Specific rules on the purchase of land
1. Financial instruments financed by the ERDF, the Cohesion Fund and the EAFRD may support investments that include the purchase of land not built on and land built on for an amount not exceeding 10 % of the programme contribution paid to the final recipient. In the case of guarantees, this percentage shall apply to the amount of the underlying loan or other risk-bearing instruments.
2. Where financial instruments provide support to final recipients in respect of infrastructure investments with the objective of supporting urban development or urban regeneration activities, the limit referred to in paragraph 1 is 20 %.
3. In exceptional and duly justified cases, the managing authority may derogate from the limits in paragraphs 1 and 2 for operations concerning environmental conservation.
Combination of technical support with financial instruments
Grants for technical support may be combined with financial instruments in a single operation pursuant to Article 37(7) of Regulation (EU) No 1303/2013 only for the purpose of technical preparation of the prospective investment for the benefit of the final recipient to be supported by that operation.
Specific rules on the role, liabilities and responsibility of bodies implementing financial instruments
1. The bodies implementing financial instruments shall perform their obligations in accordance with applicable law and act with the degree of professional care, efficiency, transparency and diligence expected from a professional body experienced in implementing financial instruments. They shall ensure that:
(a)
final recipients receiving support from financial instruments are selected with due account taken of the nature of the financial instrument and the potential economic viability of investment projects to be financed. The selection shall be transparent and justified on objective grounds and shall not give rise to a conflict of interest;
(b)
final recipients shall be informed that funding is provided under programmes co-financed by the ESI Funds, in accordance with the requirements laid down in Article 115 of Regulation (EU) No 1303/2013 for the ERDF, the ESF and the Cohesion Fund, in Article 66(1)(c)(i) of Regulation (EU) No 1305/2013 of the European Parliament and of the Council ( 3 ) for the EAFRD and in a future Union legal act establishing the conditions for the financial support for maritime and fisheries policy for the programming period 2014-2020 for the EMFF (the ‘EMFF Regulation’);
(c)
financial instruments provide support in a way which is proportionate and has the least distortive effect on competition;
(d)
preferential remuneration of private investors or public investors operating under the market economy principle, as referred to in Article 37(2)(c) and Article 44(1)(b) of Regulation (EU) No 1303/2013, is proportionate to the risks taken by these investors and limited to the minimum necessary to attract such investors, which shall be ensured through terms and conditions and procedural safeguards.
2. As direct financial liability of the managing authority towards bodies implementing financial instruments or final recipients as well as its liability as regards any other debt or obligation of the financial instrument may not exceed the amount committed by the managing authority to the financial instrument under the relevant funding agreements, the bodies implementing financial instruments shall ensure that no claims can be made on the managing authority beyond the amount committed by it to the financial instrument.
3. The bodies implementing financial instruments shall be liable for reimbursement of the programme contributions affected by irregularities, together with interest and any other gains generated by these contributions.
Nevertheless the bodies implementing financial instruments shall not be liable for reimbursement of the amounts referred to in the first subparagraph provided that they demonstrate for a given irregularity that the following cumulative conditions are fulfilled:
(a)
the irregularity occurred at the level of final recipients or, in the case of a fund of funds, at the level of financial intermediaries or final recipients;
(b)
the bodies implementing financial instruments complied with paragraph 1 of this Article in relation to the programme contributions affected by the irregularity;
(c)
the amounts affected by the irregularity could not be recovered notwithstanding that the bodies implementing financial instruments pursued all applicable contractual and legal measures with due diligence.
Criteria for the selection of bodies implementing financial instruments
1. When selecting a body to implement a financial instrument in accordance with Article 38(4)(a) and 38 (4) (b)(ii) and (b)(iii) of Regulation (EU) No 1303/2013, the managing authority shall satisfy itself that this body fulfils the following minimum requirements:
(a)
entitlement to carry out relevant implementation tasks under Union and national law;
(b)
adequate economic and financial viability;
(c)
adequate capacity to implement the financial instrument, including organisational structure and governance framework providing the necessary assurance to the managing authority;
(d)
existence of an effective and efficient internal control system;
(e)
use of an accounting system providing accurate, complete and reliable information in a timely manner;
(f)
agreement to be audited by Member State audit bodies, the Commission and the European Court of Auditors.
2. When selecting a body referred to in paragraph 1, the managing authority shall take due account of the nature of the financial instrument to be implemented, the body's experience with the implementation of similar financial instruments, the expertise and experience of proposed team members, and the body's operational and financial capacity. The selection shall be transparent and justified on objective grounds and shall not give rise to a conflict of interest. At least the following selection criteria shall be used:
(a)
robustness and credibility of the methodology for identifying and appraising financial intermediaries or final recipients as applicable;
(b)
the level of management costs and fees for the implementation of the financial instrument and the methodology proposed for their calculation;
(c)
terms and conditions applied in relation to support provided to final recipients, including pricing;
(d)
the ability to raise resources for investments in final recipients additional to programme contributions;
(e)
the ability to demonstrate additional activity in comparison to present activity;
(f)
in cases where the body implementing the financial instrument allocates its own financial resources to the financial instrument or shares the risk, proposed measures to align interests and to mitigate possible conflicts of interest.
3. Where a body that implements a fund of funds, including the EIB, further entrusts implementation tasks to a financial intermediary, it shall ensure that the requirements and criteria referred to in paragraphs 1 and 2 are met in respect of that financial intermediary.
Specific rules on guarantees delivered through financial instruments
Where financial instruments provide guarantees, the following requirements shall be fulfilled:
(a)
an appropriate multiplier ratio shall be achieved between the amount of the programme contribution set aside to cover expected and unexpected losses from new loans or other risk-sharing instruments to be covered by the guarantees and the value of corresponding disbursed new loans or other risk-sharing instruments;
(b)
the multiplier ratio shall be established through a prudent ex ante risk assessment for the specific guarantee product to be offered, taking into account the specific market conditions, the investment strategy of the financial instrument, and the principles of economy and efficiency. The ex ante risk assessment may be reviewed where it is justified by subsequent market conditions;
(c)
the programme contribution committed to honour guarantees shall reflect that ex ante risk assessment;
(d)
if the financial intermediary or the entity benefiting from the guarantees has not disbursed the planned amount of new loans or other risk-sharing instruments to final recipients, the eligible expenditure shall be reduced proportionally.
Management and control of financial instruments set up at national, regional transnational or cross-border level
1. For operations involving support from programmes to financial instruments set up at national, regional transnational or cross-border level referred to in Article 38(1)(b) of Regulation (EU) No 1303/2013, the managing authority shall ensure that:
(a)
the operation complies with applicable law, the relevant programme and the relevant funding agreement, both during the appraisal and selection process of the operation and during the set-up and implementation of the financial instrument;
(b)
funding agreements contain provisions on audit requirements and on the audit trail in accordance with point 1(e) of Annex IV to Regulation (EU) No 1303/2013;
(c)
management verifications are carried out throughout the programming period and during the set-up and implementation of the financial instruments in accordance with Article 125(4) of Regulation (EU) No 1303/2013 for the ERDF, the ESF, the Cohesion Fund and the EMFF, and in accordance with Article 58(1) and (2) of Regulation (EU) No 1305/2013 for the EAFRD;
(d)
supporting documents for expenditure declared as eligible are:
(i)
kept for the operation by the managing authority, the financial intermediary, or the body that implements the fund of funds where the financial instrument is implemented through a fund of funds, in order to provide evidence of the use of the funds for the intended purposes, of compliance with applicable law and of compliance with the criteria and the conditions for funding under the relevant programmes;
(ii)
available to allow verification of the legality and regularity of expenditure declared to the Commission;
(e)
supporting documents allowing verification of compliance with Union and national law and with the conditions of funding include at least:
(i)
documents on the establishment of the financial instrument;
(ii)
documents identifying the amounts contributed by each programme and under each priority axis to the financial instrument, the expenditure that is eligible under the programmes and the interest and other gains generated by support from the ESI Funds and re-use of resources attributable to the ESI Funds in accordance with Articles 43 and 44 of Regulation (EU) No 1303/2013;
(iii)
documents on the functioning of the financial instrument, including those related to monitoring, reporting and verifications;
(iv)
documents demonstrating compliance with Articles 43, 44 and 45 of Regulation (EU) No 1303/2013;
(v)
documents concerning exits of programme contributions and the winding-up of the financial instrument;
(vi)
documents on the management costs and fees;
(vii)
application forms, or equivalent, submitted by final recipients with supporting documents, including business plans and, when relevant, previous annual accounts;
(viii)
checklists and reports from the bodies implementing the financial instrument, where available;
(ix)
declarations made in connection with de minimis aid, if applicable;
(x)
agreements signed in connection with the support provided by the financial instrument, including for equity, loans, guarantees or other forms of investment provided to final recipients;
(xi)
evidence that the support provided through the financial instrument was used for its intended purpose;
(xii)
records of the financial flows between the managing authority and the financial instrument, and within the financial instrument at all levels, down to the final recipients, and in the case of guarantees proof that underlying loans were disbursed;
(xiii)
separate records or accounting codes for programme contribution paid or guarantee committed by the financial instrument for the benefit of the final recipient.
2. For operations involving support from programmes to financial instruments under the ERDF, the ESF, the Cohesion Fund and the EMFF, the audit authorities shall ensure that financial instruments are audited throughout the programming period until closure both in the framework of systems audits and audits of operations in accordance with Article 127(1) of Regulation (EU) No 1303/2013.
For operations involving support from programmes to financial instruments under the EAFRD, the audit bodies shall ensure that financial instruments are audited throughout the programming period until closure in the framework of systems audits and audits of operations in accordance with Article 59 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council ( 4 ) .
3. Where financial instruments are implemented by the EIB pursuant to Article 38(4)(b)(i) of Regulation (EU) No 1303/2013:
(a)
the managing authority shall mandate a firm which shall operate under a common framework established by the Commission to carry out on-the-spot verifications on the operation within the meaning of Article 125(5)(b) of Regulation (EU) No 1303/2013;
(b)
the audit authority shall mandate a firm which shall operate under a common framework established by the Commission to carry out audits on the operation.
The audit authority shall base its audit opinion on the basis of the information provided by the firm mandated.
4. In the absence of a common framework established by the Commission as referred to in paragraph 3, the managing authority shall submit a proposed methodology for carrying out on-the-spot verifications and the audit authority shall submit a proposed methodology for audits for agreement by the Commission.
Rules for withdrawal of payments to financial instruments and consequent adjustments in respect of applications for payment
Member States and managing authorities may withdraw contributions from programmes to the financial instruments referred to in point (a) of Article 38(1) and financial instruments referred to in point (b) of Article 38(1) implemented in accordance with points (a) and (b) of Article 38(4) of Regulation (EU) No 1303/2013 only if the contributions have not already been included in an application for payment as referred to in Article 41 of that Regulation. However, as regards financial instruments supported by the ERDF, the ESF, the Cohesion Fund and the EMFF, contributions may also be withdrawn if the next payment application is amended to withdraw or replace the corresponding expenditure.
System of capitalisation of annual instalments for interest rate subsidies and guarantee fee subsidies
1. Capitalised interest rate subsidies and guarantee fee subsidies referred to in Article 42(1)(c) of Regulation (EU) No 1303/2013 shall be calculated at the end of the eligibility period as the total of discounted payment obligations for the purposes and periods laid down in that Article, and in accordance with the relevant funding agreements.
2. Any resources left in the escrow account after the period referred to in Article 42(1)(c) of Regulation (EU) No 1303/2013, or as a result of an unexpected winding-up of the financial instrument before the end of that period, shall be used in accordance with Article 45 of that Regulation.
Criteria for determining management costs and fees on the basis of performance
1. The managing authority shall calculate management costs and fees which can be declared as eligible expenditure pursuant to Article 42(1)(d) of Regulation (EU) No 1303/2013 on the basis of the following performance based criteria as referred to in Article 42(5) of that Regulation:
(a)
the disbursement of contributions provided by the ESI Funds programme;
(b)
the resources paid back from investments or from the release of resources committed for guarantee contracts;
(c)
the quality of measures accompanying the investment before and after the investment decision to maximise its impact; and
(d)
the contribution of the financial instrument to the objectives and outputs of the programme.
2. The managing authority shall inform the monitoring committee set up in accordance with Article 47 of Regulation (EU) No 1303/2013 of the provisions regarding the performance-based calculation of management costs incurred or of the management fees of the financial instrument. The monitoring committee shall receive reports on an annual basis on the management costs and fees effectively paid in the preceding calendar year.
Thresholds for management costs and fees
1. For a body that implements a fund of funds, management costs and fees which can be declared as eligible expenditure pursuant to Article 42(1)(d) of Regulation (EU) No 1303/2013 shall not exceed the sum of:
(a)
3 % for the first 12 months after the signature of the funding agreement, 1 % for the next 12 months, thereafter 0,5 % per annum, of the programme contributions paid to the fund of funds, calculated pro rata temporis from the date of effective payment to the fund of funds until the end of the eligibility period, repayment to the managing authority or the date of winding up, whichever is earlier; and
(b)
0,5 % per annum of programme contributions paid by the fund of funds to financial intermediaries, calculated pro rata temporis from the moment of effective payment by the fund of funds until repayment to the fund of funds, the end of the eligibility period or the date of winding up, whichever is earlier.
2. For bodies implementing financial instruments providing equity, loans, guarantees, as well as micro-credits, including when combined with grants, interest rate subsidies or guarantee fee subsidies in accordance with Article 37(7) of Regulation (EU) No 1303/2013, management costs and fees which can be declared as eligible expenditure pursuant to Article 42(1)(d) of that Regulation shall not exceed the sum of:
(a)
a base remuneration which shall be calculated as follows:
(i)
for a financial instrument providing equity, 2,5 % per annum for the first 24 months after the signature of the funding agreement, thereafter 1 % per annum, of programme contributions committed under the relevant funding agreement to the financial instrument, calculated pro-rata temporis from the date of signature of the relevant funding agreement until the end of the eligibility period, repayment of the contributions to the managing authority or to the fund of funds, or the date of winding up, whichever is earlier;
(ii)
for a financial instrument in all other cases, 0,5 % per annum of programme contributions paid to the financial instrument, calculated pro rata temporis from the date of effective payment to the financial instrument until the end of the eligibility period, the repayment to the managing authority, or to the fund of funds, or the date of winding up, whichever is earlier; and
(b)
a performance-based remuneration which shall be calculated as follows:
(i)
for a financial instrument providing equity, 2,5 % per annum of the programme contributions paid within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013 to final recipients in the form of equity, as well as of resources re-invested which are attributable to programme contributions, which have yet to be paid back to the financial instrument, calculated pro rata temporis from the date of payment to the final recipient until repayment of the investment, the end of the recovery procedure in the case of write-offs or the end of the eligibility period, whichever is earlier;
(ii)
for a financial instrument providing loans, 1 % per annum of the programme contributions paid within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013 to final recipients in the form of loans, as well as of resources re-invested which are attributable to programme contributions, which have yet to be paid back to the financial instrument, calculated pro rata temporis from the date of payment to the final recipient until repayment of the investment, the end of the recovery procedure in the case of defaults or the end of the eligibility period, whichever is earlier;
(iii)
for a financial instrument providing guarantees, 1,5 % per annum of the programme contributions committed to outstanding guarantee contracts within the meaning of Article 42(1)(b) of Regulation (EU) No 1303/2013, as well as from re-used resources attributable to programme contributions, calculated pro rata temporis from the date of commitment until maturity of the guarantee contract, the end of the recovery procedure in the case of defaults or the end of the eligibility period, whichever is earlier;
(iv)
for a financial instrument providing micro-credit, 1,5 % per annum of the programme contributions paid within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013 to final recipients in the form of micro-credit, as well as of resources re-invested which are attributable to programme contributions, which have yet to be paid back to the financial instrument, calculated pro rata temporis from the date of payment to the final recipient, until repayment of the investment, the end of the recovery procedure in the case of defaults or the end of the eligibility period, whichever is earlier;
(v)
for a financial instrument providing grants, interest rate subsidies or guarantee fee subsidies in accordance with Article 37(7) of Regulation (EU) No 1303/2013, 0,5 % of the grant amount paid within the meaning of Article 42(1)(a) of that Regulation for the benefit of final recipients.
The provisions of this paragraph shall apply to a body implementing a financial instrument providing guarantees notwithstanding that the same body is implementing a fund of funds, subject to the provisions of paragraph 4.
3. The aggregate amount of management costs and fees over the eligibility period laid down in Article 65(2) of Regulation (EU) No 1303/2013 shall not exceed the following limits:
(a)
for a fund of funds, 7 % of the total amount of programme contributions paid to the fund of funds;
(b)
for a financial instrument providing equity, 20 % of the total amount of programme contributions paid to the financial instrument;
(c)
for a financial instrument providing loans, 8 % of the total amount of programme contributions paid to the financial instrument;
(d)
for a financial instrument providing guarantees, 10 % of the total amount of programme contributions paid to the financial instrument;
(e)
for a financial instrument providing micro-credit, 10 % of the total amount of programme contributions paid to the financial instrument;
(f)
for a financial instrument providing grants, interest rate subsidies or guarantee fee subsidies in accordance with Article 37(7) of Regulation (EU) No 1303/2013, 6 % of the total amount of programme contributions paid to the financial instrument.
4. Where the same body implements a fund of funds and a financial instrument, neither the amounts of eligible management cost and fees under paragraphs 1 and 2, nor the limits set out in paragraph 3 shall be cumulated for the same programme contributions or the same resources re-invested which are attributable to programme contributions.
5. Where the majority of the capital invested in financial intermediaries providing equity is provided by private investors or public investors operating under the market economy principle and the programme contribution is provided pari passu with the private investors, the management costs and fees shall conform to market terms and shall not exceed those payable by the private investors.
6. The thresholds laid down in paragraphs 1, 2 and 3 may be exceeded where they are charged by a body implementing the financial instrument, including, where applicable, when it implements the fund of funds, which has been selected through a competitive tender in accordance with the applicable rules and the competitive tender proved the need for higher management costs and fees.
Reimbursement of capitalised management costs and fees for equity-based instruments and micro-credit
1. Capitalised management costs and fees to be reimbursed as eligible expenditure in accordance with Article 42(2) of Regulation (EU) No 1303/2013 shall be calculated at the end of the eligibility period as the total of discounted management costs and fees to be paid after the eligibility period for the period laid down in Article 42(2) of that Regulation, and in accordance with the relevant funding agreements.
2. Capitalised management costs and fees to be paid after the eligibility period for a financial instrument providing micro-credit shall not exceed 1 % per annum of the programme contributions paid to the final recipients within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013 in the form of loans, which have yet to be paid back to the financial instrument, calculated pro rata temporis from the end of the eligibility period until repayment of the investment, the end of the recovery procedure in the case of defaults or the period referred to in Article 42(2) of that Regulation, whichever is earlier.
3. Capitalised management costs and fees to be paid after the eligibility period for a financial instrument providing equity shall not exceed 1,5 % per annum of the programme contributions paid to the final recipients within the meaning of Article 42(1)(a) of Regulation (EU) No 1303/2013 in the form of equity, which have yet to be paid back to the financial instrument, calculated pro rata temporis from the end of the eligibility period until repayment of the investment, the end of the recovery procedure in the case of defaults or the period referred to in Article 42(2) of that Regulation, whichever is earlier.
4. Any resources left in the escrow account after the period referred to under Article 42(2) of Regulation (EU) No 1303/2013, or as a result of an unexpected winding-up of the financial instrument before the end of that period, shall be used in accordance with Article 45 of that Regulation.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
