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EUROPEAN COMMISSION DIRECTORATE-GENERALRegional and Urban Policy DIRECTORATE-GENERALEmployment, Social Affairs and Inclusion
Summary report on the progress made in financing
and implementing financial engineering instruments co-financed
by Structural Funds
Programming period 2007-
Situation as at 31 December 2011
DISCLAIMER: This 'summary report' was prepared by the European Commission services based on the data reported by nationalmanaging authorities pursuant to Article 67(2)(j) of Council Regulation (EC) No 1083/2006. It aims to provide a broader understanding of the progress made in implementing financial engineering instruments, implemented by national managing authorities under “shared management” rules, with co-financing provided by theEuropean Regional Development Fund and the European Social Fund. The data provided in this report refers to the situation on 31 December 2011, as reported by national managingauthorities in the context of the Annual Implementation Reports for 2011. Initial data was sent to the Commission electronically (via SFC2007) at the time of submission of annual implementation reports, i.e. 30 June 201. This was subsequently completed and corrected with a final cut-off date of the beginning of November 2012.
I. Executive summary
II. Introduction
III. Methodology of collecting and processing data
IV. Summary of data collected on financial engineering instruments
- Structure of financial engineering instruments
- Financial engineering instruments for enterprises
- Financial engineering instruments for urban development
- Financial engineering instruments for energy efficiency and renewable energies
V. Presentation of specific topics related to data on financial engineering instruments
- Financing of financial engineering instruments
- Investments made by financial engineering instruments 2.1 Investments in enterprises 2.2 Investments in urban development projects 2.3 Investments in energy efficiency/renewable energy funds
VI. Conclusions and recommendations
Annexes:
- Table with aggregated data on FEIs implemented in 2007-
- Factsheets for financial engineering instruments per Member State
EUR 10 781, including EUR 7 078 million Structural Funds (ERDF+ESF). Of this, just over a half ( EUR 5 629 million) was allocated to holding funds, with the remainder ( EUR 5 151 million ) was allocated directly to specific funds set up without holding funds.
The majority of activity in FEIs supported through cohesion policy is for support to enterprises. This constitutes EUR 8 903 million of operational programme contributions, including EUR 5 753 million of Structural Funds. Products offered to enterprises include loans, guarantees, equity/venture capital and other products (such as interest rate and guarantee fee subsidies).
FEIs for urban development supported through cohesion policy constitute EUR 1 533 million of OPs contributions in ten Member States, including EUR 1 075 million of Structural Funds. These were delivered almost exclusively as loan funds for projects supporting brown field regeneration and development of sustainable urban infrastructure.
Cohesion policy also supported FEIs for energy efficiency and renewable energies, which constituted EUR 345 million of OP contributions in five Member States, including EUR 250 million of Structural Funds.
Cohesion policy support to FEIs included EUR 388 million in contributions from European Social Fund Operational Programmes ( including EUR 208 million in ESF contributions), through a variety of financial products, including micro-credit loans targeting specific populations, such as self-employed, long-term unemployed and women.
Management costs and fees were also reported. On the basis of the information provided, they accounted on average for 2,49% of OP contributions made in the period 2007-2011, with an average of 2,63 % for holding funds, 3,41% for specific funds operating under a holding fund and 2,03% for specific funds operating without a holding fund.
Lessons learned for 2013 exercise
Next year, the process of collection and transmitting the data in SFC 2007 should start as early as possible, to help identify gaps and errors and to correct them in good time, and to allow the Commission to produce the summary on the basis of the monitoring data with sufficient time to meet the deadline set by Article 67(5) of Council Regulation (EC) No 1083/2006.
Member States and managing authorities should be encouraged as much as possible to provide input on the optional data, as this is invaluable for providing a more complete picture
not only of the financial amounts allocated to financial engineering instruments, but also how they work in practice and the physical results produced.
If desired by Member States and managing authorities, the Commission could organise a technical session in early spring 2013 in order to provide information about the process, give examples of good practice and common errors from this year's exercise, and answer questions.
urban development projects, or in legal or natural persons carrying out specific investment activities in energy efficiency and renewable energies^3.
The types of support provided through financial engineering instruments include loans, guarantees, equity/venture capital and other forms of assistance^4.
As the use of financial engineering instruments in European cohesion policy has grown in prominence in the current programming period, the availability of data on these financial instruments and the Union funding allocated to them has become necessary.
This ‘summary report’ was prepared by the European Commission services to provide a broad understanding of the progress made in implementing financial engineering instruments, implemented by national managing authorities under ‘shared management’ rules, with co- financing provided by the European Regional Development Fund and the European Social Fund.
The report is based on the monitoring data provided by national managing authorities pursuant to Article 67(2)(j) of Council Regulation (EC) No 1083/2006. The monitoring data were sent to the Commission in the context of Annual Implementation Report for 2011 and therefore this report refers to the situation on 31 December 2011.
(^3) In this document reference is made to ‘Structural Funds Regulations’, specifically to the following provisions: Article 44 of Council Regulation (EC) No 1083/2006, hereinafter referred to as the ‘General Regulation’, Articles 3(2)(c), 4(1), 5(1)(d) and 6(2)(a) of European Parliament and Council Regulation (EC) No 1080/2006, hereafter referred to as the ‘ERDF Regulation’, Article 11(1) of European Parliament and Council Regulation (EC) No 1081/2006 hereinafter referred to as the ‘ESF Regulation’ and Articles 43 to 46 of Commission 4 Regulation (EC) No 1828/2006 hereinafter referred to as the ‘Implementing Regulation’. Some of the FEIs provide support to interest rate subsidies and guarantee fee subsidies associated and combined with ERDF loans or guarantees in a single financial package.
II. Methodology of collecting and processing data
During 2011 a voluntary exercise was carried out whereby managing authorities submitted data on an optional basis to the Commission. This was aggregated by the Commission in the synthesis report published in December 2011. The amendment of Council Regulation (EC) No 1083/2006 in December 2011 introduced an obligation for the Member States to formally report on financial engineering instruments within the annual report on implementation of operational programmes.
2012 was therefore the first year that managing authorities were obliged to formally report on implementation of financial engineering instruments. This was carried out as a part of the annual implementation report, summited by managing authorities by 30 June 2012. Consequently all the data on financial engineering instruments were presented in the context of the operational programmes under which they are implemented.
The process of gathering the requested data and information on FEIs by the Commission started in June 2012 when the electronic data collection (namely SFC2007 module for FEIs) became operational. By 30 June 2012, the Commission received only partial (75%) information on financial engineering instruments implemented under OPs. A first quantitative and qualitative analysis of the data provided by managing authorities revealed differences in terms of completeness and accuracy of the information provided in the annual reports on implementation.
The process of reporting and analyzing of the data in the context of the annual implementation report and in compliance with Article 67(2) (j) of Council Regulation (EC) No 1083/2006 required a significant investment by all stakeholders, at managing authority, Member States and Commission levels.
As required by Article 67(5) of the Council Regulation (EC) No 1083/20065, the Commission produced by 1st^ October a summary of the monitoring data on the progress made in financing and implementing financial engineering instruments, which was presented at the COCOF meeting on 26 September 2011^5. Despite best efforts, at the time of production of the ‘Summary of data’ significant data anomalies remained.
(^5) COCOF document ref. COCOF_12-0060-00-EN of 26/09/2012.
¾ The above-mentioned categories of information have been transposed in two monitoring templates made available in SFC2007^6. Almost half of the sections referred to the compulsory data required by the General Regulation.
¾ This data was sent to the Commission electronically (via SFC2007) at the time of submission of annual implementation reports, i.e. 30 June 2012 updated until 13 September 2012 and subsequently revised until the beginning of December 2012.
¾ The fact that reporting was done at Operational Programme level and not aggregated by the Member States at national level may have contributed to some discrepancies in the presentation of FEIs and the related figures ( for example: some FEIs implemented under more than one OP were reported more than once with the same figures; some Holding Funds may have been presented together with specific funds, resulting in double-counting; some FEIs were presented as operations^7 and some as individual funds; some specific funds which had not yet been officially established at 31/12/ may have been included in the reporting 8 ).
¾ Any comparison of data between the Synthesis Report from 2011 and this report should be made with caution. In the absence of binding legal requirements, the 2011 exercise was done on a voluntary basis. Consequently, the data was not provided by all MS/MAs and could not be verified against the official reporting on operational programmes. This concerns especially some category of data like: additional and outside OP sources of funding and amounts committed to the FEIs or distinction between FEIs supported from ERDF and ESF which were not required by the Regulation and therefore were not reported by all Member States.
¾ Optional information i.e. amount committed to FEIs, number of investments made, type and number of final recipients supported by FEIs, number of jobs created or
(^6) SFC2007 is an IT tool through which the annual reporting from managing authorities takes place. A newly developed sub-module for FEIs became operational and available for managing authorities of Member States 7 in June 2012. Accordingly to section 1.2.5 of the Guidance Note on Financial Engineering Instruments (COCOF-10-0014- of 08/02/2011) and in respect of assistance implemented through financial engineering instruments, the operation is constituted by the financial contributions from an operational programme to financial engineering instruments (including holding funds) and the subsequent investments made by the financial engineering instruments, which ultimately constitute eligible expenditure in accordance with Article 78(6) of the General 8 Regulation. Namely funding agreement mentioned in Articles 43(3) and 44 of the Implementing Regulation 1828/2006, either between the Member State or the managing authority and the holding fund or between the Member State/managing authority/the holding fund (where applicable) and the individual FEI, have not been concluded.
safeguarded further to investments made by FEIs, represented more than 50 % of the data requested in the monitoring templates. Although the optional data was included in the reporting templates proposed by the Commission, after extensive discussions with Member States in the Coordination Committee of the Funds (COCOF), the majority of MS objected to provide optional data, and finally it was reported for a very limited number (on average 20%) of all FEIs. Due to this fact and to the low plausibility of figures, the optional information was not analyzed in this summary report, as it could lead to the erroneous conclusions.
¾ Finally, in those cases where the expected correction or explanation was not provided directly by MS/MA, the Commission sought to complete the missing information with the information on financial engineering instruments from other available sources^9.
(^9) Other sources of information comprised among others: Financial Engineering Instruments Implemented by Member States with ERDF contributions. Synthesis Report for 2011., Geographic Units of DG REGIO, information available on public websites of the funds.
The financial engineering instruments presented in this report were set up as specific equity, loan or guarantee funds, directly by managing authorities /intermediate bodies, or indirectly through holding funds.
In 2007-2011 almost all Members States (except Ireland and Luxembourg) and one region covered by a cross-border cooperation programme implemented financial engineering instruments through 178 operational programmes.
At the end of 2011 a total of 524 specific funds (loan, guarantee, equity/venture capital and other funds) were set up, out of which: 484 (92,37%) for enterprises, 28 (5,34%) for urban development and 12 (2,29%) for energy efficiency/renewable energies.
Out of all specific funds, 353 were implemented without a holding fund and 171 were implemented through 68 holding funds. Holding funds received contributions from 1 to 10 operational programmes and made contributions to between 1 and 13 specific funds.
Most of the currently operating holding funds were set-up in 2009 (32) and 2010 (17). Six new holding funds were established in 2011, including three of them in cooperation with the European Investment Bank (as a HF manager) in the area of urban development.
Holding funds were managed either by the European Investment Bank or the European Investment Fund (31), or by other financial institutions or bodies (37). They were set up either as a separate block of finance within a financial institution (two thirds) or as an independent legal entity governed by agreement between the co-financing partners and shareholders (one third). Additionally, managing authorities awarded direct contracts to the EIB (18 cases reported) or to the EIF (13 cases reported) to manage OP contributions allocated to FEIs^10.
(^10) The numbers reported for EIB and EIF present a state of play as of 31/12/2011.
2. Financial engineering instruments for enterprises
The legal framework for financial engineering instruments for enterprises is established in Article 44(a) of the General Regulation which states that "as part of an operational programme, the Structural Funds may finance expenditure in respect of an operation comprising contributions to support the following: (a) financial engineering instruments for enterprises, primarily small and medium-sized ones, such as venture capital funds, guarantee funds and loan funds ".
In light of the above, this chapter summarises information on financial engineering instruments for enterprises implemented with or without a holding fund, pursuant to Article 44 of Council Regulation (EC) 1083/2006. Financial engineering instruments for enterprises represent the highest percentage (nearly 90%) of all financial engineering instruments implemented in 2007-2011. At the end of 2011 a total of 484 specific funds for enterprises offering all types of financial products (namely: loans, guarantees, equity/venture capital and other products^11 ) were set up. The majority (341) of those specific funds were implemented without a holding fund. The remaining 143 specific funds were implemented through a holding fund. Structural Funds assistance was paid to support financial engineering instruments for enterprises in 25 Member Stats (except Ireland and Luxembourg) and by one cross-border co-operation programme.
There are substantial differences among Member States as regards geographical coverage, total number, type and size of specific funds for enterprises, namely:
- In 8 Member States and 1 cross-border co-operation region 42 specific funds have been implemented without a holding fund;
- In 6 Member States 16 specific funds have been implemented through national and regional holding funds;
- In 11 Member States 426 specific funds were implemented with both modes of implementation i.e. with holding fund and without holding fund;
- Almost all (47) of holding funds set up to implement specific funds for enterprises were operational, namely they selected financial intermediary(ies) and made contributions to specific funds. Only one holding fund (in SK) did not set up any specific funds for enterprises by the end of 2011;
(^11) For example: interest rate subsidies, guarantee fee subsidies, interest rate rebates and equivalent measures.
3. Financial engineering instruments for urban development
Article 44 (b) of the General Regulation states that financial engineering instruments can also take the form of actions which make repayable investments (or provide guarantees for repayable investments) in public private partnerships or other urban projects included in integrated plans for sustainable urban development.
Over 2007-2011, Operational Programmes contributions supported 28 specific funds in the area of urban development in 10 Member States (BG, CZ, DE, EL, ES, IT, LT, PL, PT, UK). The majority (25) were implemented through 18 holding funds. Only in two Member States (Germany and the United Kingdom) were financial engineering instruments for urban development implemented both with and without holding funds.
In most of the ten Member States concerned there was only one holding fund established, however, four Member States (ES, IT, PL, UK) reported two or more holding funds. Holding funds for urban development were established mostly in 2009 (8) and 2010 (7), with only 3 set up in 2011.
18 holding funds were managed by the European Investment Bank 12 and only one (in Germany) was managed by a financial institution other than the EIB
The table below presents the aggregated data in relation to FEIs for urban development.
(^12) According to the most recent data from EIB, 5 national and 13 regional JESSICA holding funds were managed by the EIB at the end of 2011.
N° MemberState N° of FEIs contributionsOP paid to FEIs( in EUR million)*
out ofwhich StructuralFunds ( in EURmillion)
**contributionsOP specificpaid to ( in EUR million)funds*****
contributionsOP remaining inHFs ( in EUR million) 1 BG 2 33.00 28.05 0.00 33. 2 CZ 1 20.58 17.49 0.00 20. 3 DE 3 30.00 20.00 30.00 0. 4 EL 2 258.00 211.32 0.00 258. 5 ES 6 207.96 152.77 207.96 0. 6 IT 2 170.00 77.45 0.00 170. 7 LT 5 149.41 127.00 28.00 121. 8 PL 11 256.04 213.64 217.90 38. 9 PT 4 58.02 45.02 0.00 58. 10 UK 10 350.14 181.97 92.84 257. Total 46 1 533.15 1 074.71 576.70 956. * ** including: holding funds and specific fund implemented with and without a holding fund;paid to holding funds and directly to specific funds implemented without a holding; *** paid to specific funds implemented with and without a holding fund.
4. Financial engineering instruments for use of renewable energy and energy efficiency
Structural Fund Regulations, namely Article 44 (c) of the General Regulation, foresee also the possibility for financing investments in energy efficiency and use of renewable energy in buildings (including in existing housing), through funds or other incentive schemes providing loans, guarantees for repayable investments or equivalent instruments.
At the end of 2011 there were 12 specific funds for energy efficiency and renewable energies supported by Operational Programmes in five Member States: Estonia (1), Germany (1), Greece (1), Italy (3) and the United Kingdom (6). Out of 12 specific funds implemented, 9 were set-up in 2009-2010 without a holding fund and remaining 3 were implemented through a holding fund set up in 2010-2011.
N° MemberState N° ofFEIs contributionsOP paid to FEIs( in EUR million)*
out ofwhich StructuralFunds ( in EURmillion)
**contributionsOP specificpaid to ( in EUR million)funds*****
contributionsOP remaining inHFs ( in EUR million) 1 DE (^) 2 20.00 15.00 15.00 5. 2 EE (^) 1 41.74 17.00 41.74 0. 3 EL (^) 2 241.00 200.26 4.66 236. 4 IT (^) 4 21.50 8.39 21.50 0. 5 UK (^) 6 20.63 9.63 20.63 0. Total 15 344.87 250.28 103.53 241. * ** including: holding funds and specific fund implemented with and without a holding fund;paid to holding funds and directly to specific funds implemented without a holding; *** paid to specific funds implemented with and without a holding fund.
In addition, EUR 5 151.42 million of OP contributions, including EUR 2 934.60 million of Structural Funds, were paid directly from managing authorities to the specific funds set up without a holding fund. In total, EUR 6 889.03 million of OP contributions reached specific funds and were available to support final recipients by the end of 2011, out of which EUR 3 642.47 million was already invested in final recipients.
*SF = Structural Funds ** in the form of equity, loans, guarantees or other forms of repayable investments
The highest share, namely EUR 8 902.65 million, went to FEIs for enterprises (either to holding funds or directly to specific funds). Of this, an aggregated amount of EUR 5 753. million was paid from the Structural Funds, out of which more than 96% (EUR 5 545. million) from the ERDF. The ESF operational programmes contributed to financial engineering instruments for enterprises a total amount of EUR 388.28 million, including EUR 207.61 million from ESF.
Holding Fund (HF)
Managing Authority
**Financial products****
Specific fund managed by financial intermediary
SF and nationalco-financing*
SF and nationalco-financing*
SF and national co-financing*
EUR 6 889.03 million
EUR 3 642.47 million
EUR 10 780.67 million
EUR 5 629.25 million EUR 5 151. million
EUR 1 737.61million
Operational Programme contributions paid to FEIs for enterprises
N° MemberState FEIsN° of contributionsOP paid toFEIs* (in EUR million)**
**contributionsOP specificpaid to (in EUR million)funds*****
contributionsOP paid to finalrecipients (in EUR million)
contributionsOP remaining inHFs (in EUR million)
contributionsOP remaining inspecific (in EUR million)funds (^1) BE 9 264.04 264.04 100.24 0.00 163. (^2) BG 3 199.00 1.12 1.12 197.88 0. (^3) CZ 2 285.48 285.48 252.21 33. (^4) DK 6 19.52 19.52 8.37 11. (^5) DE 37 1291.65 1291.65 625.27 0.00 666. (^6) EE 5 132.04 132.04 103.77 28. (^7) EL 10 710.00 2.03 5.53 707.97 () (^8) ES 5 339.30 149.99 215.07 189.31 () (^9) FR 111 261.25 214.08 137.26 47.17 76. (^10) IT 74 1972.17 1860.61 743.72 111.56 1116. (^11) CY 4 20.00 2.54 2.52 17.46 0. (^12) LV 9 239.07 164.19 158.64 74.88 5. (^13) LT 24 283.65 125.56 144.40 158.09 () (^14) HU 3 398.02 270.59 222.70 127.43 47. (^15) MT 2 10.00 1.34 1.34 8.66 0. (^16) NL 5 43.22 43.22 35.95 7. (^17) AT 2 22.89 22.89 0.95 21. (^18) PL 128 821.73 364.59 212.68 457.13 151. (^19) PT 15 248.65 244.70 139.56 3.95 105. (^20) RO 3 100.00 2.15 2.15 97.85 0. (^21) SI 10 99.21 98.09 64.03 1.11 34. (^22) SK 1 100.00 0.00 0.00 100.00 0. (^23) FI 1 90.83 90.83 54.77 36. (^24) SE 11 150.63 150.63 44.06 106. (^25) UK 50 796.17 402.77 307.14 393.40 95. (^26) CBC 1 4.12 4.12 0.39 3. Total 531 8 902.65^ 6 208.78^ 3 583.85^ 2 693.87^ 2 624. _ ** including: holding funds and specific fund implemented with and without a holding fund;paid to holding funds and directly to specific funds implemented without a holding; **() figures not provided as the amounts reported paid to specific funds implemented with and without a holding fund;_ by managing authorities, primarily in lead to the unrealistic results at the level of aggregated data
OP contributions paid to the funds in the area of urban development amounted to EUR 1 533.15 million at the end of 2011. Most of this (EUR 1 460.59 million, including EUR 1 030.33 million of ERDF) was paid to 18 holding funds. The holding funds paid less than one third of the OP contributions received from managing authorities, namely EUR 504.15 million to the specific urban development funds. EUR 956.44 million (with EUR 628.07 million of ERDF) remained at the level of holding funds at the end of 2011.
