Commission Delegated Regulation (EU) No 1268/2012 (repealed)Show full title

TITLE VIII U.K. FINANCIAL INSTRUMENTS

Article 216 U.K. Selection of the entities entrusted with the implementation of financial instruments in indirect management(Article 139 of the Financial Regulation)

1. For the implementation of financial instruments under indirect management, the Commission shall obtain evidence that the entrusted entity fulfils the requirements of Article 60(2) of the Financial Regulation. Once that evidence is obtained, it shall be valid for any future implementation of financial instruments by the relevant entity, unless substantial changes to the entrusted entities’ systems, rules and procedures covered by those requirements have been made.

2. For the selection of entities entrusted with the implementation of financial instruments pursuant to Article 61(2) of the Financial Regulation, the Commission shall publish a call to potential entrusted entities. That call shall include the selection and award criteria.

The call referred to in the first subparagraph shall also indicate whether the entrusted entity is required to allocate its own financial resources to the specific financial instrument or share the risk. Where such indication is made and where it is necessary to mitigate a possible conflict of interest, the call shall also indicate that the entrusted entity is required to propose measures on alignment of interest, as set out in Article 140(2) of the Financial Regulation. The measures on alignment of interest shall be included in the agreement of the specific financial instrument.

The Commission shall open a dialogue with the entities that satisfy the selection criteria in a transparent and objective manner and without giving rise to a conflict of interest. After the dialogue the Commission shall sign delegation agreements with the entity or entities that have submitted the best value for money proposals including, where applicable, the allocation of their own financial resources or risk-sharing.

3. The Commission may enter into direct negotiations with potential entrusted entities before signing delegation agreements where the entrusted entity is identified in the relevant basic act or listed in Article 58(1)(c)(iii) of the Financial Regulation, or in duly justified and properly documented exceptional cases, in particular where:

(a) no suitable proposals were submitted following a call to potential entrusted entities;

(b) financial instruments with specific characteristics require a particular type of entrusted entity on account of its technical competence, its high degree of specialisation or its administrative power;

(c) for reasons of extreme urgency brought about by unforeseeable events not attributable to the Union, it is impossible to comply with the procedure referred to in paragraph 2.

Article 217 U.K. Content of the delegation agreement with entities entrusted with the implementation of financial instruments in indirect management(Article 139 of the Financial Regulation)

In addition to the requirements listed in Article 40, delegation agreement with entities entrusted with the implementation of financial instruments shall include appropriate arrangements for ensuring compliance with the principles and conditions set out in Article 140 of the Financial Regulation. In particular, the delegation agreements shall contain:

(a)

the description of the financial instrument, including its investment strategy or policy, the type of support provided, the criteria for eligibility for financial intermediaries and final recipients as well as additional operational requirements transposing the policy objectives of the instrument;

(b)

the requirements for a target range of values for the leverage effect;

(c)

a definition of non-eligible activities and exclusion criteria;

(d)

provisions ensuring alignment of interest and addressing possible conflicts of interest;

(e)

provisions for the selection of financial intermediaries pursuant to the second subparagraph of Article 139(4) of the Financial Regulation and for the establishment of dedicated investment vehicles, if applicable;

(f)

provisions on the liability of the entrusted entity and of other entities involved in the implementation of the financial instrument;

(g)

provisions on the settlement of disputes;

(h)

provisions on the governance of the financial instrument;

(i)

provisions regarding the use and reuse of the Union contribution in compliance with Article 140(6) of the Financial Regulation;

(j)

provisions for the management of contributions from the Union and of fiduciary accounts, including counterparty risks, acceptable treasury operations, responsibilities of parties concerned, remedial actions in the event of excessive balances on fiduciary accounts, record keeping and reporting;

(k)

provisions on the remuneration of the entrusted entity, including management fee rates and on the calculation and payment of management costs and fees to the entrusted entity in accordance with Article 218;

(l)

where appropriate, provisions on a framework of conditions for the contributions from the funds referred to in Article 175 of the Financial Regulation, in particular the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural development and the Future Fisheries Fund (hereinafter ‘CSF Funds’);

(m)

provisions on the duration, possibility of extension, and termination of the financial instrument, including the conditions for early termination and, where appropriate, exit strategies;

(n)

provisions on the monitoring of the implementation of support to financial intermediaries and final recipients including reporting by the financial intermediaries;

(o)

where applicable, type and nature of any hedging operations referred to in Article 219.

Article 218 U.K. Management costs and fees to entrusted entities(Article 139 of the Financial Regulation)

1. The Commission shall remunerate the entrusted entities for the implementation of a financial instrument through performance based fees, reimbursement of exceptional expenses and, where the entrusted entity manages the treasury of the financial instrument, treasury management fees.

2. Performance based fees shall comprise administrative fees to remunerate the entrusted entity for the work carried out in the implementation of a financial instrument. Where appropriate, they may also comprise policy related incentives to promote the achievement of the policy objectives or incentivise the financial performance of the financial instrument.

Article 219 U.K. Specific rules for fiduciary accounts in indirect management(Article 139 of the Financial Regulation)

1. Entities entrusted with the implementation of financial instruments may open fiduciary accounts within the meaning of Article 68(7) of the Financial Regulation, in their name and exclusively on behalf of the Commission. Those entrusted entities shall send the corresponding account statements to the Commission’s responsible service.

2. The fiduciary accounts shall maintain appropriate liquidity and the assets held on such fiduciary accounts shall be managed in accordance with the principles of sound financial management and follow appropriate prudential rules in accordance with Article 140(7) of the Financial Regulation.

3. For the implementation of financial instruments, entrusted entities shall not carry out hedging operations for speculative purposes. The type and nature of any hedging operations shall be agreed ex ante by the Commission and included in the delegation agreements referred to in Article 217.

Article 220 U.K. Financial instruments implemented directly(Article 139 of the Financial Regulation)

1. In exceptional cases, financial instruments may be implemented directly pursuant to Article 139(4) of the Financial Regulation through any of the following:

(a) a dedicated investment vehicle in which the Commission participates together with other public or private investors with a view to increasing the leverage effect of the Union contribution;

(b) loans, guarantees, equity participations and other risk-sharing instruments other than investments in dedicated investment vehicles, provided directly to final recipients or through financial intermediaries.

2. For the implementation of financial instruments, the Commission shall not carry out hedging operations for speculative purposes. The type and nature of any hedging operations shall be agreed ex ante by the Commission and included in the agreements with entities implementing the financial instrument.

Article 221 U.K. Selection of financial intermediaries, managers of dedicated investment vehicles and of final recipients(Article 139 of the Financial Regulation)

1. Where the Commission implements financial instruments directly or indirectly through dedicated investment vehicles, such vehicles shall be established according to the laws of a Member State. They may also be established according to the laws of a country other than a Member State in the area of external action. The managers of such vehicles shall be obliged by law or contract to act with the diligence of a professional manager and in good faith.

2. The managers of the dedicated investment vehicles referred to in paragraph 1 and financial intermediaries or final recipients of the financial instruments shall be selected with due account of the nature of the financial instrument to be implemented, the experience and the operational and financial capacity of the entities concerned, and/or the economic viability of projects of final recipients. The choice shall be transparent, justified on objective grounds and shall not give rise to a conflict of interest.

F1 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Deleted by Commission Delegated Regulation (EU) 2015/2462 of 30 October 2015 amending Delegated Regulation (EU) No 1268/2012 on the rules of application of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union.

Article 222 U.K. Conditions for the use of financial instruments(Article 140 of the Financial Regulation)

1. Financial instruments shall address market imperfections or failures or sub-optimal investment situations and provide support only to final recipients that are deemed potentially economically viable at the time of the Union support through a financial instrument.

2. Financial instruments shall provide support to final recipients in a proportionate manner. In particular, preferential treatment of investors providing co-investment or risk-sharing should be justified, proportionate to the risks taken by the investors in a financial instrument and limited to the minimum necessary to ensure their investment or risk-sharing.

Article 223 U.K. Leverage effect(Article 140 of the Financial Regulation)

1. Financial instruments shall aim at achieving a leverage effect of the Union contribution by mobilising a global investment exceeding the size of the Union contribution.

The leverage effect of Union funds shall be equal to amount of finance to eligible final recipients divided by the amount of the Union contribution.

2. The target range of values for the leverage effect shall be based on an ex ante evaluation for the corresponding financial instrument.

Article 224 U.K. Ex ante evaluation of financial instruments(Article 140 of the Financial Regulation)

1. Financial instruments shall be based on ex ante evaluations identifying market imperfections or failures, or sub-optimal investment situations and assessing investment needs in view of the policy objectives.

2. The ex ante evaluation shall demonstrate that identified market needs cannot be addressed appropriately and in a timely manner through either market led activities or types of Union intervention other than funding by a financial instrument, such as regulation, liberalisation, reform or other policy action. It shall assess the likelihood and possible costs of market distortions and crowding-out of private funding through the financial instruments and shall identify means to minimise negative effects of such distortions.

3. In accordance with the principle of subsidiarity, the ex ante evaluation shall demonstrate that an Union-level financial instrument addresses identified market needs more appropriately than similar financial instruments at national or regional level, including those financed by CSF Funds. Factors such as difficult access to funding at national level, in particular for cross-border projects, economies of scale or strong demonstration effects linked to the diffusion of best practices to Member States shall be taken into account when assessing the added value of the Union contribution.

4. The ex ante evaluation shall determine the most efficient mode for delivering the financial instrument.

5. The ex ante evaluation shall also demonstrate that the planned financial instrument is consistent with:

(a) new and existing financial instruments, avoiding undesirable overlaps and achieving synergies and economies of scale;

(b) financial instruments and other forms of public intervention addressing the same market environment, avoiding inconsistencies and exploring potential synergies.

6. The ex ante evaluation shall assess proportionality of the envisaged intervention with regard to the size of the identified funding gap, the expected leverage effect of the planned financial instrument and also examine additional qualitative effects, such as the diffusion of best practices, the effective promotion of Union policy objectives throughout the implementation chain or the access to specific expertise available from actors involved in the implementation chain.

7. The ex ante evaluation shall establish a set of appropriate performance indicators for the proposed financial instruments and specify the expected output, results and impact.

8. A separate ex ante evaluation of financial instruments shall only be carried out where such evaluation complying in full with the criteria in paragraphs 1 to 7 is not included in the ex ante evaluation or an impact assessment of the programme or activity covered by a basic act.

Article 225 U.K. Monitoring of financial instruments(Article 140 of the Financial Regulation)

1. In order to ensure the harmonised monitoring of financial instruments referred to in Article 140(12) of the Financial Regulation, a monitoring system shall be put in place by the authorising officer responsible to contribute to the provision of reasonable assurance that Union funds are used in accordance with Article 32(2) of the Financial Regulation.

2. The monitoring system shall be used to assess the progress of the implementation towards the achievement of the policy objectives reflected in the relevant output and result indicators established pursuant to the ex ante evaluation, and to analyse the compliance of the implementation with the defined requirements pursuant to Article 140(2) of the Financial Regulation and provide the basis for the Commission’s reporting required under Articles 38(5) and 140(8) of the Financial Regulation.

3. In case of indirect management, the monitoring by the Commission shall build on the reporting and accounts provided by entrusted entities and on the audits available and controls carried out by the entrusted entity, taking due account of the management declaration of the entrusted entity and the opinion of the independent audit body referred to in Article 60(5) of the Financial Regulation. The Commission shall review the information provided by the entrusted entities and may carry out controls, including on a sample basis, at the appropriate implementation levels up to final recipients.

The monitoring by the entrusted entity shall build on the reporting and accounts provided by financial intermediaries and on the audits available and controls carried out by the financial intermediary, taking due account of the management declaration of the financial intermediary and the opinion of independent auditors.

Where, no financial intermediary exists, the entrusted entity shall directly monitor the use of the financial instrument based on the reporting and accounts provided by the final recipients.

The entrusted entity shall review, where appropriate on a sample basis, the information provided by the financial intermediaries or final recipients and shall carry out controls as set out in the agreement referred to in Article 217.

4. In case of direct management, the monitoring by the Commission shall build on the reporting and accounts provided by financial intermediaries and final recipients, subject to appropriate controls. The provisions under paragraph 3 shall apply to direct management mutatis mutandis.

5. The agreements implementing the financial instrument shall contain the provisions necessary for the application of paragraphs 1 to 4.

Article 226 U.K. Treatment of contributions from the CSF Funds(Article 140 of the Financial Regulation)

1. Separate records shall be kept for contributions from CSF Funds to financial instruments established under Title VIII of the Financial Regulation and supported by CSF Funds pursuant to the sector specific rules.

2. Contributions from the CSF Funds shall be placed in separate accounts and used in accordance with the objectives of the respective CSF Funds to actions and final recipients consistent with the programme or programmes from which contributions are made.

3. As regards contributions from CSF Funds to financial instruments established under Title VIII of the Financial Regulation, the sector specific rules shall apply.