Proposal for a Decision of the European Parliament and of the Council on the participation of the European Union in the capital increase of the European Investment Fund

The European Investment Fund (EIF) was founded in 1994 to "stimulate sustained and balanced growth within the Community". Article 2 of the EIF Statutes commits the EIF to support EU policy objectives. The current activities of the EIF cover on the one hand investments in venture capital and lower mid-market funds as well as mezzanine funds to improve the availability of risk capital for high-growth and innovative SMEs. On the other hand, it provides guarantees and credit enhancement through securitisation to improve the lending capacity of financial intermediaries and thus the availability and terms of debt for beneficiary SMEs. The EIF operates using either its own funds or by managing mandates on behalf of the EIB, the Commission or national and regional governments.

The European Council of June 2012 requested to develop the action of the EIF, particularly as regards its venture capital activity, in liaison with existing national structures. In June 2013, the European Council called for an increase in the credit enhancement capacity of the EIF. The call was made in the context of the "New Investment Plan for Europe", which places particular emphasis on SME finance, a core activity of the EIF. In October, the European Council requested all efforts to continue to restore normal lending to the economy and facilitate financing of investment, particularly with respect to SMEs.

In response to the conclusions of the European Council, the EIF has identified a number of financing solutions for further supporting SMEs and for ensuring the highest impact of its funds. Two principal delivery channels are proposed for their implementation:
- Facilitating the supply of debt finance to SMEs through credit enhancement operations, including the SME Initiative; and
- Creating additional investment capacity for private equity, mezzanine and venture and growth capital.

EIF own resources will be key to support these activities as well as to ensure alignment of interest with other mandates, including EU mandates such as Horizon 2020 and COSME, through co-investment.

As a result of these initiatives, the EIF is expected to double its overall guarantee and venture capital exposure over the coming years. Each of EIF's business lines involves different risks, which are reflected by a certain level of economic capital allocation needing to be set aside. For risk management considerations, the sum of the capital allocation should not exceed EIF own funds. Given the growth plans described above, the current buffer is expected to decrease rapidly. As a consequence, an increase in EIF's available capital is required in order to meet statutory capital requirements and to maintain its AAA credit rating, which is crucial for the EIF credit enhancement activity.

In December 2013, the EIB Board of Directors approved the EIF capital increase and authorised the submission to the EIB Board of Governors. The December European Council also called on the Commission and the EIB to further enhance the capacity of the EIF through an increase in its capital with a view to reaching final agreement by May 2014.

• Primary Source

EUR-Lex: COM(2014)66: Follow the progress of this proposal through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2014:066:FIN

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