Conclusions 1 Role of the EIB

The role of the EIB in Cohesion Policy expanded rapidly during the 2007-13 programme period. It now undertakes activities and delivers products and services that are intended to provide both financial and non-financial added value in support of EU policy objectives. In some cases, these roles were anticipated, whereas in others they evolved in response to new policy priorities and demands.

The original remit of the EIB in relation to Cohesion Policy was to provide finance for economic development projects. It continues to fulfil this role by providing direct loans, framework loans, intermediated loans and global loans. The EIB’s lending to support social and economic cohesion objectives of the EU amounted to EUR 147 billion in 2007-13. Furthermore, through its Structural Programme Loans (SPLs) facility, the EIB makes available investment programmes made up of projects from one or more OPs.

Furthermore, the EIB’s role in mandate management means that it has taken an important step in terms of assuming indirect responsibility over the implementation of Cohesion Policy budget. However, under the shared management model final responsibility for implementation of Cohesion Policy lies with the Member State and the Commission. Over time, the EIB’s role has expanded to include a wide range of analytical and advisory services as well as capacity-building activities. Of particular importance in the 2007-13 period was the EIB and EIF’s roles in the development and implementation of ‘Special Support Instruments’. JESSICA (Joint European Support for Sustainable Investment in City Areas) – a TA initiative to help managing authorities set up investment funds supporting sustainable urban development. The JEREMIE (Joint European Resources for Micro to Medium Enterprises) initiative offered EU Member States TA assistance, through their national or regional managing authorities, the opportunity to explore possibilities of using part of their EU Structural Funds to finance small and medium-sized enterprises by means of equity, loans or guarantees. The EIB and EIF were involved by:

 advising and assisting national, regional and local authorities in implementing JESSICA and JEREMIE initiatives; and

 promoting the use of FIs and best practice across Europe.

JASPERS (Joint Assistance to Support Projects in European Regions) was a joint initiative by the Commission (DG REGIO), EIB and EBRD356 to assist beneficiary countries (principally the new Member States and acceding countries of the EU) to absorb EU Structural and Cohesion

Funds over the 2007-13 period. JASMINE (Joint Action to Support Microfinance Institutions) was an EU initiative managed by EIF in the 2007-13 period to help non-bank microfinance institutions to scale up their operations and maximise the impact of microfinance products on microenterprises’ development and unemployment reduction within the European Union. In both the JASPERS and JASMINE initiatives, the EIB and EIF provided advisory and analytical services. Furthermore, the EIB and EIF could act as holding fund manager of financial instruments for enterprises and urban development when requested by Member States or managing authorities. This role meant that the EIB and EIF have increased their responsibilities in terms of implementing Cohesion Policy funds.

Additionally, outside the formal Cohesion Policy framework, the EIB provides a wider range of services and products to achieve Europe 2020 goals (COSME, INNOVFIN and Connecting Europe Facility). These instruments are complementary and contribute to Cohesion Policy objectives.

7.1.2 Effectiveness and efficiency

The EIB activities are generally regarded as making a significant contribution to Cohesion Policy objectives and have a high level of added value and complementarity. Member States generally consider the activities of the EIB to be effective in terms of absorption, generating relevant projects and results. Member States identified access to finance, analytical support and technical know-how as key areas in which the EIB contributed to Cohesion Policy implementation. Complex rules and regulations, high management fees and high costs of HF management were considered to be the main challenges when engaging with the EIB.

As the EIB’s role in Cohesion Policy increases, there is a need for more insight into the effectiveness of its different activities. Evaluations of JEREMIE and JESSICA provide evidence of the positive contribution of EIB and EIF advisory and analytical services and their related operations to build capacity for implementing Cohesion Policy, but the services have been fragmented across the EIB and EIF. The introduction of a more centralised advisory service in the form of fi-compass is therefore welcomed. The EIB’s (b)lending activities are often assessed and reported as part of its overall lending portfolio. However, its specific contribution to - and relation with - Cohesion Policy programmes and projects are unclear. Its role in mandate management means that the EIB has indirect responsibility (through managing authorities) for the implementation of Cohesion Policy instruments, but this is still a relatively new role for the EIB and the currently available data only provide only limited insights into the comparative performance of HFs managed by the EIB relative to those managed by other institutions.

The increased role of the EIB also presents considerable challenges in terms of the monitoring and control of its operations. As the EIB workload increases, questions have been raised on whether it should adopt a more programme-based approach rather than a project-based approach in terms of monitoring its lending activities. To an extent, such a shift has already taken place, and the EIB has adapted to the new circumstances. For example, its Structural Programme Lending provides framework loans that can cover a whole programme period. A further integration of this programme approach for other activities would bring EIB investments more into line with the implementation of Cohesion Policy.

Cohesion Policy has become the EU’s main investment policy, increasingly focused on the EU’s overall economic objectives. The EIB is a natural partner in supporting these goals. However, the EIB can be characterised as a risk-averse organisation. Its AAA rating

is the foundation of its investment strategy. There have been concerns that the EIB is too risk-averse and that necessary investments to improve the sluggish European economic growth rate are not being supported. The EFSI and the EUR 8 billion guarantee provided by the Community budget are an attempt to increase investment in higher-risk projects.

7.1.3 Accountability, transparency and visibility

The dual role of the EIB (public institution and investment bank) can lead to ambiguity in terms of its accountability, transparency and visibility. However, over the past five years major efforts have been made to improve its accountability framework and transparency policy, particularly by providing more information. Innovations such as dedicated sub-reports on themes such as SMEs or external affairs are regarded as an important improvement in terms of European Parliament’s ability to scrutinise the EIB’s activities.

The overall conclusion from the research for this study is that most Member States regard EIB activities as accountable, transparent and visible. However, in a few Member States, EIB involvement was not rated positively. Many of the issues noted by respondents related to gaps or uncertainties in the legal framework for implementing FIs and the lack of guidance – which are not solely due to the EIB.

In 2007-13, there were major drawbacks in reporting and monitoring the performance of FIs. As the EIB has a major role in terms of providing advisory/analytical and mandate management services for FIs, it has a significant role to play in terms of improving the situation. The CPR lays down new and more detailed requirements for monitoring FIs. However, the first reporting round will not occur until 2016. Although the framework for reporting has been strengthened, it remains to be seen whether the quality of data that is returned will improve and whether issues around data availability and reliability are resolved.

The EIB’s role has increased most in the area of FIs and associated advisory services. However, in financial terms this still only represents a small proportion of its activities when compared with its overall (b)lending activities in Cohesion Policy. Curiously, despite this being the longest-standing involvement of the EIB in Cohesion Policy, it is probably least well understood in terms of its overall contribution to the Policy with relatively little information available. Some information is included in annual reports but is limited to the Bank’s contributions to its economic convergence objectives. It does not provide a clear picture of the EIB’s different instruments where they are used or the extent to which they contribute and are complementary to Cohesion Policy funding.

The dual role of the EIB in providing advisory and also mandate management services can be perceived as a conflict of interest. The Bank carries out the ex-ante assessment or evaluation whilst at the same time it is a prospected HF manager. The Bank has taken a number of steps to mitigate this risk, most significantly by centralising all advisory services in one unit, fi-compass. Nevertheless, there are still questions about a potential conflict of interests.

7.1.4 Inter-institutional relationships

Over the 2007-13 programme period, a process of learning has taken place at the institutional level. The introduction of FIs and the associated increased role of the EIB represent a paradigm shift in the implementation of Cohesion Policy. Although FIs still represent a relatively small part of the overall Cohesion Policy budget, there is strong support for increasing their use. The 2007-13 period represented a steep learning

curve on the part of the EIB and the Commission. The two institutions have different cultures which sometimes complement each other but have also been the cause of friction. Particularly through the introduction of FIs, EIB activities have become more dependent on Cohesion Policy regulation, which in 2007-13 were regarded as a significant constraint. Understanding the policy and legal context and reallocating resources to its advisory and mandate management services required considerable effort on the part of the EIB.

For the Commission (DG REGIO), the shift from an implementation culture based on grants to financial instruments has also been challenging. Understandably, there has been a reliance on the technical expertise and know-how of the EIB. However, this has meant that the implications of decisions and the possibilities of implementation have not always been fully understood. The Commission has had to adjust to this context at a time of considerable budget and resource constraints.

The increased role of the EIB in Cohesion Policy has implications for the role of the European Parliament and, in particular, the REGI Committee in terms of scrutinising the Bank’s activities. There is widespread recognition that the EIB makes a significant contribution to Europe’s Growth Agenda in general and Cohesion Policy specifically, but the full implications of increased EIB involvement are not understood in detail. Partly, this is because the European Parliament Committees (other than BUDG/CONT) have a relatively limited understanding of EIB activities and in particular financial instruments. This means that there is an understanding of the general importance and impact of EIB activities, but further expertise, knowledge and routine in dealing with and processing EIB information needs to be built up in the political groups, policy committees and the administration.

7.1.5 The EIB in 2014-20 and beyond

The role of the EIB in Cohesion Policy is set to increase in the 2014-20 programme period. Many lessons have been learned, and the CPR provides a more robust framework for financial instruments in which the EIB and EIF are playing a major role. Furthermore, given the continued budgetary constraints that many Member States face, the EIB financial products and services will be important in achieving Cohesion Policy objectives.

Post 2020 the engagement of the EIB is critically dependent on two factors. The first is Member State experience with FIs and particularly the degree to which they are implemented on time in the 2014-20 period and whether they can demonstrate the claimed efficiency and effectiveness benefits relative to grant instruments (such as legacy funding). Second, the introduction of the EFSI, although not directly linked to the Cohesion Policy budget, has important implications for Cohesion Policy and the involvement of the EIB, given the responsibilities of the EIB in the delivery of EFSI. Ensuring a sufficient pipeline of projects that is complementary and synergistic with ESIF programmes and that optimise the potential leverage of programmes is realised, is crucial. Both will determine the degree to which the upward trajectory of spending in FIs can be maintained. EFSI and Cohesion Policy have complementarities, but there are also considerable tensions with the aims and objectives of Cohesion Policy. Looking forward, if the EFSI is deemed to be a success in the 2017 review of the fund, it might be institutionalised as a permanent policy and compete with the ESIF for resources in future budget negotiations.357