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- EIB role in Financial Instruments in 2014-2020
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EIB role in Financial Instruments in 2014-2020
From 2014-2020, the EIB Group will be involved in ESIF Financial Instruments through:
- A technical assistance platform for Financial Instruments
- Bilateral ex-ante assessments and advisory activities
- Blending activities
- Fund management activities
Technical Assistance Platform for Financial Instruments
The EIB Group will manage and deliver a technical assistance platform for financial instruments (the platform) to facilitate the use of FIs in ESI Funds. The amount of ESIF resources dedicated to FIs is expected to increase from approximately EUR 12bn during 2007-2013 to EUR 30-35bn during 2014-2020. To facilitate this increase, the European Commission took the decision to expand horizontal advisory activities through the platform.
Under the platform, the EIB Group will provide methodological guidance, in the form of handbooks and manuals, and capacity building services through classroom training or e-learning. Additional activities may be developed as the platform matures.
Bilateral ex-ante assessments and advisory activities
Member States may request support from the EIB Group in delivering ex-ante assessments prior to setting up financial instruments (FIs). Ex-ante assessments are a new requirement under the Common Provisions Regulation for 2014-2020, and consist of a study conducted by the Managing Authority (MA) which provides evidence of the need for using FIs. Such ex-ante assessments are financed by the MAs, which can directly appoint the EIB Group or any other service provider following the relevant procurement rules. The recently-released ex-ante methodology (available here) may be used as a practical guidebook for this type of documents.
The EIB Group has considerable experience in providing technical assistance for JESSICA and JEREMIE projects and has been heavily involved in producing the ex-ante methodology. Should the EIB Group be requested to support Member States in delivering ex-ante assessments, the delivery of such assignments would be subject to a bilateral contract with the respective MA. The EIB Group also provides tailored advisory services in relation to the full ESIF FI life cycle upon MA request.
Blending is one of the EIB Group’s core products, along with advising. It means that we combine our finance with other sources to maximize financial impact. Blending is also possible when using ESI Funds: for certain projects, EIB financial products are combined with ESI Funds and/or other public funds. An example is the Greener Social Housing Fund, a JESSICA Urban Development Fund managed by The Housing Finance Corporation Limited (THFC). THFC received GBP 12m from the London Green Fund which is partly financed by ERDF funds. At the same time, the EIB loaned THFC up to GBP 500m, while the UK government provided grant assistance of GBP 450m. The money is used to offer affordable loans to registered social housing providers for urban regeneration projects and refurbishment of social housing.
The EIB Group can provide Member States or MAs with specific support on the design, set-up and implementation of specific FIs within particular programmes. The MAs can take advantage of synergies between FIs and other forms of support, such as grants, by combining several financing sources into one FI operation. For instance, in the case of the FI targeting apartment blocks renovation in Lithuania (available here) grants, loans and technical assistance have been combined into one operation. The ESIF 2014-2020 regulations allow for much more flexibility in combining grants, loans and technical assistance than was previously the case. MAs finance this type of services through the technical assistance budget of the involved programme. Typical services here include, but are not limited to, the formulation of investment strategies for specific sectors or territories, the design of specific loan, equity or guarantee products, the development of procurement procedures, etc.
Fund management activities
The ESIF 2014-2020 regulation allows MAs to entrust the implementation of national, regional, trans-national or cross-border FIs directly to the EIB Group or other bodies, upon certain conditions. The EIB Group’s experience with managing funds for Decentralised Financial Instruments (DFI) and funds for SME financing (JEREMIE) leaves us perfectly positioned to assume the role of Fund Manager.
Decentralised Financial Instruments (DFI) aim to maximise the impact of limited EU budgetary resources through increased leverage. Financial Instruments (FIs) transform EU resources under the European Structural and Investment Funds (ESIF) into financial products such as loans, guarantees, equity and other risk-bearing mechanisms, with an overarching objective to recycle funds. Currently the EIB manages 8 DFI Fund of Funds (FoFs) in five European countries (please check the full list) totaling EUR 1.28 billion of funds.
Ten JESSICA funds, focused on urban development, from the first generation of DFIs (Programming period 2007 - 2013) are still active in 7 European countries.