EAPB - ANFIR statement on ESIF funding 2021 - 2027

On the occasion of the ESIF conference organized on 1 July 2022 in Milan, Italy, the members of the EAPB[i] and A.N.FI.R [ii] state their clear commitment to the implementation of the ESIF funds under the new programming period.

EAPB member organizations have been key actors in the precedent programming period (2014 – 2020), having been involved in the implementation of the ERDF (10 members[1]), the ESF (7 members[2]), cohesion funding (3 members[3]) as well as the EAFRD (4 members[4]). All in all, 13 direct EAPB members from 9 Member States have been involved in the roll-out of ESIF funding during the past programming period, not counting additional institutions represented via the Association of German Public Banks (VÖB) and the Italian Associazione Nazionale delle Finanziarie Regionali (A.N.FI.R.)

As during the 2007-08 economic crisis, the European public banks have fulfilled their counter-cyclical role during the economic downturn induced by the COVID-19 pandemic. By providing national and European emergency funding and enabling support measures, they have acted as stabilizers for small and large companies – and, hence, for the European economy. “European Structural and Investment Funds quickly adapted to changing needs”[5] and so did the promotional banks.

When it comes to the recovery, promotional banks are crucial in delivering the funds, the tools, and the expertise to allow companies as well as the public sector to build up their investment capacities.

As experienced recently, both the close cooperation between policymakers, promotional banks and house banks, and the simplification of programs have worked very well. Similar conditions and mechanisms should be maintained post-COVID-19 as they will facilitate and accelerate the recovery.

Of course, the consequences of the Ukraine war on the European economy, most manifest through the arrival of refugees as well as the impact of energy cost hikes and lost market shares for SMEs, will present a significant challenge.

Strong with this experience, promotional financial institutions can be trusted when it comes to tackling the economic recovery from the pandemic, the fall-out from the Ukraine war as well as the twin transitions of digitalisation and sustainability and, hence, realising the objectives the Commission has put front and centre in the new programming period 2021-2027.

 oPromotional financial institutions are already subjects with a mission oriented towards the public interest and intervene with a subsidiary logic with respect to the private sector, not replacing commercial financial intermediaries, but operating alongside them and crowding them in, thus producing an added multiplier effect.

oBut the contribution of the Regional Financing Institutions is not only quantitative: their concrete experience is even more relevant to improving the qualitative profile and breadth of the financial instrumentation in cohesion policies. Significant experiences have been gained, in particular, in venture capital, microfinance, private debt, green finance and social impact finance, as well as in relations with the EIB and the EIF.

 oThanks to their knowledge of the economic conditions on the ground and the trust that their partners put into promotional banks on the local and regional level, EAPB members will be key actors in addressing the structural challenges that a transition towards a green and digital economy entails. Considering the local specificities is key in achieving the EU’s green and digital objectives with the right degree of proportionality (Of the 2021-2027 MFF 30% need to be invested in climate action and 20% in digitalisation.)

 oThe COVID-19 pandemic has driven structural change and revealed weaknesses but also opportunities in the areas of digitalisation and sustainability. The promotional banks accept this challenge and are ready to actively accompany the change towards more sustainability as well as the transformation of the economy.

 oThe options for combining grants and loans have been strengthened in the new programming period, but some hurdles remain, for example, when it comes to covering costs when credit institutions offer costly loan programs or higher-risk investments (startups) from EU structural funds. The mix of different investment funds such as grants and loans has again proved particularly effective during the crisis and will do so again in tackling the twin transitions.

Main points of attention for a successful implementation process going forward

The following are some of the issues that we believe are important to keep in mind during the implementation of the new programmes and the financial instruments:

 oProportionality: at all levels, the controls and fulfilments required should hopefully be proportional to the level of facilitation for the final recipients. Greater proportionality in this sense would also result in greater appropriateness of the management costs associated with the financial instruments, which are often too high compared to the size of the facilitation (e.g. micro-credit, guarantees). The call for greater proportionality of compliance is also motivated by the fact that such instruments are in any case also subject to other rules, costs and controls, such as those arising from banking regulations, and the overall compliance cost risks making them out of business;

 oOperational standardisation of the financial instruments towards private financial intermediaries: the definition of operational and procedural rules that are as standardised as possible would make it possible to achieve financial instrumentation that is as uniform as possible for the various regional funds, while respecting the specific features of the individual instruments and the needs of the regions, thus enabling maximum adherence by private financiers, who would not be disincentivised by the excessive multiplication of rules and operational peculiarities.

 oSimplification for businesses/SME: the private financial system and the final beneficiaries themselves often approach forms of intervention more favourably, even to the detriment of the intensity of the subsidies (lower level of guarantee or co-financing), requiring less operational and bureaucratic formalities. Therefore, operating modes that are able to mediate between the Public Administration's need for formality and protection and the banks' need for simplified and streamlined operating modes and for businesses, have the result of attracting a greater value of private funding and ultimately making the instrument more attractive.