PURPOSE: to create the conditions for the guarantee fund for external actions to receive risk premiums from EIB financing operations under the private sector mandate for refugee projects.

LEGISLATIVE ACT: Regulation (EU) 2018/409 of the European Parliament and of the Council amending Council Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions.

CONTENT: this Regulation amends Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions. The amendments introduced are as follows:

risk-premium revenues generated under the financing operations of the European Investment Bank (EIB) that benefit from a Union budgetary guarantee should be paid into the fund; where the amount of the Fund exceeds 10 % of the Union's total outstanding capital liabilities, the surplus should be paid back into the general budget of the Union in order to better protect the general budget of the Union against potential additional risk of default of the EIB financing operations addressing the long-term economic resilience of refugees, migrants, host and transit communities, and communities of origin as a strategic response to addressing root causes of migration; the financial management of the fund shall be entrusted to the EIB by the Commission.

The Commission shall:

present by 30 June 2019 at the latest, an independent external evaluation of the advantages and disadvantages of entrusting the financial management of the assets of the fund and of the European fund for sustainable development to the Commission, the EIB or a combination of the two. Where appropriate, the evaluation shall be accompanied by a legislative proposal; present each year , a report on the presentation of the financial position and information on the functioning of the fund at the end of the previous calendar year, including detailed information on the outstanding capital of guaranteed loans or the fund's assets during the previous calendar year, as well as conclusions and lessons learned. The report shall also include information about the financial management and performance and the risk of the Fund at the end of the previous calendar year. Starting in 2019 and every three years thereafter, the report shall also include an assessment of the adequacy of the 9% target and the 10% threshold for the fund.

ENTRY INTO FORCE: 8.4.2018.

The European Parliament adopted by 506 votes to 83, with 36 abstentions, a legislative resolution on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions.

The European Parliament’s position adopted at first reading following the ordinary legislative procedure should amend the Commission proposal as follows:

Financial management of the Guarantee Fund : according to the amended text, the Commission shall entrust the financial management of the Fund to the European Investment Bank (EIB). By 30 June 2019, the Commission shall submit an independent external evaluation of the advantages and disadvantages of entrusting the financial management of the assets of the Fund and of the European Fund for Sustainable Development to the Commission, the EIB, or a combination of the two. The evaluation shall, where appropriate, be accompanied with a legislative proposal.

Annual report : this shall contain a presentation of the financial position and information on the functioning of the Fund at the end of the previous calendar year, the financial flows as well as the significant transactions and any relevant information on the financial accounts, such as detailed information on the outstanding capital of guaranteed loans or the Fund's assets during the previous calendar year, as well as conclusions and lessons learned.

As of 2019 and every third year thereafter, it shall also include an assessment on the adequacy of the 9 % target and the 10% threshold for the Fund .

The text stressed that where the amount of the Fund exceeds 10 % of the Union's total outstanding capital liabilities, the surplus should be paid back into the general budget of the Union in order to better protect the general budget of the Union against potential additional risk of default of the EIB financing operations addressing the long-term economic resilience of refugees, migrants, host and transit communities, and communities of origin as a strategic response to addressing root causes of migration.

The Committee on Budgets adopted the report by Eider GARDIAZABAL RUBIAL (S&D, ES) on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions.

The Committee on Development, exercising its prerogative as an associated committee in accordance with Article 54 of the Rules of Procedure, also gave its opinion on the report.

The committee recommended that the European Parliament’s position, adopted at first reading following the ordinary legislative procedure, should amend the Commission proposal as follows:

Financial management of the Guarantee Fund : Members stated that the Commission shall ensure the financial management of the Fund, while taking into account the principles guiding the Union's external action. The Commission shall explain to the European Parliament how the management of the Fund is integrated into its broader development strategy.

The financial management of Fund shall be carried out under the highest standards of transparency and democratic accountability .

Annual report : Regulation (EC, Euratom) No 480/2009 stipulated that the target amount of the Fund shall be 9 % of the Communities’ total outstanding capital liabilities arising from each operation, increased by unpaid interest due.

The Commission proposal stipulated the amount of the Guarantee Fund in surplus exceeding 10% of the Union's total outstanding capital liabilities shall be paid back to the general budget of the Union.

According to Members, the annual report on the management of the Guarantee Fund in the previous calendar year and an assessment of the adequacy of the 9 % target amount and of the 10 % threshold , and of the asset management of the Guarantee Fund by the Commission.

PURPOSE: to create the necessary preconditions in order for the Guarantee Fund for external action to receive the risk premiums originating from EIB financing operations under the private sector mandate dedicated to projects in support of refugees and/or host communities.

PROPOSED ACT: Regulation of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with Council.

BACKGROUND: the proposal forms part of the ambitious external investment plan ("EIP") announced in the Commission communication of 7 June 2016 on establishing a new partnership framework with third countries under the European agenda on migration. On 28 June 2016, the European Council endorsed the EIP initiative, which aims to address root causes of migration, while contributing to the achievement of sustainable development goals. Together with a separate legislative proposal to amend Decision No 466/2014/EU of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank ("EIB") against losses under financing operations supporting investment projects outside the Union, the proposal will enable the EIB to contribute to the EIP by expanding both quantitatively and qualitatively the EIB’s external lending mandate.

CONTENT: the proposal seeks to amend Regulation (EC, Euratom) No 480/2009 establishing a Guarantee Fund for external actions. It contains ancillary provisions necessary for the functioning of the EIP, in particular the new private sector lending mandate to the EIB.

Endowment of the Fund : currently, the Guarantee Fund is endowed by the following: (1) one annual payment from the general budget of the Union, (2) interest on Guarantee Fund resources invested, and (3) amounts recovered from defaulting debtors. It is proposed that the risk premium revenues generated under the new private sector lending mandate of the EIB should represent a fourth source of income for the Guarantee Fund.

In order to better protect the budget against potential additional risk of default of the EIB financing operations related to migration crisis, the amount of the Guarantee Fund in surplus exceeding 10% of the outstanding of loans will be paid back to the EU budget.

Management of the Fund: until now, the assets of the Guarantee Fund have been managed by the EIB. In view of the facts that the Commission has strong experience managing similar financial operations, and is already entrusted with the management of the Guarantee Fund for the EFSI, it is proposed that the management of the assets of the Guarantee Fund be transferred to the Commission.

Reports: the Commission will, by 31 March of each year, in the context of the financial statements of the Commission, submit to the European Parliament, to the Council and to the Court of Auditors the required information on the situation of the Guarantee Fund.

BUDGETARY IMPLICATIONS: under the new private sector lending mandate set up by a separate legislative act, the Union will be entitled to the risk premium revenues generated under EIB financing operations. The risk premium revenues will remunerate the higher risk and contribute over the lifetime of the instrument to the funding of the additional provisioning needs for the Guarantee Fund.

The proposal is not expected to have any net budgetary implication because the risk premiums constitute inflows to the Guarantee Fund. They will be charged to the EIB in return for risks borne by the Union budget.