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Financial Instruments 2014-2020*

Financial Instruments 2014-2020*. Presentation to the debate on Financial engineering in future EU programmes Thursday 26th April 2012, 9h00 – 11h00 Czech Permanent Representation to the EU. George Lemonidis European Commission DG Enterprise and Industry

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Financial Instruments 2014-2020*

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  1. Financial Instruments 2014-2020* Presentation to the debate onFinancial engineering in future EU programmes Thursday 26th April 2012, 9h00 – 11h00 Czech Permanent Representation to the EU George Lemonidis European Commission DG Enterprise and Industry Deputy Head of Unit – Financing of innovation and SMEs * Based on a presentation by Roger Havenith, DG ECFIN

  2. What are EU Financial Instruments? Equity/risk capital: e.g. venture capital to SMEs with high growth potential or risk capital to infrastructure projects Guarantees to financial intermediaries that provide lending to e.g. infrastructure projects, SMEs, persons at risk of social exclusion Other risk-sharing arrangements with financial intermediaries in order to increase the leverage capacity of the EU funds or a combination of the above with other forms of EU financial assistance 2 2

  3. EU Financial Instruments: Why? • An appropriate tool in times of budget constrains • 3 types of benefits • Multiplier effect – multiplication of scarce budgetary resources by attracting additional finance • Policy impact – financial intermediaries pursue EU policies • Institutional know-how – EU can use the resources and expertise of financial intermediaries • A political priority (Europe 2020 strategy, Communication on a Budget for Europe 2020) • Effective and efficient way to support Europe 2020 objectives of smart, sustainable and inclusive growth

  4. Next MFF: Simplification and Transparency • Fewer financial instruments (from 13 to 6) • Larger financial instruments ensuring critical mass • Minimisation of overlap between instruments • Standardised contractual arrangements including management structures, reporting, fees… • More transparent to stakeholders • Budget: No contingent liabilities • Dedicated regulatory framework (Title VIII of the Financial Regulation)

  5. Financial Instruments included in proposals for 2014-2020 MFF Centrally managed by COM Shared Management Research, Development Innovation Horizon 2020 Equity and Risk Sharing Instruments EUR 3.5bn Instruments under Structural and Cohesion Funds EU level Off-the shelf instruments Tailor made instruments Significantly higher amounts than currently Growth, Jobs and Social Cohesion Creative Europe Guarantee Facility EUR 210m Competitiveness & SME (COSME) Equity & guarantees EUR 1.4bn Erasmus for all Guarantee Facility EUR 881m Social Change & Innovation Micro-finance EUR 192m Infrastructure Connecting Europe Facility (CEF) Risk sharing (e.g. project bonds) and equity instruments Budget not yet decided

  6. EU financial instruments current and new

  7. Equity instrument for SMEs’ growth and R&I • Equity Facility for R&I (H2020) • focus: early stage • final beneficiaries: innovative SMEs and small midcaps • also covering growth-stage investments • Equity Facility for Growth for SMEs (COSME) • focus: growth stage • final beneficiaries: growth-oriented SMEs • also covering early-stage investments • Multi-stage funds: contributions from COSME and H2020 on a pro-rata basis (based on a fund’s investment policy) 7

  8. EU financial instruments current and new

  9. Debt instrument for SMEs’ growth and R&I • Loan Guarantee Facility(COSME) • guarantees for loans to SMEs up to € 150 000 • securitisation of SME debt finance portfolios • SMEs & Small Midcaps Guarantee Facility(H2020) • guarantees for loans over € 150 000 for R&I activities 9

  10. EU financial instruments current and new

  11. EU financial instruments current and new

  12. COSME & Horizon 2020 - Budget proposed • COSME – “Actions to improve SME access to finance” • € 1 436 million in current prices • Equity Facility for Growth: € 690 million • Loan Guarantee Facility: € 746 million • H2020 (Industrial Leadership) – “Access to risk finance” • € 3 768 million in current prices for financial facilities supporting all sizes of companies and types of entity • At least 1/3 (ca. € 1.25 bn) likely to be absorbed by SMEs and small midcaps (no breakdown between equity and debt) indicative 12

  13. Implementation Under discussion • Commission delegates implementation to the EIB/EIF and/or other financial institutions (partnership, delegation, …) • Implementation in line with a common set of rules that will be incorporated in a regulatory framework (Financial Regulation – new Title VIII; its Delegated Act (implementing rules); Debt and Equity Platforms (operational requirements)) • Debt and equity funding can be combined; also with grants in H2020 • Demand-driven approach and Flexibility • Equity and debt facilities can pool resources with Member States willing to contribute part of their Structural Funds • Budget for H2020 “Access to Risk Finance” can be topped-up by ring-fenced contributions from other parts of H2020, otherprogrammes in the EU budget, third parties (inc. EUREKA), etc. 13

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