Summaries of the data on the progress made in financial instruments – Situation as at 31 December 2022
Summaries of data on the progress made in financing and implementing financial instruments supported by ESIF as of 31 December 2022.
Audit of financial instruments in the 2021-2027 programming period
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Watch the full recording of the webinar 'Audit of Financial Instruments in the 2021-2027 Programming Period', jointly organised by the EC (DG REGIO) and the EIB. Held on Thursday, 21 March 2024, this online event focused on the updated audit methodology, system audits, audit and control of financial instruments design and setup, verification of expenditure for eligible purposes, payments, and sampling techniques.
Audit of financial instruments in the 2021-2027 programming period
Not formal guidance
The European Commission (EC) has published the methodology for the audit of financial instruments (FI) in the 2021-2027 programming period (the 2021-2027 audit methodology). The approach in the 2021-2027 audit methodology reflects the requirements of the Common Provisions Regulation 2021/1060 (CPR), in particular:
Audit methodology for auditing financial instruments, programming period 2021-2027
This document presents the audit methodology for the audit of EU shared management funds’ financial instruments under the 2021-2027 programming period. The audit work is detailed in the checklist in the Annex to this audit methodology. The document describes the overall audit approach of the Commission services to carrying out system audits and audits of financial instrument operations, in accordance with the applicable rules and internationally accepted audit standards.
New to financial instruments?
This page can help you get up to speed in the world of EU shared management financial instruments.
Browse through the sections below to build up your knowledge of financial instruments.
Introduction
Financial instruments are a form of support where EU shared management funds are delivered via a structure through which financial products are provided to final recipients. They provide an alternative to grant programmes and are suitable wherever the investment is likely to lead to financial returns or savings which can be used to repay the investments.
Introduction
When compared with grants, financial instruments offer three main benefits:
- The – money repaid by final recipients can be reused to support further investments to support the programme objectives
- – financial instruments can attract additional public and private co-investment to multiply the amount of financing available to final recipients. The scope to combine grant within the same operation further enhances the potential range of financial instruments and
- – financial instruments are closer to the market and implemented by financial intermediaries who bring their own sector expertise. Thus finance is targeted at viable projects with robust business plans increasing the impact of the investments made.
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The revolving effect ...
– money repaid by final recipients can be reused to support further investments to support the programme objectives
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Leverage effect
– financial instruments can attract additional public and private co-investment to multiply the amount of financing available to final recipients. The scope to combine grant within the same operation further enhances the potential range of financial instruments and ...
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High impact
– financial instruments are closer to the market and implemented by financial intermediaries who bring their own sector expertise. Thus finance is targeted at viable projects with robust business plans increasing the impact of the investments made.
What are EU shared management funds?
EU funding is managed by the European Commission, jointly with the Member States, or through implementing partners. All the programmes funded by the EU budget fall under one of three types of implementation modes depending on the nature of the funding concerned:
Direct management
EU funding is managed directly by the European Commission;
EU funding is managed directly by the European Commission;
Shared management
the European Commission and national authorities jointly manage the funding;
the European Commission and national authorities jointly manage the funding;
Indirect management
funding is managed by partner organisations or other authorities inside or outside the EU.
funding is managed by partner organisations or other authorities inside or outside the EU.
In shared management, both the European Commission and national authorities in Member States, such as ministries and public institutions, are in charge of running a particular programme.
The EU shared management Funds are:
These funds can be used to support development in a comprehensive way by investing for instance in businesses, research and development, infrastructure, employment and training, agriculture, forestry and fisheries development, with the overall objective to improve the quality of life of EU citizens.
The planned use of financial instruments to support specific objectives shall be identified in the programme of the relevant EU shared management Fund prepared by the Member State and approved by the Commission.
What are EU financial instruments?
Financial instruments co-funded by the EU shared management funds are a sustainable and efficient way to invest in the growth and development of people and businesses in the EU Member States and regions. They support a broad range of development objectives to the benefit of a wide range of recipients, with the potential for funds to be reused for further investments.
Financial instruments are suitable for financially viable projects and businesses, i.e. those which are expected to generate enough income or savings to pay back the support received. Financial instruments must address an identified market failure, e.g. where banks are unwilling to lend and/or where the private sector is unwilling to invest.
Managing authorities may choose to implement financial instruments where their use has been identified in the programme. The design of the financial instruments and choice of financial products should be determined early on in the implementation through the ex-ante assessment.
Financial instrument can take different forms:
Find out more about financial instruments products here
- Loans
- Guarantees
- Equity
- Quasi-equity
fi-compass has published many factsheets to explain the different forms:
How do they work?
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Funds are allocated from the EU budget ...
to countries and regions to carry out seven-year economic and social development strategies which fit in Europe’s policy objectives. The programmes are implemented by the EU Member States and regions who decide what kind of projects and investments are best suited to their strategies. This work is organised by ‘managing authorities’, so national or local authorities, in each country and/or region. The managing authorities decide where to use grants or financial instruments to provide support.
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Before allocating money to a financial instrument ...
managing authorities have to assess what is needed, why and by whom. For example, a region may have high technology firms that cannot access ordinary bank funding because their projects are too risky. Alternatively, there may be very small firms and entrepreneurs that cannot obtain loans because they have no track record with the bank or no collateral to offer. Based on this assessment of needs, one or more financial instruments may be set up. This analysis is called ‘ex-ante assessment’.
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Financial instruments are usually managed by ...
nationally or regionally operating financial institutions (such as banks) that are selected and entrusted with running financial instruments on behalf of the managing authority. The financial instruments using EU funds are therefore delivered regionally or locally, often by institutions that are already familiar to those who finally will receive the support.
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The financial institutions ...
The financial institutions entrusted to manage the instruments invest directly or through intermediaries in people and enterprises, often providing favourable conditions that allow the final recipients to grow and expand their businesses.
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The final recipients ...
The final recipients repay the funds to the intermediaries or to the financial institutions managing the financial instrument. The money is then reused to finance more projects and businesses.
What benefits do financial instruments bring?
Financial instruments bring many benefits:
- Money is paid back and used over and over again in the same region for other investments. This is especially important in times of public spending cuts.
- The use of public money attracts private investment. For instance, so-called ‘business angels’ may invest in small businesses alongside EU funded instruments when they would not have invested alone. Urban property that would otherwise lie unused can be reconfigured for a range of commercial and industrial uses because property developers can be persuaded to come on board. Banks may lend to entrepreneurs unable to offer collateral because of an EU-backed guarantee fund.
- With private investment comes private investor expertise. Firms and local authorities can benefit from a more ‘hands on’ approach to develop their projects as the organisations appointed to manage financial instruments are incentivised to see their investments succeed.
Advantages to managing authorities?
As a national, regional or local authority, you can increase the leverage of the money available for development in your area by attracting other sources of finance and re-investing the money paid back.
Watch these testimonial interviews to hear from managing authorities on the impact of EU shared management financial instruments.
Alignment with banks, fund managers, investors?
As a financial intermediary, you can contribute to sustainable development in your region by helping to invest EU funds in exchange for a management fee, while potentially broadening your customer base.
Watch these testimonial interviews to hear from banks, fund managers and investors on the impact of EU shared management financial instruments.
Supporting final recipients?
As a citizen, entrepreneur or business, you may be able to access finance thanks to EU shared management financial instruments. Your managing authority can tell you which financial intermediaries in your region offer financial products co-funded by EU funds that may be appropriate for you.
Watch these testimonial interviews to hear from final recipients on the impact of EU shared management financial instruments.
Which Regulations apply?
EU shared management financial instruments must comply with specific regulatory provisions which are set out in the Common Provisions Regulation (CPR) for shared management funds .
Learn more
about what regulations apply to specific EU shared management funds
A podcast series to explain the new CPR
The 'Calling the Tune' podcast series features experts from the European Commission’s DG REGIO discussing and shedding light on novelties of the Common Provisions Regulation 2021.
Similar to the role of a conductor guiding an orchestra, harmonising the instruments to one music sheet, our experts will walk you through the latest regulatory provisions with hands on advice and useful information tailored to help you set up financial instruments in the 2021-2027 programming period.
How much money is now contributed to financial instruments?
The total programme contributions committed to FIs increased by almost EUR 1.9 billion by the end of 2021, to EUR 29.3 billion, including EUR 21.9 billion from the European Regional Development Fund (ERDF) and the Cohesion Fund (CF).
Find out more in this article:
Financial instruments provided real returns in the real economy
What financial instruments are active in your country?
What is fi-compass?
About fi-compass
fi-compass is the go-to place for anyone interested in EU shared management financial instruments. The fi-compass platform for advisory services is provided by the European Commission in partnership with the European Investment Bank.
fi-compass supports financial instruments practitioners, by providing practical know-how and learning tools on financial instruments. These include ‘how-to’ manuals, factsheets and case study publications, as well as face-to-face training seminars, networking events, and video information. Browse through this website to find out more.
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