COMMISSION IMPLEMENTING REGULATION (EU) No 964/2014
of 11 September 2014
laying down rules for the application of Regulation (EU) No 1303/2013 of the European Parliament and of the Council as regards standard terms and conditions for financial instruments
Article 1
Subject matter
Article 2
Additional terms and conditions
Article 3
Compliance with State aid rules under the standard terms and conditions
Article 4
Governance under the standard terms and conditions
Article 5
Funding agreement under the standard terms and conditions
Article 6
RS Loan
Article 7
Capped Portfolio Guarantee
Article 8
Renovation Loan
Article 9
ANNEX I
Annotated table of content of a funding agreement between a managing authority and a financial intermediary
1. PREAMBLE
2. DEFINITIONS
3. SCOPE AND OBJECTIVE
4. POLICY OBJECTIVES AND
EX-ANTE
ASSESSMENT
5. FINAL RECIPIENTS
6. FINANCIAL ADVANTAGE AND STATE AID
7. INVESTMENT, GUARANTEE OR LENDING POLICY
8. ACTIVITIES AND OPERATIONS
9. TARGET RESULTS
10. ROLE AND LIABILITY OF THE FINANCIAL INTERMEDIARY: RISK AND REVENUE SHARING
11. MANAGEMENT AND AUDIT OF THE FINANCIAL INSTRUMENT
12. PROGRAMME CONTRIBUTION
13. PAYMENTS
14. ACCOUNT MANAGEMENT
15. ADMINISTRATIVE COSTS
16. DURATION AND ELIGIBILITY OF EXPENDITURE AT CLOSURE
17. RE-UTILISATION OF RESOURCES PAID BY THE MANAGING AUTHORITY (INCLUDING INTEREST YIELDED)
18. CAPITALISATION OF INTEREST RATE SUBSIDIES, GUARANTEE FEE SUBSIDIES (IF APPLICABLE)
19. GOVERNANCE OF THE FINANCIAL INSTRUMENT
20. CONFLICTS OF INTEREST
21. REPORTING AND MONITORING
22. EVALUATION
23. VISIBILITY AND TRANSPARENCY
24. EXCLUSIVITY
25. SETTLEMENT OF DISPUTES
26. CONFIDENTIALITY
27. AMENDMENT OF THE AGREEMENT AND TRANSFER OF RIGHTS AND OBLIGATIONS
ANNEX II
Loan for SMEs based on a portfolio Risk Sharing loan model (RS loan)
Schematic representation of the RS loan principle
Structure of the financial instrument |
The Risk Sharing loan (RS loan or financial instrument) shall take the form of a loan fund to be set up by a financial intermediary with contributions from the programme and the financial intermediary to finance a portfolio of newly originated loans, to the exclusion of the refinancing of existing loans. The Risk Sharing loan shall be made available in the framework of an operation which is part of the priority axis defined in the programme co-funded by the relevant ESIF and defined in the context of the ex-ante assessment required in Article 37 of Regulation (EU) No 1303/2013. |
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Aim of the instrument |
The aim of the instrument shall be to:
The contribution from the ESIF programme to the financial intermediary shall not crowd out financing available from other private investors or public investors. The ESIF programme shall provide funding to the financial intermediary in order to build up a portfolio of newly generated loans to SMEs, and in parallel, participate in the losses/defaults and recoveries on the SME loans in this portfolio on a loan by loan basis and in the same proportion as the programme contribution in the instrument. In the case of fund of funds structure, the fund of funds shall transfer the contribution from the ESIF programme to the financial intermediary. In addition to the ESIF programme contribution, the fund of funds may provide its own resources which are combined with the financial intermediary resources. The fund of funds shall in this case take the pro-rata part of the risk sharing between the different contributions in the portfolio of loans. State aid rules have to be respected if the resources provided by the fund of funds are State resources. |
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State aid implication |
The RS Loan shall be designed as a State aid free instrument, i.e. market-conform remuneration for the financial intermediary, full pass-on of financial advantage by the financial intermediary to the final recipients, and the financing provided to the final recipients are under the applicable de minimis Regulation. (a) Aid at the level of the financial intermediary and the fund of funds is excluded when:
(b) At the level of the SMEs: At the SMEs' level, the loan shall comply with the de minimis rules. For each loan inserted in the portfolio, the financial intermediary shall calculate the GGE by using the following calculation methodology: Calculation of the GGE = Nominal amount of the loan (EUR) × (Cost of funding (standard practice) + Cost of risk (standard practice) – Any fees charged by the managing authority on the programme contribution to the financial intermediary) × Weighted average life of the loan (Years) × Risk sharing rate. When the GGE is calculated with the above mentioned formula, for the purpose of the Risk Sharing loan, the requirement as foreseen in Article 4 of the de minimis Regulation(1) is considered to be met. There is no minimum collateral requirement. A verification mechanism shall ensure that the GGE calculated with the above mentioned formula is not below than the GGE calculated following the Article 4(3)(c) of the de minimis Regulation. The total amount of aid calculated with the GGE cannot be above EUR 200 000 over a 3 years fiscal period taking into account the cumulation rule for final recipients in the de minimis Regulation. Technical support grant or another grant provided to the final recipient shall be cumulated with the calculated GGE. Regarding SMEs in the fisheries and aquaculture sector, the aid shall comply with the relevant rules of the fisheries de minimis Regulation. For activities supported by the EAFRD, general rules apply. |
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Lending policy |
(a) Disbursement from the managing authority or fund of funds to the financial intermediary: Following the signature of a funding agreement between the managing authority and the fund of funds or the financial intermediary, the relevant managing authority transfers public contributions from the programme to the fund of funds or the financial intermediary which places such contributions in a dedicated Risk Sharing loan fund. The transfer shall be in tranches and respect the ceilings of the Article 41 of Regulation (EU) No 1303/2013. The target lending volume and range of interest rate shall be confirmed within the ex-ante assessment in accordance with Article 37 of Regulation (EU) No 1303/2013and shall be taken into account to determine the nature of the instrument (revolving or non-revolving instrument). (b) Origination of a portfolio of new loans: The financial intermediary shall be required to originate within a pre-determined limited period of time a portfolio of new eligible loans in addition to its current loan activities, partly funded from the disbursed funds under the programme at the risk-sharing rate agreed in the funding agreement. Eligible loans for SMEs (according to pre-defined eligibility criteria on a loan-by-loan and portfolio level) shall be automatically included in the Portfolio, by way of submitting inclusion notices at least on a quarterly basis. The financial intermediary shall implement a consistent lending policy, especially regarding portfolio diversification, enabling a sound credit portfolio management and risk diversification, while complying with the applicable industry standards and while remaining aligned with the managing authority's financial interests and policy objectives. The identification, selection, due diligence, documentation and execution of the loans to final recipients shall be performed by the financial intermediary in accordance with its standard procedures and in accordance with the principles set out in the relevant funding agreement. (c) Re-use of resources paid back to financial instrument: Resources paid back to the financial instrument shall be either reused within the same financial instrument (revolving within the same financial instrument) or after being paid back to the managing authority or the fund of funds they shall be used in accordance with Article 44 of Regulation (EU) No 1303/2013. When revolving within the same financial instrument, as a matter of principle, the amounts that are attributable to the support of the ESIF and that are reimbursed and/or recovered by the financial intermediary from loans to final recipients within the time framework for investments shall be made available for new use within the same financial instrument. This revolving approach as referred at Articles 44 and 45 of Regulation (EU) No 1303/2013 shall be included in the funding agreement. Alternatively, if the managing authority or the fund of funds is directly repaid, the repayments shall occur regularly mirroring (i) principal repayments (on a pro rata basis on the basis of the risk sharing rate) (ii) any recovered amounts and losses deductions (according to the risk sharing rate), of the SME loans and (iii) any interest rate payments. These resources have to be used in accordance with Articles 44 and 45 of Regulation (EU) No 1303/2013. (d) Loss recoveries: The financial intermediary shall take recovery actions in relation to each defaulted SME loan financed by the financial instrument in accordance with its internal guidelines and procedures. Amounts recovered (net of recovery and foreclosure costs, if any) by the financial intermediary shall be allocated pro-rata to the risk-sharing between the financial intermediary and the managing authority or the fund of funds. (e) Others: Interest and other gains generated by support from the ESI Funds to financial instrument shall be used as referred in Article 43 of Regulation (EU) No 1303/2013. |
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Pricing policy |
When proposing its pricing, the financial intermediary shall present a pricing policy and the methodology to ensure the full pass on of the financial advantage of the programme public contribution to the eligible SMEs. The pricing policy and the methodology shall include the following elements:
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Programme contribution to financial instrument: amount and rate (product details) |
The actual risk sharing rate, programme public contribution and interest rate on loans shall be based on the ex-ante assessment findings and shall be such as to ensure that the benefit to the final recipients complies with the de minimis rule. The size of the target portfolio Risk Sharing loan shall be confirmed within the ex-ante assessment justifying the support to the financial instrument (Article 37 of Regulation (EU) No 1303/2013) and take into account the revolving approach of the instrument (if applicable). The composition of the targeted portfolio of loans shall be defined in a way to ensure diversification of risk. The RS loan allocation and the risk-sharing rate must be set in order to fill the gap evaluated within the ex-ante assessment, but in any case must comply with the conditions laid down in this term sheet. The risk sharing rate agreed with the financial intermediary shall define for each eligible loan included in the portfolio, the portion of the eligible loan principal amount financed by the programme. The risk-sharing rate agreed with the financial intermediary determines the exposure of the losses which are to be covered by the financial intermediary and by the programme contribution accordingly. |
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Programme contribution to financial instrument (activities) |
The portfolio funded by the RS loan instrument shall include only newly originated loans provided to SMEs, to the exclusion of the refinancing of existing loans. The eligibility criteria for inclusion in the portfolio are determined pursuant to Union law (e.g. Regulation (EU) No 1303/2013 and Fund-specific rules), programme, national eligibility rules, and with the financial intermediary with the aim of reaching a large number of final recipients and achieving sufficient portfolio diversification. The financial intermediary shall have a reasonable estimation of the portfolio risk profile. These criteria shall reflect market conditions and practices in the relevant Member State or region. |
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Managing Authority's liability |
The managing authority's liability in relation to the financial instrument shall be as set out in Article 6 of Delegated Regulation (EU) No 480/2014. The losses covered are principal amounts due, payable and outstanding and standard interest (but excluding late payment fees and any other costs and expenses). |
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Duration |
The lending period of the financial instrument shall be set in order to ensure that the programme contribution as referred in Article 42 of Regulation (EU) No 1303/2013 is used for loans disbursed to final recipients no later than the 31 December 2023. The typical duration to create the portfolio of loans is recommended to be up to 4 years from the date of signature of the funding agreement (between the managing authority or fund of funds and the financial intermediary). |
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Lending and risk-sharing at financial intermediary level (alignment of interest) |
Alignment of interest between the managing authority and the financial intermediary shall be achieved through:
The expected risk-sharing rate shall be determined based on the ex-ante assessment findings justifying the support to the financial instrument. |
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Eligible Financial Intermediaries |
Public and private bodies established in a Member State which shall be legally authorised to provide loans to enterprises operating in the jurisdiction of the programme which contributes to the financial instrument. Such bodies are financial institutions, and, as appropriate, microfinance institutions or any other institution authorised to provide loans. |
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Final recipients eligibility |
The final recipients shall be eligible under EU and national law, the relevant programme and funding agreement. The following eligibility criteria shall be met at the date of the signature of the loan:
In addition, at the time of the investment and during the reimbursement of the loan, final recipients shall have a registered place of business in a Member State and the economic activity for which the loan was disbursed shall be located in the relevant Member State and Region/Jurisdiction of the ESIF programme. |
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Characteristics of the product for the final recipients |
The financial intermediary shall deliver to final recipients the loans that contribute to the objective of the programme and that are co-financed by the programme under the RS loan instrument. Their terms shall be grounded on the ex-ante assessment referred to in Article 37 of Regulation (EU) No 1303/2013. The loans shall be used exclusively for the following permitted purposes:
The following eligibility criteria shall be met at all times by the loans included in the portfolio:
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Reporting and targeted results |
Financial intermediaries shall provide the managing authority or fund of funds with at least quarterly information in a standardised form and scope. The report shall include all the relevant elements for the managing authority to fulfil the conditions of Article 46 of Regulation (EU) No 1303/2013. Member States shall also fulfil their reporting obligations pursuant to the de minimis Regulation. Indicators must be aligned with the specific objectives of the relevant priority of the ESIF programme financing the financial instrument and on the expected results of the ex-ante assessment. They shall be measured and reported at least quarterly for the RS loan instrument and aligned as a minimum with the regulation requirements. In addition to the common indicators of the priority axis of the ESIF programme (employment increase, number of SMEs, …) other indicators are:
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Evaluation of the economic benefit of the programme contribution |
The financial intermediary shall reduce the overall effective interest rate (and collateral policy where appropriate) charged to the final recipients under each eligible loan included in the portfolio reflecting the favourable funding and risk sharing conditions of the RS loan. The entire financial advantage of the programme public contribution to the instrument shall be transferred to the final recipients in the form of an interest rate reduction. The financial intermediary shall monitor and report on the GGE for final recipients as referred in the State aid section. This principle shall be reflected in the funding agreement between the managing authority or fund of funds and the financial intermediary. |
ANNEX III
Capped Portfolio Guarantee for SME's (Capped Guarantee)
Schematic representation of the Capped Guarantee
Structure of the financial instrument |
The Capped Portfolio Guarantee shall provide credit risk coverage on a loan by loan basis, for the creation of a portfolio of new loans to SMEs up to a maximum loss amount (cap). The Capped Portfolio Guarantee shall be made available by the managing authority, in the framework of the operation which is part of the priority axis defined in the programme co-funded by the European Structural and Investment Funds (ESIF) and defined in the context of the ex-ante assessment required in Article 37 of Regulation (EU) No 1303/2013. |
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Aim of the instrument |
The aim of the instrument shall be to:
The ESIF programme contribution from the managing authority takes the form of a guarantee fund managed by a financial intermediary. This contribution shall not crowd out guarantees available from other public or private investors. The guarantee fund managed by the financial intermediary shall commit to provide funds from the ESIF programme to the financial institutions building up portfolios of new loans in case of default of the final recipients. In the case of fund of funds structure, the fund of funds shall transfer the contribution from the ESIF programme to the financial intermediary. The Capped Guarantee Instrument shall be implemented to cover a portfolio of new loans build up by one or more financial institutions. The financial institutions building up portfolios of new loans shall count on a partial guarantee covering losses up to a capped amount when providing loans to eligible SMEs. The financial advantage of the guarantee must be passed on to the final recipients (e.g. as a reduction of the interest rate of the loans or/and collateral reduction but always with a full financial advantage of the programme public contribution passed on to the final recipients). |
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State aid implication |
The Capped Portfolio Guarantee shall be designed as a State aid free instrument, i.e. market conform at the level of the financial intermediary managing the guarantee fund and financial institutions building up portfolios of new loans and aid to the final recipients under the applicable de minimis Regulation. (a) At the level of the fund of funds, the financial intermediary managing the guarantee fund, the financial institutions building up portfolios of new loans the aid is excluded when:
The guarantee must be linked to a specific financial transaction, for a fixed maximum amount and limited in time. (b) At the level of final recipients: At the SMEs' level, the guaranteed loan shall comply with the de minimis rules. For each loan inserted within the guaranteed portfolio, the financial intermediary shall calculate the GGE by using the following calculation methodology: Calculation of the GGE = Nominal amount of the loan (EUR) × Cost of risk (standard practice) × Guarantee rate × Guarantee cap rate × Weighted average life of the loan (Years). The total amount of aid calculated with the GGE cannot be above EUR 200 000 over a 3 years fiscal period taking into account the cumulation rule for final recipients in the de minimis Regulation. When the GGE is calculated with the above mentioned formula, for the purpose of a Capped Portfolio Guarantee instrument, the requirement as foreseen in Article 4 of the de minimis Regulation(1) is considered to be met. A verification mechanism shall ensure that the GGE calculated with the above mentioned formula is not below than the GGE calculated following the Article 4(6)(c) of the de minimis Regulation. Technical support grant or another grant provided to the final recipient shall be cumulated with the calculated GGE. Regarding SMEs in the fisheries and aquaculture sector, the aid shall comply with the relevant rules of the fisheries de minimis Regulation For activities supported by the EAFRD, general rules apply. |
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Guarantee policy |
(a) Transfer from the managing authority to the financial intermediary: Following the signature of a funding agreement between the managing authority and the fund of funds or the financial intermediary, the relevant managing authority transfers contributions from the programme to the fund of funds or to the financial intermediary which places such contributions in a dedicated guarantee fund. The transfer shall be in tranches and respect the ceilings of Article 41 of Regulation (EU) No 1303/2013. (b) Origination of a portfolio of new loans: The financial institutions shall be required to build up within a pre-determined limited period of time portfolios of new SME loans. Newly originated SME loans are partly covered by the programme contribution on a loan by loan basis up to a certain amount (Cap). Eligible SME loans are automatically included in the portfolio subject to a pre-set loan inclusion criteria. Inclusion of SME loans shall occur automatically upon receipt by the financial intermediary managing the guarantee fund of an inclusion notice submitted at least on a quarterly basis until the end of the relevant inclusion period. The financial institutions shall implement a consistent loan policy regarding portfolio diversification, enabling a sound portfolio management and risk diversification, while complying with the applicable industry standards and while remaining appropriate to the managing authority's financial interests and policy objectives. The identification, selection, due diligence, documentation and execution of the loans for final recipients shall be performed by the financial institutions in accordance with their standard procedures and in accordance with the principles set out in the agreement between the financial intermediary and the financial institution building up a portfolio of new loans. (c) Loss cover: The Capped Portfolio Guarantee shall cover losses incurred by the financial institutions in respect of each defaulted eligible SME loan in accordance with the guarantee rate of a maximum percentage of 80 %. Losses covered by the Capped Portfolio Guarantee in respect of the portfolio of eligible SME loans shall in aggregate not exceed the cap amount. The cap amount which is the maximum liability under this instrument is the product of the volume of the target loan portfolio multiplied by the guarantee rate and the guarantee cap rate. The guarantee cap rate shall be determined as part of the ex-ante risk assessment in accordance with Article 42(1)(b) of Regulation (EU) No 1303/2013 and Article 8 of Delegated Regulation (EU) No 480/2014. Losses covered are principal amounts due, payable and outstanding and standard interest (but excluding late payment, fees and any other costs and expenses). (d) Guarantee payment: Following the occurrence of a loss related to a default, the financial intermediary managing the guarantee fund shall make guarantee payments to the financial institution under the Guarantee within typically 60 days. |
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Pricing and collateral policies |
The financial intermediary shall present a methodology that ensures the full pass on of the financial advantage of the programme public contribution to the eligible SMEs. The financial institution shall have a pricing/collateral policy in line with the methodology. The pricing/collateral policy and the methodology shall include the following elements:
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Guarantee to financial institution amount and rate (product details) |
The Capped Portfolio Guarantee shall respect the conditions set in Article 8 of the Delegated Regulation (EU) No 480/2014. The Guarantee Cap rate shall be determined in the ex-ante risk assessment in accordance with Article 42(1)(b) of Regulation (EU) No 1303/2013 and Article 8 of Delegated Regulation (EU) No 480/2014 and in all cases not exceed 25 %. The guarantee may cover expected and unexpected losses. The multiplier of the guarantee financed by the programme contribution is defined as: Multiplier = (1/Guarantee Rate) × (1/Guarantee Cap Rate). The multiplier ratio shall be based on the ex-ante risk assessment and be equal to or higher than 5. The size of the target portfolio partially covered by the guarantee shall be based on the ex-ante assessment findings justifying the support to the financial instrument (Article 37 of Regulation (EU) No 1303/2013) and take into account the revolving approach of the instrument (if applicable). The composition of the targeted portfolio of loans shall be defined in a way to ensure diversification of risk. |
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Guarantee to financial institution (activities) |
The loan portfolio guaranteed by the guarantee instrument shall include newly originated loans provided to the final recipients, to the exclusion of refinancing of existing loans. The eligibility criteria for inclusion in the portfolio are determined pursuant to the Union law (e.g. Regulation (EU) No 1303/2013 and Fund-specific rules), programme, national eligibility rules, and with the financial intermediary with the aim of reaching a large number of final recipients and achieving sufficient portfolio diversification. Financial institutions shall have a reasonable estimation of the portfolio risk profile (concentration limit by sector for example). These criteria shall reflect market conditions and practices in the relevant country or region. The financial institution shall estimate ex-ante a recovery rate to be used for calculating the amount expected to be recovered from the defaults in the portfolio, which impacts the evaluation of the guarantee cap rate. |
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Managing authority's liability |
The managing authority's liability in relation to the financial instrument shall be as set out in Article 6 of Delegated Regulation (EU) No 480/2014. Default means, in respect of a loan to final recipient that (i) the financial institution can prove at any time (acting in accordance with its internal procedures and as reflected in its financial and regulatory reporting) that a final recipient is unlikely to meet its payment obligations; or (ii) a final recipient has failed to meet any payment obligation under the relevant SME loan which has continued for at least 90 consecutive calendar days |
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Duration |
The guarantee period of the financial instrument shall be set in order to ensure that the programme contribution as referred in Article 42 of Regulation (EU) No 1303/2013 is used with guarantees of loans disbursed to final recipients no later than the 31 December 2023. The typical duration to create the portfolio of guaranteed loans is recommended to be up to 4 years from the date of signature of the funding agreement (between the managing authority or fund of funds and the financial intermediary). |
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Risk-sharing at FI level (alignment of interest) |
Alignment of interest between the managing authority, the financial intermediary and the financial institution shall be achieved through:
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Eligible Financial Intermediaries and Financial Institutions |
Financial intermediaries shall be public and private bodies established in a Member State which are legally authorised to provide guarantees on loans to enterprises operating in the jurisdiction of the programme which contributes to the financial instrument. Financial institutions shall be public and private bodies established in a Member States which are legally authorised to provide loans to enterprises operating in the jurisdiction of the programme which contributes to the financial instrument. Such bodies are financial institutions, and, as appropriate, microfinance institutions or any other institution authorised to provide loans. |
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Final Recipient (final recipients) eligibility |
The final recipients shall be eligible under Union and national law, the relevant programme, and funding agreement. The final recipients shall fulfil the following eligibility criteria at the date of the document evidencing the relevant SME guarantee, meaning the guarantee commitment:
In addition, at the time of the investment and during the reimbursement of the guaranteed loan, final recipients shall have a registered place of business in a Member State and the economic activity for which the guaranteed loan was disbursed shall be located in the relevant Member State and Region/Jurisdiction of the ESIF programme. |
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Characteristics of the product for the final recipients |
The financial institution shall deliver to final recipients the loans that contribute to the objective of the programme and that are guaranteed by the programme under the Capped guarantee portfolio. The terms of the guarantees and of the loans shall be grounded on the ex-ante assessment referred to in Article 37(2) of Regulation (EU) No 1303/2013. The loans shall be used exclusively for the following permitted purposes:
The following eligibility criteria shall be met at all times by the loans included in the portfolio:
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Reporting and targeted results. |
Financial intermediaries shall provide the managing authority or fund of funds with at least quarterly information in a standardised form and scope. The report shall include all the relevant elements for the managing authority to fulfil the provisions of Article 46 of Regulation (EU) No 1303/2013. Member States shall also fulfil their reporting obligations pursuant to the de minimis Regulation. Indicators must be aligned with the specific objectives of the relevant priority of the ESIF programme financing the financial instrument and on the expected results of the ex-ante assessment. They shall be measured and reported at least quarterly for the guarantee fund and aligned as a minimum with the regulation requirements. In addition to the common indicators of the priority axis of the ESIF programme (employment increase, number of SMEs,…) other indicators are:
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Evaluation of the economic benefit of the programme contribution |
The financial advantage of the programme public contribution to the instrument shall be fully passed on to the final recipients (benefit of the guarantee). The financial advantage for the eligible SMEs shall be evidenced by a reduction of the overall interest rate required by the financial institution and/or collateral reduction on such SME loan. The financial intermediary shall monitor and report on the GGE for final recipients as referred in the State aid section. These principles shall be reflected in the agreements between the managing authority or fund of funds and the financial intermediaries and between the financial intermediaries and the financial institutions building up portfolios of new loans. |
ANNEX IV
Loan for energy efficiency and renewable energies in the residential building sector (Renovation loan)
Schematic representation of the Renovation loan principle
Structure of the financial instrument |
The Renovation loan shall take the form of a loan fund to be set up by a financial intermediary with contributions from the programme and the financial intermediary itself to finance a portfolio of newly originated loans, to the exclusion of the refinancing of existing loans. The Renovation loan shall be made available, in the framework of the operation which is part of the priority axis defined in the programme funded by the ESIF and defined in the context of the ex-ante assessment required in Article 37 of Regulation (EU) No 1303/2013. |
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Aim of the instrument |
The aim of the instrument is to offer preferential loans to natural and legal persons or independent professionals owning premises (apartment, social housing or individual household), as well as administrators or other legal bodies acting on behalf and for the benefit of the owners in order to undertake renovation works that are eligible for ESIF support. The ESIF programme contribution from the managing authority to a financial intermediary shall not crowd out financing available from other private or public investors. The ESIF programme shall provide funding to the financial intermediary in order to build up a portfolio of newly generated loans, and in parallel, participate in the losses/defaults and recoveries on the loans in this portfolio on a loan by loan basis and in the same proportion as the programme contribution in the instrument. In the case of fund of funds structure, the fund of funds shall transfer the contribution from the ESIF programme to the financial intermediary. In addition to the ESIF programme contribution, the fund of funds may provide its own resources which are combined with the financial intermediary resources. The fund of funds shall in this case take the pro-rata part of the risk sharing between the different contributions in the portfolio of loans. State aid rules have to be respected also in relation to such resources if they are public resources. |
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State aid implication |
The Renovation Loan shall be designed as a State aid free instrument, i.e. market-conform remuneration for the financial intermediary, full pass-on of financial advantage by the financial intermediary to the final recipients, and the financing provided to the final recipients are under the applicable de minimis Regulation. (a) Aid at the level of the financial intermediary and the fund of funds is excluded when:
(b) Aid at the level of an entity acting on behalf of the owners (i.e. natural and legal persons, independent professionals owning premises, administrators, other legal bodies): Aid at the level of an entity acting on behalf of the owners is excluded when:
(c) At the level of the owners without or with an economic activity (legal person or independent professionals, landlords and owners who install renewable energies, supplying part of the energy produced to the grid): Owners that are natural persons and which are not considered undertakings because they do not exercise an economic activity are not considered to be beneficiaries of State aid. Owners with an economic activity qualify as an ‘undertaking’ and are subject to State aid rules. In particular, this is the case if they are landlords (renting is an economic activity) and in the case of installing renewable energies, if part of the renewable energies produced is supplied to the grid (supplying energy to the grid is considered an economic activity). At the level of the owners with an economic activity, the aid shall comply with the de minimis rules. For each loan inserted within the portfolio regarding owners with an economic activity, the financial intermediary shall calculate the GGE by using the following calculation methodology: Calculation of the GGE = Nominal amount of the loan (EUR) × (Cost of funding (standard practice) + Cost of risk (standard practice) – Any fees charged by the managing authority on the programme contribution to the financial intermediary) × Weighted average life of the loan (Years) × Risk sharing rate. When the GGE is calculated with the above mentioned formula, for the purpose of the Renovation loan instrument, the requirement as foreseen in Article 4 of the de minimis Regulation(1) is considered to be met. There is no minimum collateral requirement. A verification mechanism shall ensure that the GGE calculated with the above mentioned formula is not below than the GGE calculated following the Article 4(3)(c) of the de minimis Regulation. The total amount of aid calculated with the GGE cannot be above EUR 200 000 over a 3 years fiscal period taking into account the cumulation rule for final recipients in the de minimis Regulation. Technical support grant or another grant provided to the final recipient shall be cumulated with the calculated GGE. |
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Lending policy |
(a) Disbursement from the managing authority or fund of funds to the financial intermediary: Following the signature of a funding agreement between the managing authority and the fund of funds or the financial intermediary, the relevant managing authority transfers public contributions from the programme to the fund of funds or the financial intermediary which places such contributions in a dedicated Renovation loan fund. The transfer shall be in tranches and respect the ceilings of Article 41 of Regulation (EU) No 1303/2013. The target lending volume and range of interest rate shall be confirmed within the ex-ante assessment in accordance with Article 37 of Regulation (EU) No 1303/2013 and shall be taken into account to determine the nature of the instrument (revolving or non-revolving instrument). The maximum risk-sharing of the financial instrument towards the final recipients shall be 85 % (i.e. at least 15 % shall be provided by the financial intermediary own funds). (b) Origination of a portfolio of new loans: The financial intermediary shall be required to originate within a pre-determined limited period of time a portfolio of new loans funded according to a risk-sharing rate agreed in the funding agreement (i.e. funded by (i) the programme contribution) (ii) the financial intermediary own fund). Eligible loans pre-defined according to eligibility criteria on a loan-by-loan basis and portfolio level shall be automatically included in the portfolio by way of submitting inclusion notices at least on a quarterly basis. The financial intermediary shall implement a consistent lending policy, especially regarding portfolio composition enabling a sound credit portfolio management and risk diversification, while aiming at reducing the market failure identified in the ex-ante assessment (referring to Article 37 of Regulation (EU) No 1303/2013) and while remaining aligned with the managing authority's financial interests and policy objectives. The identification, selection, due diligence, documentation and execution of the loans to final recipients shall be performed by the financial intermediary in accordance with its standard procedures and in accordance with the principles set out in the relevant funding agreement. (c) Re-use of resources paid back to financial instrument: Resources paid back to the financial instrument shall be either reused within the same financial instrument (revolving within the same financial instrument) or after being paid back to the managing authority or the fund of funds they shall be used in accordance with Article 44 of Regulation (EU) No 1303/2013. When revolving within the same financial instrument, as a matter of principles, the amounts that are attributable to the support of the ESIF and that are reimbursed and/or recovered by the financial intermediary from loans to final recipients within the time framework for investments shall be made available for new use within the same financial instrument. This revolving approach as referred at Articles 44 and 45 of Regulation (EU) No 1303/2013 shall be included in the funding agreement. Alternatively, if managing authority or fund of funds is directly repaid, the repayments shall occur regularly mirroring (i) principal repayments (on a pro rata basis on the basis of the risk sharing rate) (ii) any recovered amounts and losses deductions (according to the risk sharing rate), of the Renovation loans and (iii) any interest rate payments. These resources have to be used in accordance with Articles 44 and 45 of Regulation (EU) No 1303/2013. (d) Loss recoveries: The financial intermediary shall take recovery actions in relation to each defaulted loan co-financed by the Renovation loan in accordance with its internal guidelines and procedures. Amounts recovered by the financial intermediary (net of recovery and foreclosure costs, if any) shall be allocated pro-rata to the risk-sharing between the financial intermediary and the managing authority or the fund of funds. (e) Others: Interest and other gains generated by support from the ESI Funds to financial instrument shall be used in accordance with Article 43 of Regulation (EU) No 1303/2013. |
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Pricing policy |
When proposing its pricing, the financial intermediary shall present a pricing policy and the methodology to ensure the full pass on of the financial advantage of the programme public contribution to the final recipients. The pricing policy and the methodology shall include the following elements:
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Programme contribution to financial instrument: amount and rate (product details) |
The Renovation loan allocation to financial intermediaries and the minimum risk sharing rate shall be based on the ex-ante assessment findings justifying the support to the financial instrument (Article 37 of Regulation (EU) No 1303/2013) and taking into account the revolving approach of the instrument (if applicable). |
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Programme contribution to financial instrument (activities) |
The loan portfolio funded by the Renovation loan instrument shall include newly originated loans to the final recipients, to the exclusion of the refinancing of existing loans. The eligibility criteria for inclusion in the portfolio are determined pursuant to the Union law (e.g. Regulation (EU) No 1303/2013 and Fund-specific rules), programme, national eligibility rules, and with the financial intermediary with the aim of reaching a large number of final recipients and achieving sufficient portfolio diversification and homogeneity in order to allow a reasonable estimation of the portfolio risk profile. These criteria shall reflect market conditions and practices in the relevant country or region. The financial intermediary shall be required to cooperate with regional or national bodies responsible for providing additional services in relation to the implementation of the renovation projects, which includes inter alia: consultancy services; verification and evaluation of project preparation, construction, technical supervision and procurement documents; evaluation of the compliance of renovation projects with Union and national law; the provision of grant support, State aid verification and registration. |
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Managing authority's liability |
The managing authority's liability in relation to the financial instrument shall be as set out in Article 6 of Delegated Regulation (EU) No 480/2014. |
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Duration |
The lending period of the financial instrument shall be set in order to ensure that the programme contribution as referred in Article 42 of Regulation (EU) No 1303/2013 is used for loans disbursed to final recipients no later than by 31 December 2023. |
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Lending and risk-sharing at financial intermediary level (alignment of interest) |
Alignment of interest between the managing authority and the financial intermediary shall be achieved through:
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Eligible financial intermediaries |
Public and private bodies established in a Member State which shall be legally authorised to provide Renovation loans to persons owning premises and enterprises operating and owning premises in the jurisdiction of the programme which contributes to the financial instrument. Such bodies are financial institutions, and as appropriate microfinance institutions or any other institution authorised to provide loans. |
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Final recipient eligibility |
The final recipients shall be eligible under Union and national law, the relevant priority, and funding agreement. Final recipients shall be natural or legal persons or independent professionals (economic activity), as well as administrators or other legal bodies acting on behalf and for the benefit of owners, owning premises (apartment or individual household) implementing energy efficiency or renewable energies measures that are eligible under Regulation (EU) No 1303/2013 and programme support. Within the eligibility rules under the programme and in line with national and Union rules the following examples of types of works may be eligible:
Regarding the final recipients, the following eligibility criteria shall apply when lending to final recipient/owners with an economic activity under a legal entity (for example independent professionals). The eligibility criteria shall be met at the date of the signature of the loan:
In addition, at the time of the investment and during the reimbursement of the loan, final recipients shall have a registered place of business in a Member State and the economic activity for which the loan was disbursed shall be located in the relevant Member State and Region/Jurisdiction of the ESIF programme. |
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Characteristics of the product for the final recipients |
The financial intermediary shall deliver to final recipients new loans that contribute to the objective of the programme and that are co-financed by the programme under the Renovation loan, to the exclusion of the refinancing of existing loans. Their terms shall be grounded on the ex-ante assessment referred to in Article 37 of Regulation (EU) No 1303/2013. The Renovation loan maturity shall be for a period of up to 20 years. The maximum amount of each Renovation loan shall be fixed in relation with the ex-ante assessment findings justifying the programme contribution to the financial instrument and shall be fixed in the funding agreement between the managing authority, fund of funds and the financial intermediary. The maximum amount per loan per individual household shall not exceed EUR 75 000. Loans for a building administrator are the sum of individual households of the building. The financial instrument may require from the final recipients or the administrators of common property acting on behalf of final recipients, an ‘own funds’ contribution. The Renovation loan shall be subject to annual fixed interest rate and shall include regular amortisation. The interest rate on the financial intermediary participation is set at market basis. The interest rate applicable to the relevant eligible loan included in the portfolio shall be reduced by the proportion of the programme public contribution in favour of the final recipients. An interest rate subsidy, as under Article 37(7) of Regulation (EU) No 1303/2013, may be awarded to low income households or vulnerable households(3) The maximum interest rate subsidy shall correspond to the interest rate to be paid by the low income households or vulnerable households on the contribution of the financial intermediary in each loan. Certain technical support costs may be included in the financial instrument in the context of Article 37(7) of Regulation (EU) No 1303/2013. Support must be provided for project preparation only (preparatory studies and assisting in the preparation of the investment up to the investment decision). These technical support costs shall only be eligible in the event that a Renovation loan is signed between the financial intermediary and the final recipients and regardless of the entity that provides these services (e.g. regardless of whether the financial intermediary provides such services or they are obtained from another entity). |
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Reporting and targeted results |
Financial intermediaries shall provide the managing authority or fund of funds with at least quarterly information in a standardised form and scope. The report shall include all the relevant elements for the managing authority to fulfil the conditions of Article 46 of Regulation (EU) No 1303/2013. Member States shall also fulfil their reporting obligations pursuant to the de minimis Regulation. Indicators must be aligned with the specific objectives of the relevant priority of the ESIF programme financing the financial instrument and on the expected results of the ex-ante assessment. They shall be measured and reported at least quarterly for the Renovation loan and aligned as a minimum with the regulation requirements. In addition to the common indicators of the priority axis of the ESIF programme (number of households with improved energy consumption classification, estimated annual decrease of GHG …) other indicators are:
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Evaluation of the economic benefit of the programme contribution |
The financial intermediary shall reduce the overall effective interest rate (and collateral policy where appropriate) charged to the final recipients under each eligible loan included in the portfolio reflecting the favourable funding and risk sharing conditions of the Renovation loan. The entire financial advantage of the programme public contribution to the instrument shall be transferred to the final recipients in the form of an interest rate reduction. The financial intermediary shall monitor and report on the GGE for final recipients as referred in the State aid section. This principle shall be reflected in the funding agreement between the managing authority or fund of funds and the financial intermediary. |