except for the
following new and amended IFRS and IFRIC interpretations:

ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
The following interpretations as well as the amendments to and revision of existing standards became
effective for the financial statements as of 1 January 2021:
Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.
On 27 August 2020, the IASB published Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16. With publication of the phase two amendments, the IASB has completed
its work in response to IBOR reform.
The amendments provide temporary reliefs which address the financial reporting effects when an interbank
offered rate (IBOR) is replaced with an alternative near risk-free interest rate (RFR).
The amendments are effective for annual periods beginning on or after 1 January 2021.
This change had no impact on the EFSF’s financial statements.

NEW ACCOUNTING PRONOUNCEMENTS
Certain new standards and interpretations have been issued that are mandatory for the annual periods
beginning on or after 1 January 2022 or later, and which EFSF has not early adopted. None of the below
standards are expected to have any material impact on the financial statements when adopted:
Annual improvements 2018-2020 cycle (amendments on IFRS 1, IFRS 9 and IFRS 16) and narrow scope
amendments to IFRS 3, IAS 16, IAS 37
• Amendments to IFRS 3 “Business Combinations” – update a reference in IFRS 3 to the
Conceptual Framework for Financial Reporting without changing the accounting
requirements for business combinations.
• Amendments to IAS 16 “Property, plant and equipment” - prohibit an entity from deducting
from the cost of property, plant and equipment amounts received from selling items
produced while the entity is preparing the asset for its intended use. Instead, the entity will
recognise such sales proceeds and related cost in profit or loss.
• Amendments to IAS 37 “Provisions, contingent liabilities and contingent assets” - specify
which costs an entity includes when assessing whether a contract will be loss-making.
These amendments were endorsed by the EU on 28 June 2021 and are effective for annual
periods beginning on or after 1 January 2022.

37

Financial Statements
4. Financial risk management
4.1.

CREDIT RISK

Credit risk arises mainly from loans granted to the beneficiary euro area member states and also from
investments in Treasury financial assets related to the support programmes.
Given the nature of the EFSF’s mandate, where credit risk from lending arises as a result of activities
performed in support of euro area member state borrowers under a Financial Assistance Facility Agreement,
the credit risk in the EFSF’s lending exposure must be accepted. As such, financial assistance in line with the
purpose of the EFSF is granted to euro area member states experiencing severe financial problems, if
indispensable to safeguard the financial stability of the euro area as a whole and of its members. Therefore,
the assistance aims at providing financial support according to rules that differ from those of financial
markets, meaning the overall aim is to accompany the euro area member state borrower to a return to public
financial stability.
The determination and close monitoring of debt sustainability and the conditionality attached to all financial
assistance to borrower euro area member states, as negotiated with the European Commission in liaison
with the ECB and whenever possible the IMF, are aimed at addressing and substantially reducing credit risk.
Moreover, the EFSF applies an early warning procedure to monitor the ability of the euro area member state
borrower to repay its obligations.
From an investor’s point of view, the loan programmes were carefully designed to assure the EFSF’s
creditworthiness. To mitigate the exposure to the credit risk of the euro area member state borrower, the
Company has adopted several credit enhancement measures, namely:
•
•
•

irrevocable and unconditional guarantees granted by euro area member states on the issued
bonds;
a general Cash Reserve from the loan (equal to the sum of a service fee and the present value
of the Margin) which can be used to fund shortfalls on all loans made by the EFSF;
a Loan Specific Cash Buffer from the loan and by retaining the Negative Carry payment.

The Loan Specific Cash Buffer, in relation to loans under EFSF 1, ensures that the principal amount of debt
securities (together with the interest) issued to fund that loan is at the date of issuance fully covered by the
sum of:
• the aggregate amount of guarantees of Guarantors with the highest quality rating (taking into
account the 120% guarantee coverage);
• the cash reserve retained from the Loan (financed out of Prepaid Margin and the Service Fee);
• the Negative Carry payment retained in respect of such Loan;
• the applicable Loan Specific Cash Buffer and;
• any other credit enhancement (if any) that is adopted pursuant to the Framework Agreement.
Under the amended EFSF 2.1 framework, adopted by the Board of Directors on 27 October 2011, the credit
enhancement mechanism was changed to focus on a higher level of over-guarantee of up to 165%, which
meant that the above-mentioned general Cash Reserve and Loan Specific Cash Buffer were no longer
required.

4.1.1. RISK CONCENTRATIONS: EXPOSURE TO CREDIT RISK WITHOUT TAKING ACCOUNT OF
ANY COLLATERAL AND OTHER CREDIT ENHANCEMENTS
The following table shows the maximum exposure to credit risk for the components of the statement of
financial position without considering any collateral and other credit enhancements. For on-balance-sheet
positions, the exposures set out hereafter are based on net carrying amounts as reported in the statement
of financial position.

38

Financial Statements

(in € '000)

Maximum credit exposure
31.12.2021
31.12.2020

Cash and cash equivalents
Loans to euro area member states
Treasury financial assets
Prepayments and other receivables
On balance sheet credit risk exposure

2,585,075
185,891,476
123
188,476,674

7,103,441
185,066,378
1,551,117
214
193,721,150

4.1.2. CREDIT RISK ON LOANS TO EURO AREA MEMBER STATES
The following table shows the maximum exposure to credit risk for the components of the loans to countries
in financial difficulties, by geography of counterparties.
Credit exposure
31.12.2021
31.12.2020

(in € '000)
Loans under EFSF 1
- to Ireland
- to Portugal
Loans under EFSF 2.1
- to Ireland
- to Portugal
- to Greece
Loans to euro area member states

4,229,822
6,148,267

4,236,447
6,199,068

14,351,667
19,295,239
141,866,481
185,891,476

14,358,779
19,317,294
140,954,790
185,066,378

IFRS 9 requires recognising a loss allowance equal to either 12-month ECLs or lifetime ECLs. The EFSF
calculates 12-month ECLs, except when a significant increase in credit risk occurs on a financial asset, which
would then require the ECL calculation on a lifetime basis [IFRS9 9.5.5.4].
The stage allocation returned Stage 1 for all lending exposures. No Expected Credit Loss was recorded on
lending exposures as of 31 December 2021.

4.1.3. CREDIT RISK ON TREASURY FINANCIAL ASSETS
For treasury financial assets, the EFSF established strict investment guidelines that focus on low-risk asset
classes and issuers with the highest credit standings in euro. The guidelines include a limit structure to
mitigate the maximum exposure per counterparty. As of 31 December 2021, the EFSF did not hold any
treasury financial assets in its balance sheet.

4.1.4. CREDIT RATINGS
The following tables show the breakdown of the financial assets by credit rating from Moody’s, Standard &
Poor’s, and Fitch. In respect of debt securities including fixed-income securities, the credit ratings of
individual issuances (or in the case of short-term securities their long-term rating equivalents) are presented.
If issuance ratings are not available, the issuer’s rating is presented. For other financial assets, the credit
ratings of the counterparties are presented.

39

Financial Statements

Moody’s

Standard &
Poor’s

Fitch

Balance as of
31.12.2021

Cash and cash equivalents(1)

NR

NR

NR

2,585,075

Loans to euro area member
states

A2

AA-

A+

18,581,489

Baa2
Ba3

BBB
BB

BBB
BB

25,443,506
141,866,481

Ba3

BB-

BB

123

(in € '000)

Prepayments and other
receivables
Total

(in € '000)
Cash and cash equivalents(1)

Loans to euro area member
states

Treasury financial assets

Prepayments and other
receivables
Total

188,476,674

Moody’s

Standard &
Poor’s

Fitch

Balance as of
31.12.2020

NR
Aa2

NR
AA+

NR
NR

6,958,542
144,899

A2

AA-

A+

18,595,226

Baa3
Ba3

BBB
BB-

BBB
BB

25,516,362
140,954,790

NR
Aaa
Aa2
Aa2

AAA
AA
AA
AA

NR
AA
AA
NR

50,097
66,758
299,827
1,134,435

Ba3

BB-

BB

214
193,721,150

(1) ‘Cash and cash equivalents include balances placed with Eurosystem central banks, which do not have
ratings

40

Financial Statements
4.2. MARKET RISK
At present, EFSF loans are longer in maturity than its funding, hence there is a structural maturity mismatch
which gives rise to refinancing risk.
Until November 2011, the EFSF used a back-to-back approach to funding, whereby liabilities were matched
exactly to assets. It then adopted a diversified funding strategy. Under the new strategy, funds are not
attributed directly to a particular loan or loans, but pooled to support disbursements to beneficiary countries.
A combination of long and short-term instruments is used, and any cash raised in excess of lending
requirements serves as a liquidity buffer, a key component of this approach. As a consequence of the
diversified funding strategy, the EFSF accepts mismatches between its assets and its liabilities. The average
cost of funding is, however, invoiced to beneficiary countries, neutralising the EFSF’s structural interest rate
exposure in financial terms.
The financial assets for the credit enhancement portfolios follow a strict maturity profile in accordance with
the related funding programme. The EFSF’s financial assets are in practice generally held to maturity.
Although market risk is assumed on the portfolio from one accounting period to the next, the impact on the
EFSF over the life of the investments is therefore limited.

4.2.1. INTEREST RATE RISK
Securities issued, and the treasury financial assets, are fixed or floating rate products. Loans and receivables
granted to the BMS are also fixed or floating-rate products, perfectly reflecting the cost of funding the EFSF
incurs in financing these loans.
As at 31 December 2021, the sensitivity to a general movement in the interest rate yield curve on the treasury
financial assets portfolio was € nil in fair-value reserve for a one basis-point parallel increase in rates (2020:
€-0.1 million). Investments are all managed under formal guidance that specifies a maximum maturity date
for each tranche of credit enhancement. Although the stated interest rate risk applies to EFSF equity on an
accounting period basis via the treasury financial assets rules (refer to Note 9), it is not a risk that is actively
managed or mitigated, since the programmes concerned have stipulated that bonds should be purchased
with proceeds from EFSF issuance and are constrained to certain fixed maturity dates. Additionally,
investment of the periodic coupons from bond holdings and of any cash buffer takes place from time to time.

4.2.2. CURRENCY RISK
All the debt securities issued, and the loans and receivables granted to the programme countries, as well as
the treasury financial assets portfolio, are denominated in euros. The Company does not therefore face any
currency risk.

4.3.

LIQUIDITY RISK

The EFSF monitors its liquidity position on a regular basis and will honour its obligations under its issued
bonds and bills from proceeds that stem from its support programmes.
The EFSF required payments under its issued bonds and bills benefit from euro area member state
guarantees. There is an established and detailed procedure which governs the operation of these guarantees.
The EFSF makes a demand to euro area member state guarantors under the Deed of Guarantees if it
determines on any date during the calculation period or the cut-off period as defined in the Deed of
Guarantees that it has a cash shortfall in available funds in respect to the payments scheduled to be made
on the relevant due date.

41

Financial Statements
Cash buffers are established in line with the EFSF Framework Agreement and constitute liquid assets from
which the EFSF will be able to assure payments under its issued bonds and bills. Surplus cash held by the
Company over and above the balance required for working capital management is invested in interestbearing current accounts, time deposits, money market deposits and marketable securities. Instruments are
chosen with appropriate maturities and sufficient liquidity to provide adequate headroom, as determined by
EFSF forecasts.
The following table analyses the gross undiscounted cash outflows and inflows on the Company’s financial
assets and liabilities by maturity based on the period remaining between the balance sheet date and the
contractual maturity date. If financial assets and liabilities have undeterminable future cash flows, then only
the known cash flows are presented in the table below.
As at 31 December 2021
(in € '000)
ASSETS
Cash and cash equivalents
Loans to euro area member
states
Prepayments and other
receivables

Up to 12 months

1 to 5 years

Over 5 years

Total

2,585,075

-

-

2,585,075

2,078,086

16,304,619

185,967,072

204,349,777

123

-

-

123

Total financial assets

4,663,284

16,304,619

185,967,072

206,934,975

LIABILITIES
Debt securities in issue
Trade and other payables

16,558,399
8,370

85,893,971
-

106,599,492
-

209,051,862
8,370

Total financial liabilities

16,566,769

85,893,971

106,599,492

209,060,232

Net of financial position

(11,903,485)

(69,589,352)

79,367,580

(2,125,257)

42

Financial Statements

As at 31 December 2020
(in € '000)
ASSETS
Cash and cash equivalents
Loans to euro area member
states
Treasury financial assets
Prepayments and other
receivables

Up to 12 months

1 to 5 years

Over 5 years

Total

7,103,441

-

-

7,103,441

2,318,348

14,230,138

190,033,832

206,582,318

1,492,763

-

-

1,492,763

214

-

-

214

10,914,766

14,230,138

190,033,832

215,178,736

22,678,620

79,687,738

112,686,483

215,052,841

1,410,085

-

-

1,410,085

9,739

-

-

9,739

Total financial liabilities

24,098,444

79,687,738

112,686,483

216,472,665

Net of financial position

(13,183,678)

(65,457,600)

77,347,349

(1,293,929)

Total financial assets
LIABILITIES
Debt securities in issue
Liability against euro area
member states
Trade and other payables

4.4. CAPITAL MANAGEMENT
The Company’s objective when managing capital is safeguarding its activity. The Company’s lending costs
reflect funding costs and operational costs. The Company is entitled to charge up-front service fees and
annual service fees to cover its operational costs. The shareholders, if necessary and as occurred in 2011, are
willing to raise capital to support the Company’s capital structure.
The Management regularly monitors the Company’s capital structure based on the ratio of total
shareholders’ equity excluding revaluation reserve per ordinary shares. On 31 December 2021, this ratio was
2,718% (2020: 2,791%).
The Company shall be dissolved and liquidated when its purpose is fulfilled, in other words, when the
Company has received full repayment of the financing granted to the Member States and has repaid its
liabilities under the financial instruments issued and financing arrangements entered into.

4.5. SICR AND ECL ASSESMENT IN THE CONTEXT OF COVID-19 PANDEMIC
During 2021, the EFSF risk assessment and impairment assessment methodology duly captured the severe
impact from the pandemic, together with the related risks and the recent developments. In particular, the
assessment focused on whether the effects of the pandemic triggered a significant increase in credit risk
(SICR) and if it would materialise in an expected credit loss (ECL), in accordance with IFRS 9 requirements. In
that context, a complete assessment of a wide range of inputs was performed, to ensure a comprehensive
assessment of all short-term and medium-to-long term factors and consequences. As described above, inputs
include short-term economic data, vulnerability indicators, liquidity balances and market indicators, together
with medium-to-long term risks, policy measures and mitigating factors.

43

Financial Statements
All those factors, and in particular the strong liquidity position, the market access of BMS, and the economic
rebound in 2021, are expected to adequately balance the effects of the pandemic and address the related
risks. The liquidity risk can be a major concern in a crisis context, therefore the positive funding performance
of BMS, including the vulnerable ones, represent a remarkable balancing element. Because of this and all
elements included, as of 31 December 2021, the assessment did not identify a significant increase in credit
risk on its exposures to BMS. The overall credit quality of the EFSF loans portfolio remained relatively stable.

5. Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal, or in its absence, the
most advantageous market to which the Company has access at that date.
When applicable, the Company measures the fair value of an instrument using the quoted price in an active
market for that instrument. A market is regarded as active if transactions for the asset or liability take place
with sufficient frequency and volume to provide pricing information on an on-going basis.
Where the fair values of financial assets and financial liabilities cannot be derived from active markets, they
are determined using valuation techniques that include the use of mathematical models. The input to these
models is taken from observable markets where possible, but where this is not feasible, a degree of
judgement is required in establishing fair values. The chosen valuation technique incorporates all the factors
that market participants would take into account in pricing a transaction.
The Company measures fair values using the following fair value hierarchy that reflects the significance of
the inputs used in making the measurements:
•
•
•

Level 1 – Quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly or indirectly
Level 3 – Inputs for the asset or liability that are not based on observable market data

The Company recognises transfers between levels of the fair value hierarchy as of the end of the reporting
period during which the change has occurred.

44

Financial Statements
The following tables set out a comparison of the fair value, by the level of the fair value hierarchy, and the
carrying amounts of the Company’s financial assets and financial liabilities that are carried in the financial
statements. The tables do not include the fair value of non-financial assets and non-financial liabilities. For
financial instruments not carried at fair value, fair values are provided for disclosure purposes only and do
not impact the balance sheet or income statement.

Fair value
Level 1

Level 2

Level 3

Assets not
carried at
fair value

Total

Carrying
amount

-

-

-

2,585,075

2,585,075

2,585,075

Prepayments and
other receivables

-

-

-

123

123

123

Total

-

-

-

2,585,198

2,585,198

2,585,198

Loans to euro area
member states(1)

-

-

-

185,891,476

185,891,476

185,891,476

Total

-

-

-

185,891,476

185,891,476

185,891,476

Total financial assets

-

-

-

188,476,674

188,476,674

188,476,674

159,129,063

43,565,795

-

-

202,694,858

187,214,745

Liability against euro
area member states

-

478,700

-

-

478,700

478,700

Trade and other
payables

-

-

-

8,370

8,370

8,370

Total

159,129,063

44,044,495

-

8,370

203,181,928

187,701,815

Total financial
liabilities

159,129,063

44,044,495

-

8,370

203,181,928

187,701,815

31 December 2021
(in € '000)
Assets not carried at
fair value:
Cash and cash
equivalents

Assets carried at
amortised cost:

Liabilities carried at
amortised cost:
Debt securities in
issue

45

Financial Statements

Fair value
Level 1

Level 2

Level 3

Assets not
carried at
fair value

Total

Carrying
amount

Treasury financial
assets

1,551,117

-

-

-

1,551,117

1,551,117

Total

1,551,117

-

-

-

1,551,117

1,551,117

-

-

-

7,103,441

7,103,441

7,103,441

Prepayments and
other receivables

-

-

-

214

214

214

Total

-

-

-

7,103,655

7,103,655

7,103,655

Loans to euro area
member states(1)

-

-

-

185,066,378

185,066,378

185,066,378

Total

-

-

-

185,066,378

185,066,378

185,066,378

1,551,117

-

-

192,170,033

193,721,150

193,721,150

186,817,872

31,186,871

-

-

218,004,743

191,350,731

Liability against euro
area member states

-

1,560,524

-

-

1,560,524

1,553,915

Trade and other
payables

-

-

-

9,739

9,739

9,739

Total

186,817,872

32,747,395

-

9,739

219,575,006

192,914,385

Total financial
liabilities

186,817,872

32,747,395

-

9,739

219,575,006

192,914,385

31 December 2020
(in € '000)
Assets carried at fair
value:

Assets not carried at
fair value:
Cash and cash
equivalents

Assets carried at
amortised cost:

Total financial assets
Liabilities carried at
amortised cost:
Debt securities in
issue

(1)

Loans to euro area member states
The EFSF plays a unique role in providing financial assistance support to beneficiary Member States. The EFSF
financing features policy conditions that require beneficiary Member States to implement macroeconomic
and structural policies and are an integral part of the EFSF financing support. These measures aim to help
beneficiary Member States to resolve their financial needs while safeguarding the EFSF resources.
In light of this specificity, the fair value of the EFSF loans to euro area member states is not relevant.
Assets for which carrying value approximates fair value
For financial assets and financial liabilities that are liquid or have a short-term maturity (under three months),
it is assumed that the carrying amount approximates their fair value.

46

Financial Statements
Assets and liabilities recorded at fair value
Published price quotations in an active market are the first source for determining the fair value of a financial
instrument. For instruments without an available market price, fair values are estimated using valuation
techniques or models based whenever possible on observable market data prevailing at the balance sheet
date.
Debt securities in issue
Published price quotations in an active market are the first source for determining the fair value of the debt
securities in issue. If public price is not available, especially for private placement in the case of back-to-back
funding, the fair value is determined using valuation techniques with observable inputs. For such cases, the
fair value is calculated using a discounted cash flow model which takes into account specific factors such as
the funding cost of other debt securities in issue with available published price quotations.
Liability against euro area member states
The item ‘Liability against euro area member states’ represents amounts collected and held by the EFSF and
which are due to euro area member states, such as the margin in relation to the financial assistance
programmes under EFSF 1 and the guarantee commission fee. Since the amounts are invested until their
payment is due, the fair value is determined based on the fair value of the underlying investments. This fair
value will not necessarily reflect the final liability due at payment date.

6. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Up-front service fee amortisation under EFSF 2.1
For the loans granted to Ireland, Greece, and Portugal under EFSF 2.1, the EFSF charged an up-front service
fee of 0.5% of the notional amount of the loan to cover its operational cost. The EFSF recognises the up-front
service fees over a seven-year period, matching them as closely as possible to the economy of the business
and to the occurrences of the expenses to be covered by those fees. In 2021, €2.6 million (2020: €19.7
million) in service fees was recognised in the statement of comprehensive income under interest revenue
calculated using the effective interest method.
Impairment of loans and receivables
The EFSF, in accordance with IFRS 9 requirements, reviews its loans and receivables at each reporting date
to assess whether an impairment loss must be recorded, as described in Note 2.5.1.
For loans to euro area member states, given the EFSF’s specific mandate as described in Note 4.1, judgement
by the Company’s management is required for the SICR assessment and the determination of the ECL. Such
judgement follows specific policies in place to closely monitor the ability of the borrower to repay its
obligations, as described in Note 2.5.1.
The fair value of Loans and receivables at initial recognition
The fair value of the loans to euro area member states at initial recognition is deemed to be the cash
consideration to originate a purchase of the loans including any transaction costs given that these loans to
euro area member states are made in line with the Company’s specific mandate as described in Note 4.1.

47

Financial Statements
7. Cash and cash equivalents
The composition of cash and cash equivalents is as follows:
(in € '000)

31.12.2021

31.12.2020

Cash at bank and in hand

2,585,075

6,958,542

Short-term bank deposits

-

144,899

2,585,075

7,103,441

Total cash and cash equivalents

8. Loans to euro area member states
The following table shows the geographical breakdown of loans per financial assistance programmes and by
borrowing country:

Nominal amount

Carrying value as at
31 December 2021

- to Ireland

4,193,836

4,229,822

- to Portugal

6,127,669

6,148,267

- to Ireland

14,216,833

14,351,667

- to Portugal

19,200,623

19,295,239

- to Greece

130,909,125

141,866,481

Total

174,648,086

185,891,476

Nominal amount

Carrying value as at
31 December 2020

- to Ireland

4,193,836

4,236,447

- to Portugal

6,127,669

6,199,068

14,216,833

14,358,779

(in € '000)
Loans under EFSF 1

Loans under EFSF 2.1

(in € '000)
Loans under EFSF 1

Loans under EFSF 2.1
- to Ireland
- to Portugal

19,200,623

19,318,294

- to Greece

130,909,126

140,953,790

Total

174,648,087

185,066,378

The following table shows the movements of the loans to euro area member states:
(in € '000)

31.12.2021

31.12.2020

Balance as at 1 January
Discount amortisation
Up-front service fee amortisation
Change in accrued interest and loan related fees

185,066,378
8,018
2,556
814,524

183,991,181
12,353
19,681
1,043,163

Balance as at 31 December

185,891,476

185,066,378

From the total balance of ‘Loans to euro area member states’, an amount of €1.0 billion (2020: €1.2 billion)
is due within 12 months and is considered as a current asset. This amount consists entirely of interest and

48

Financial Statements
fee accruals as there are no repayments of nominal amounts due within 12 months. ‘Change in accrued
interest and loan related fees’ includes the change in deferred interest under the financial assistance
programme for Greece for an amount of €1.0 billion (2020: €1.1 billion).

9. Treasury financial assets
Treasury financial assets are mainly composed of a portfolio of debt instruments. The following table shows
the movements in the treasury financial assets:
(in € '000)

31.12.2021

31.12.2020

Balance on 1 January

1,551,117

1,364,885

Additions

-

719,284

Disposals

(1,517,113)

(483,733)

Discount and premium amortisation

(4,300)

6,648

Change in accrued interest

(18,709)

(14,122)

Change in fair value

(10,995)

(41,845)

-

1,551,117

Balance on 31 December

On 31 December 2021, the amortised cost of the treasury financial assets was € nil (2020:
€1.5 billion), against a market value of € nil (2020: €1.6 billion). The differences present the fair-value
unrealised gain as revaluation reserve which amounted on 31 December 2021 to € nil million (2020: €11.0
million).
From the total balance of the treasury financial assets, an amount of € nil (2020: €18.7 million) is due within
12 months and considered as a current asset. This amount represents interest accruals.
The fair values of the treasury financial assets are determined based on quoted market prices which
represent the first level of the fair value hierarchy (refer to Note 5).
There was no change in valuation techniques during the year. The EFSF’s policy is to recognise the transfers
between Levels as of the date of the event or change in circumstances that caused the transfer.

10. Prepayments and other receivables
On 31 December 2021, the prepayments were entirely composed of invoices paid in advance and amounted
to €123,000 (2020: €214,000).

11. Debt securities in issue
The table below discloses details of debt outstanding on 31 December 2021, together with applicable rates
and maturity dates.
Financial assistance
programmes

ISIN code

Nominal Amount
(in € '000)

Maturity date

Coupon

Issues under EFSF 2.1
Ireland

EU000A1G0AD0

3,000,000

04/02/2022

3.500%

Greece

EU000A1G0A57⁽¹⁾

1,140,000

19/12/2022

0.000%

Greece

EU000A1G0A65⁽¹⁾

1,262,000

19/12/2023

0.000%

Greece

EU000A1G0A73⁽¹⁾

1,540,000

19/12/2024

0.000%

49

Financial Statements
Greece

EU000A1G0AQ2⁽¹⁾

1,660,000

19/04/2022

0.000%

Greece

EU000A1G0D05

4,500,000

05/09/2040

1.450%

Greece

EU000A1G0DL7

3,500,000

13/02/2043

1.700%

Greece

EU000A1G0DN3

2,500,000

28/02/2056

2.000%

Greece

EU000A1G0DR4

6,000,000

03/05/2027

0.750%

Greece

EU000A1G0DT0

6,000,000

24/05/2033

1.250%

Greece

EU000A1G0DW4

4,800,000

10/07/2048

1.800%

Greece

EU000A1G0D96

2,000,000

17/07/2053

1.750%

Issues under long-term funding
Long-term

EU000A1G0A16

3,974,350

05/09/2022

2.250%

Long-term

EU000A1G0AJ7

2,500,000

30/03/2032

3.875%

Long-term

EU000A1G0EC4

5,500,000

19/04/2024

0.000%

Long-term

EU000A1G0AT6

3,500,000

03/04/2037

3.375%

Long-term

EU000A1G0BC0

5,000,000

23/05/2023

1.875%

Long-term

EU000A1G0EG5

4,000,000

20/01/2050

0.700%

Long-term

EU000A1G0BJ5

3,000,000

04/09/2034

3.000%

Long-term

EU000A1G0EK7

5,000,000

13/10/2027

0.000%

Long-term

EU000A1G0BL1

1,500,000

03/12/2029

2.750%

Long-term

EU000A1G0EE0

5,000,000

17/10/2029

0.050%

Long-term

EU000A1G0BN7

4,000,000

19/02/2024

2.125%

Long-term

EU000A1G0BQ0

4,500,000

27/06/2024

1.750%

Long-term

EU000A1G0D39

5,000,000

17/10/2023

0.125%

Long-term

EU000A1G0DB8

4,000,000

29/07/2044

2.350%

Long-term

EU000A1G0DC6

3,968,500

20/01/2023

0.500%

Long-term

EU000A1G0DD4

4,500,000

17/02/2045

1.200%

Long-term

EU000A1G0DE2

3,000,000

28/04/2025

0.200%

Long-term

EU000A1G0EF7

3,000,000

17/07/2023

0.000%

Long-term

EU000A1G0DH5

5,000,000

31/05/2026

0.400%

Long-term

EU000A1G0DJ1

4,500,000

31/05/2047

1.375%

Long-term

EU000A1G0DK9

4,988,600

17/11/2022

0.000%

Financial assistance
programmes
Long-term

ISIN code
EU000A1G0DL7

Nominal Amount
(in € '000)
1,500,000

Maturity date
13/02/2043

Coupon
1.700%

Long-term

EU000A1G0DQ6

4,000,000

11/10/2024

0.375%

Long-term

EU000A1G0DV6

3,495,550

11/07/2025

0.500%

Long-term

EU000A1G0DY0

4,500,000

26/07/2027

0.875%

Long-term

EU000A1G0EA8

4,000,000

17/01/2024

0.200%

Long-term

EU000A1G0D70

5,000,000

14/02/2028

0.950%

Long-term

EU000A1G0D88

3,999,800

16/10/2026

0.625%

Long-term

EU000A1G0D62

6,000,000

17/02/2025

0.400%

Long-term

EU000A1G0ED2

4,000,000

10/04/2035

0.875%

Long-term

EU000A1G0EB6

5,000,000

26/01/2026

0.400%

Long-term

EU000A1G0D96

1,000,000

17/07/2053

1.750%

50

Financial Statements
Long-term

EU000A1G0EJ9

4,998,300

15/10/2025

0.000%

Long-term

EU000A1G0EH3

3,000,000

24/04/2023

0.000%

Long-term

EU000A1G0EM3

2,000,000

18/01/2052

0.050%

Long-term

EU000A1G0EL5

5,000,000

20/01/2031

0.000%

Long-term

EU000A1G0EN1

4,000,000

20/07/2026

0.000%

Long-term

EFSFNBOND001⁽²⁾

25,000

31/08/2046

0.771%

Long-term

EFSFNBOND002⁽²⁾

50,000

20/03/2037

1.450%

Long-term

EFSFNBOND003⁽²⁾

27,000

10/05/2055

1.900%

Long-term

EFSFNBOND004⁽²⁾

101,000

11/05/2048

1.820%

Long-term

EFSFNBOND005⁽²⁾

40,000

07/06/2056

1.775%

Long-term

EFSFNBOND006⁽²⁾

30,000

23/03/2048

1.520%

Long-term

EFSFNBOND007⁽²⁾

50,000

20/12/2046

1.582%

Long-term

EFSFNBOND008⁽²⁾

50,000

22/02/2056

1.794%

Long-term

EFSFNBOND009⁽²⁾

125,000

23/02/2056

1.770%

Long-term

EFSFNBOND010⁽²⁾

60,000

15/02/2049

1.495%

Long-term

EFSFNBOND011⁽²⁾

97,000

25/06/2054

1.132%

Long-term

EFSFNBOND012⁽²⁾

30,000

24/03/2054

0.410%

Long-term

EFSFNBOND013⁽²⁾

25,000

10/09/2054

0.420%

Long-term

EFSFNBOND014⁽²⁾

30,000

24/09/2053

0.285%

Long-term

EFSFNBOND015⁽²⁾

25,000

30/09/2054

0.499%

Long-term

EFSFNBOND016⁽²⁾

30,000

20/12/2052

0.322%

Long-term

EFSFNBOND017⁽²⁾

50,000

31/01/2056

0.663%

Long-term

EFSFNBOND018⁽²⁾

25,000

17/09/2055

0.340%

Total

185,697,100

(1) For floating rate bonds, the rate applicable on the balance sheet date is presented.
(2) N-bond with technical ISIN: N-Bonds (Namensschuldverschreibungen) are privately-placed, long-term

funding instruments that are neither centrally cleared nor listed.

The table below discloses the details of debt outstanding on 31 December 2020, together with applicable
rates and maturity dates.

Financial assistance
programmes

Nominal Amount
(in € '000)

Maturity date

Coupon

EU000A1G0AB4

5,000,000

05/07/2021

3.375%

Ireland

EU000A1G0AD0

3,000,000

04/02/2022

3.500%

Greece

EU000A1G0A57⁽¹⁾

1,140,000

19/12/2022

0.103%

Greece

EU000A1G0A65⁽¹⁾

1,262,000

19/12/2023

0.113%

Greece

EU000A1G0A73⁽¹⁾

1,540,000

19/12/2024

0.123%

Greece

EU000A1G0AP4⁽¹⁾

1,642,000

19/04/2021

0.444%

Greece

EU000A1G0AQ2⁽¹⁾

1,660,000

19/04/2022

0.504%

ISIN code

Issues under EFSF 1
Portugal
Issues under EFSF 2.1

51

Financial Statements
Greece

EU000A1G0D05

4,500,000

05/09/2040

1.450%

Greece

EU000A1G0DL7

3,500,000

13/02/2043

1.700%

Greece

EU000A1G0DN3

2,500,000

28/02/2056

2.000%

Greece

EU000A1G0DR4

6,000,000

03/05/2027

0.750%

Greece

EU000A1G0DT0

6,000,000

24/05/2033

1.250%

Greece

EU000A1G0DW4

4,800,000

10/07/2048

1.800%

Greece

EU000A1G0D96

2,000,000

17/07/2053

1.750%

Issues under long-term
funding
Long-term
EU000A1G0A16

3,974,350

05/09/2022

2.250%

Long-term

EU000A1G0AJ7

2,500,000

30/03/2032

3.875%

Long-term

EU000A1G0EC4

3,000,000

19/04/2024

0.000%

Long-term

EU000A1G0AT6

3,500,000

03/04/2037

3.375%

Long-term

EU000A1G0BC0

5,000,000

23/05/2023

1.875%

Long-term

EU000A1G0EG5

4,000,000

20/01/2050

0.700%

Long-term

EU000A1G0BJ5

3,000,000

04/09/2034

3.000%

Long-term

EU000A1G0EK7

3,000,000

13/10/2027

0.000%

Long-term

EU000A1G0BL1

1,500,000

03/12/2029

2.750%

Long-term

EU000A1G0EE0

5,000,000

17/10/2029

0.050%

Long-term

EU000A1G0BN7

4,000,000

19/02/2024

2.125%

Long-term

EU000A1G0BP2

5,000,000

07/06/2021

1.375%

Long-term

EU000A1G0BQ0

4,500,000

27/06/2024

1.750%

Long-term

EU000A1G0D39

5,000,000

17/10/2023

0.125%

Long-term

EU000A1G0DB8

4,000,000

29/07/2044

2.350%

Long-term

EU000A1G0DC6

3,968,500

20/01/2023

0.500%

Long-term

EU000A1G0DD4

4,500,000

17/02/2045

1.200%

Long-term

EU000A1G0DE2

3,000,000

28/04/2025

0.200%

ISIN code Nominal Amount

Maturity date

Coupon

Financial assistance
programmes
Long-term

EU000A1G0EF7

3,000,000

Long-term

EU000A1G0DG7

4,997,150

19/01/2021

0.100%

Long-term

EU000A1G0DH5

5,000,000

31/05/2026

0.400%

Long-term

EU000A1G0DJ1

4,500,000

31/05/2047

1.375%

Long-term

EU000A1G0DK9

4,988,600

17/11/2022

0.000%

Long-term

EU000A1G0DL7

1,500,000

13/02/2043

1.700%

Long-term

EU000A1G0DM5

4,000,000

29/03/2021

0.000%

Long-term

EU000A1G0DQ6

4,000,000

11/10/2024

0.375%

Long-term

EU000A1G0DV6

3,495,550

11/07/2025

0.500%

Long-term

EU000A1G0DY0

4,500,000

26/07/2027

0.875%

Long-term

EU000A1G0EA8

4,000,000

17/01/2024

0.200%

Long-term

EU000A1G0D70

5,000,000

14/02/2028

0.950%

52

0.000%

Financial Statements
Long-term

EU000A1G0D88

3,999,800

16/10/2026

0.625%

Long-term

EU000A1G0D62

6,000,000

17/02/2025

0.400%

Long-term

EU000A1G0ED2

4,000,000

10/04/2035

0.875%

Long-term

EU000A1G0EB6

5,000,000

26/01/2026

0.400%

Long-term

EU000A1G0D96

1,000,000

17/07/2053

1.750%

Long-term

EU000A1G0EJ9

4,000,000

15/10/2025

0.000%

Long-term

EU000A1G0EH3

3,000,000

24/04/2023

0.000%

Long-term

EFSFNBOND001⁽²⁾

25,000

24/04/2023

0.771%

Long-term

EFSFNBOND002⁽²⁾

50,000

20/03/2037

1.450%

Long-term

EFSFNBOND003⁽²⁾

27,000

10/05/2055

1.900%

Long-term

EFSFNBOND004⁽²⁾

101,000

11/05/2048

1.820%

Long-term

EFSFNBOND005⁽²⁾

40,000

07/06/2056

1.775%

Long-term

EFSFNBOND006⁽²⁾

30,000

23/03/2048

1.520%

Long-term

EFSFNBOND007⁽²⁾

50,000

20/12/2046

1.582%

Long-term

EFSFNBOND008⁽²⁾

50,000

22/02/2056

1.794%

Long-term

EFSFNBOND009⁽²⁾

125,000

23/02/2056

1.770%

Long-term

EFSFNBOND010⁽²⁾

60,000

15/02/2049

1.495%

Long-term

EFSFNBOND011⁽²⁾

97,000

25/06/2054

1.132%

Long-term

EFSFNBOND012⁽²⁾

30,000

24/03/2054

0.410%

Long-term

EFSFNBOND013⁽²⁾

25,000

10/09/2054

0.420%

Long-term

EFSFNBOND014⁽²⁾

30,000

24/09/2053

0.285%

Long-term

EFSFNBOND015⁽²⁾

25,000

30/09/2054

0.499%

Long-term

EFSFNBOND016⁽²⁾

30,000

20/12/2052

0.322%

Long-term

EFSFNBOND017⁽²⁾

50,000

31/01/2056

0.663%

Long-term

EFSFNBOND018⁽²⁾

25,000

17/09/2055

0.340%

Total

189,837,950

(1) For floating rate bonds, the rate applicable on the balance sheet date is presented.
(2) N-bond with technical ISIN: N-Bonds (Namensschuldverschreibungen) are privately-placed, long-term

funding instruments that are neither centrally cleared nor listed.
The following table shows the movements in carrying amount of the debt securities in issue:
(in € '000)

31.12.2021

31.12.2020

Balance on 1 January

191,350,731

193,133,608

Issuance during the year
Maturities during the year

16,719,799
(20,639,150)

20,053,280
(21,696,250)

Premium amortisation

(89,448)

(4,485)

Change in accrued interest

(127,187)

(135,422)

Balance on 31 December

187,214,745

191,350,731

On 31 December 2021 all debt securities in issue are backed by irrevocable and unconditional guarantees of
the euro area member states.

53

Financial Statements
From the total balance of ‘Debt securities in issue’, an amount of €15.9 billion (2020: €21.9 billion) is due
within 12 months and considered as a current liability. This amount includes interest accruals of issued debt
and the carrying value of securities maturing within 12 months.
On 31 December 2021, the total fair value of the debt securities in issue (including their accrued interest)
amounted to €202.7 billion (2020: €218.0 billion) based on quoted market prices.

12. Liability against euro area member states
Under the financial assistance programmes running under EFSF 1, the Margin deducted from the loan
amount at disbursement date is booked as an amount held as cash reserve. This Margin will be paid out at
maturity if all payments on the issued bonds are met. If there is a shortfall on the loan payments, this will be
used to meet the obligations arising from the bond issue.
The Margin is accrued on a pro rata basis. For disbursements occurred until 21 July 2011, the related Margin
will be paid to the Member State Guarantors, while for disbursements occurred after that date the Margin
can be paid back to BMS as a rebate. The payments at maturity should equal the initial Margin amount and
any investment return (interests) on the underlying made from the respective part of the cash reserve.
This Margin is included in the balance sheet position ‘Liability against euro area member states’.
Moreover, the EFSF is entitled to charge 10 basis points of guarantee commission fee for loans granted under
EFSF 2.1 where this fee is the remuneration for the guarantor Member States. In parallel to accrual of such
income on the loans granted to euro area member states, the Company recognises a liability against the euro
area member states at the same time for the same amount. With the amendment of the Master Financial
Assistance Facility Agreement signed on 12 December 2012 with Greece, the guarantee commission fee has
been reduced to zero basis points per annum without retroactive effect.

54

Financial Statements

The following tables show the balance of the components per financial assistance programmes:

31 December 2021
(in €'000)

Nominal amount

Return on
underlying
investments

Total liabilities

45,170

9,307

54,477

9,560

5,547

15,107

155,529

-1,930

153,599

193,938

-2,465

191,473

65,306

-1,262

64,044

Financial assistance under EFSF 1
Ireland
- Margin as remuneration for the MSG(1)
Portugal
- Margin as remuneration for the MSG(1)
Financial assistance under EFSF 2.1
Ireland
- Guarantee commission fee(2)
Portugal
- Guarantee commission fee(2)
Greece
- Guarantee commission fee(2)

Balance as at 31 December 2021
469,503
9,197
478,700
(1) Member State Guarantors (MSG)
(2) Return on the underlying investments includes negative interest on cash balances due to MSG. Amounts
include cumulative negative interest from 2017 to 2021 (totaling €5.5 million for 2017-2020 and €0.2 million
for 2021).

31 December 2020
(in €'000)
Financial assistance under EFSF 1
Ireland
- Margin as remuneration for the MSG(1)
Portugal
- Rebate for the borrowing countries
- Margin as remuneration for the MSG(1)

Nominal amount

Return on
underlying
investments

Total liabilities

45,170

10,533

55,703

827,561
9,560

284,378
3,289

1,111,939
12,849

137,120

-

137,120

170,998

-

170,998

65,306

-

65,306

1,255,715

298,200

1,553,915

Financial assistance under EFSF 2.1
Ireland
- Guarantee commission fee
Portugal
- Guarantee commission fee
Greece
- Guarantee commission fee
Balance as at 31 December 2020
(1) Member State Guarantors

The total balance of ‘Liability against euro area member states’ is a non-current liability.
On 31 December 2021, the total estimated fair value of the position ‘Liability against euro area member
states’ amounted to €0.5 million (31 December 2020: €1.6 million).

55

Financial Statements

13. Trade and other payables
The following table shows the breakdown of trade and other payables which are reported as current liabilities
and are expected to be settled within no more than 12 months after the date of the statement of financial
position:
(in € '000)

31.12.2021

31.12.2020

8,284

9,516

Trade payables

1

118

Accrued expenses

85

105

8,370

9,739

Amount charged by ESM for administrative services

Total trade and other payables

14. Share capital
By resolutions dated 30 June 2011, the Board of Directors of the Company approved an increase in the
Company’s share capital reserving to the existing shareholders their preferential subscription rights, by a
total amount of €10,000,000, to raise it to €28,440,453.35 from its previous amount of €18,440,453.35. To
do so, it created and issued 1,000,000,000 new shares with a par value of €0.01 each, with the capital
increase taking effect upon receipt of all the subscription funds.
As a result of the share capital increase with effect from 29 July 2011, the Company’s subscribed share capital
amounts to €28,440,453.35, divided into 2,844,045,335 shares, with a par value of €0.01 each.
In addition to the subscribed share capital, the Company had an unissued but authorised share capital set at
€1,590,546.65 to be divided into 159,054,665 shares of a par value of €0.01 each.
By resolutions dated 27 October 2011 further to the integration of Estonia in the EFSF, the Board of Directors
of the Company approved an increase in the Company’s share capital without reserving to the existing
shareholders their preferential subscription rights, by a total amount of €72,943.57, in order to raise it to
€28,513,396.92 from its previous amount of €28,440,453.35 by creating and issuing 7,294,357 new shares
with a par value of €0.01 each. The number of ordinary shares outstanding stood at 2,851,399 thousand as
at 31 December 2021 and 31 December 2020.
In addition to the subscribed share capital, the Company has an unissued but authorised share capital set at
€1,517,603.08 to be divided into 151,760,308 shares of a par value of €0.01 each.

56

Financial Statements
15. Reserves
The following table shows the reserves:
(in € '000)

31.12.2021

31.12.2020

Fair value reserve
Legal reserve

2,894

10,995
2,894

Total reserves

2,894

13,889

As a result of the disposal of €1.5 billion of treasury financial assets (refer to Note 9), an amount of
€11.0 million recorded in the Fair value reserve as of 31 December 2020 was recycled to the Statement of
Comprehensive Income for the period ending 31 December 2021.
In accordance with Luxembourg Law, the Company allocated €2.9 million to the legal reserve for the first
time in 2013. There was no additional allocation. This reserve may be distributed to shareholders only in the
event of the liquidation of the Company.

16. Interest revenue and expense calculated using the effective interest
method
The following table shows the net interest margin:
(in € '000)

2021

2020

421

-

1,899,854
1,854
24,992

2,273,623
35,085
31,565

1,927,121

2,340,273

(27,884)
(3,148)
(1,849,517)

(35,115)
(27,088)
(2,209,948)

(1,880,549)

(2,272,151)

46,572

68,122

Interest revenue calculated using the effective interest method
on loans to credit institutions
on loans to euro area member states
on treasury financial assets
on debt securities in issue
Total interest revenue calculated using the effective interest
method
Interest expense calculated using the effective interest method
on cash and cash equivalents
on liability against euro area member states
on debt securities in issue
Total interest expense calculated using the effective interest
method
Net interest margin

On 31 December 2021 and on 31 December 2020, the interest expenses on cash and cash equivalents
represent the negative interest paid for the cash in hand. The EFSF is being charged a negative interest
(- 0.50% per annum) on the cash held at Eurosystem central banks and shall be prevalent until any further
change is communicated.

57

Financial Statements
17. Other expenses
Other expenses are mainly composed of guarantee commission fees due to Member State Guarantors in
relation to the EFSF 2.1 programme for an amount of €41.3 million on 31 December 2021 (2020:
€39.2 million).

18. Administrative expenditures
Administrative expenditures consist of fees paid for professional services and miscellaneous operating
expenses and are detailed as follows:
(in € '000)
Amount charged by the ESM for administrative services
Rating agency fees
Other services
Total other administrative expenditures

2021
(33,139)
(630)
(460)
(34,229)

2020
(33,139)
(623)
(641)
(34,403)

The ESM provides administrative services and other support services to the EFSF. To formalise such
cooperation, the ESM and the EFSF entered into a Service Level Agreement starting on 1 January 2013. On
17 July 2020 and effective for the full year 2020, the fees calculation section of the Annex to the SLA between
the EFSF and the ESM has been amended by a decision of the ESM Managing Director to better reflect the
cost-sharing between the EFSF and the ESM. The change did not lead to material differences.
Under the amended terms of this agreement, the ESM is entitled to charge a service fee, which is calculated
based on a fair cost-sharing and reflecting the level of activity for cost allocations between two institutions.
The service fee represents the compensation for staff cost and other administrative costs incurred by the
ESM. For the services provided during the financial year 2021, the ESM charged €33.1 million to the EFSF (31
December 2020: €33.1million), out of which €8.3 million (31 December 2020: €9.5 million) (refer to Note 13)
had yet to be paid on the balance sheet date.

19. Staff cost
The EFSF did not employ any staff in either 2021 or 2020. The ESM provides administrative services and other
support services to the EFSF. A service fee is charged by the ESM to the EFSF for the services provided (refer
to Note 18).

20. Segment reporting
The Company applies the “management approach” of IFRS 8 meaning that the definition of segments as well
as the preparation of information used for segment reporting are both based on information prepared for
internal management decisions.
The Company has one single reportable segment which is the Company’s financial assistance activity
comprising the Company’s lending and funding operations.

58

Financial Statements
21. Related-party transactions
Key Management
On 31 December 2021, the Board of Directors was composed of 17 Directors. They have the authority for
planning, directing and controlling the Company’s activities. These Directors were not entitled to
remuneration during the period.
Transactions with shareholders
As disclosed in detail in Note 8, the Company provided loans to Ireland, Greece and Portugal which are also
Company shareholders. As part of its activities, the EFSF can also purchase debt securities issued by its
shareholders. Such securities are reported as Treasury financial assets in the statement of financial position.
On 31 December 2021, the total carrying amount of purchased securities issued by shareholders of the EFSF
was € nil (31 December 2020: € nil).
Transactions with the European Stability Mechanism
The ESM provides administrative services and other support services to the EFSF. To formalise such
cooperation, the ESM and the EFSF entered into a Service Level Agreement starting on 1 January 2013 and
has been subsequently revised during 2020. Under the terms of this agreement, the ESM is entitled to charge
a service fee to the EFSF (refer to Note 18 and Note 19).

22. Auditor’s fee
The total fees paid by the Company to Ernst & Young, Société anonyme are presented as follows:
(in € '000)

2021

2020

Legal audit

(166)

(166)

Total fees

(166)

(166)

23. Events after the reporting period
Following Russia’s invasion of Ukraine on 24 February 2022, all countries of the European Union and many
other countries worldwide, including the USA, the United Kingdom and Canada, started imposing heavy
financial and commercial sanctions on Russia and related companies, financial institutions and wealthy
individuals, with the aim of forcing Russia to stop the conflict. Those measures include in particular the
freezing of assets held abroad by the Russian central bank and the ban of major Russian banks from the
SWIFT system. Beyond the impact on Russia, the sanctions will most likely have an effect on financial
markets and economies globally. As a consequence, the EFSF’s activities may be affected as well. As of
today, the concrete magnitude of the effects cannot be reliably assessed. The EFSF is analysing direct and
indirect implications on its activities and continues to closely monitor the situation to be ready to
implement mitigating action, as needed.
There have been no other material events after the balance sheet date that would require adjustment of, or
disclosure in, the financial statements as of 31 December 2021.

59