Legal provisions of COM(2022)557 - Exceptional macro-financial assistance to Ukraine, reinforcing the Common Provisioning Fund by guarantees by the Member States and by provisions for financial liabilities

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dossier COM(2022)557 - Exceptional macro-financial assistance to Ukraine, reinforcing the Common Provisioning Fund by guarantees by the Member ...
document COM(2022)557 EN
date September 20, 2022

Contents

CHAPTER - I


UNION’S EXCEPTIONAL MACRO-FINANCIAL ASSISTANCE

Article 1

Making available of the Union’s exceptional macro-financial assistance

1. The Union shall make available to Ukraine exceptional macro-financial assistance of a maximum amount of EUR 5 000 000 000 (the ‘Union’s exceptional macro-financial assistance’) with a view to supporting Ukraine’s macro-financial stability. The Union’s exceptional macro-financial assistance shall be provided to Ukraine in the form of loans. It shall contribute to covering Ukraine’s financing gap as identified in cooperation with international financial institutions.

2. In order to finance the Union’s exceptional macro-financial assistance, the Commission shall be empowered, on behalf of the Union, to borrow the necessary funds on the capital markets or from financial institutions and to on-lend them to Ukraine. The loans provided under paragraph 1 of this Article and under Decision (EU) 2022/1201 shall together have a maximum average maturity of 25 years.

3. The Union’s exceptional macro-financial assistance shall be made available starting on the day after the entry into force of the MoU referred to in Article 3(1) and during the availability period set out therein, even if the guarantees set out in Chapter II, Section 1, of this Decision have not yet been provided.

4. If the financing needs of Ukraine decrease fundamentally during the period of the disbursement of the Union’s exceptional macro-financial assistance compared to the initial projections, the Commission shall reduce the amount of the assistance, suspend it or cancel it.

Article 2

Precondition for the Union’s macro-financial assistance

1. A precondition for granting the Union’s exceptional macro-financial assistance shall be that Ukraine respect effective democratic mechanisms, including a multi-party parliamentary system, and the rule of law, and guarantee respect for human rights.

2. The Commission shall monitor the fulfilment of the precondition set out in paragraph 1 throughout the life-cycle of the Union’s exceptional macro-financial assistance, in particular before disbursements are made, also taking into account the circumstances in Ukraine and the consequences of the application there of martial law.

3. Paragraphs 1 and 2 of this Article shall apply in accordance with Council Decision 2010/427/EU (12).

Article 3

Memorandum of Understanding

1. The Commission shall agree with Ukraine on policy conditions to which the Union’s exceptional macro-financial assistance is to be linked. The policy conditions shall be adopted in accordance with the examination procedure referred to in Article 15(2). Those policy conditions shall be set out in a Memorandum of Understanding (the ‘MoU’).

2. The reporting requirements that were adopted under Decision (EU) 2022/1201 shall be included in the MoU and shall ensure, in particular, the efficiency, transparency and accountability of the use of the Union’s exceptional macro-financial assistance.

3. The detailed financial terms of the Union’s exceptional macro-financial assistance shall be laid down in a loan agreement to be concluded between the Commission and Ukraine.

4. The Commission shall verify, at regular intervals, the implementation of the reporting requirements and the progress made towards fulfilling the policy conditions set out in the MoU. The Commission shall inform the European Parliament and the Council about the results of that verification.

Article 4

Release of the Union’s exceptional macro-financial assistance

1. Subject to the requirements referred to in paragraph 3, the Union’s exceptional macro-financial assistance shall be made available by the Commission in instalments, each of which shall consist of a loan. The Commission shall decide on the timeframe for the disbursement of each instalment. An instalment may be disbursed in one or more tranches.

2. The release of the Union’s exceptional macro-financial assistance shall be managed by the Commission in a manner consistent with the MoU.

3. The Commission shall decide on the release of the instalments subject to its assessment of the following requirements:

(a)respect for the precondition set out in Article 2(1);

(b)the satisfactory implementation of the reporting requirements agreed in the MoU;

(c)for the second and subsequent instalments, satisfactory progress towards the implementation of the policy conditions set out in the MoU.

Before the maximum amount of the Union’s macro-financial assistance is disbursed, the Commission shall verify the fulfilment of all the policy conditions set out in the MoU.

4. Where the requirements set out in paragraph 3 are not met, the Commission shall temporarily suspend or cancel the disbursement of the Union’s exceptional macro-financial assistance. In such cases, it shall inform the European Parliament and the Council of the reasons for the suspension or cancellation.

5. The Union’s exceptional macro-financial assistance shall in principle be disbursed to the National Bank of Ukraine. Subject to the provisions to be agreed in the MoU, including a confirmation of residual budgetary financing needs, the Union funds may be disbursed to the Ukrainian Ministry of Finance as the final beneficiary.

Article 5

Borrowing and lending operations

1. The borrowing and lending operations shall be carried out in accordance with Article 220 of the Financial Regulation.

2. Where necessary, by derogation from Article 220(2) of the Financial Regulation, the Commission may roll over the associated borrowings contracted on behalf of the Union.

Article 6

Interest rate subsidy

1. By derogation from Article 220(5), point (e), of the Financial Regulation, the Union may bear interest by granting an interest rate subsidy and covering administrative costs related to the borrowing and lending, with the exception of costs related to early repayment of the loan, in respect of the loans under this Decision.

2. Ukraine may request the interest rate subsidy and coverage of the administrative costs by the Union by the end of March of each year.

3. The financial envelope referred to in Article 6(2), point (a), first indent, of Regulation (EU) 2021/947 shall be used to cover the costs of interest payments related to the Union’s macro-financial assistance during the period of the multiannual financial framework 2021–2027 as an interest rate subsidy.

Article 7

Information to the European Parliament and to the Council

The Commission shall inform the European Parliament and the Council of developments regarding the Union’s exceptional macro-financial assistance, including disbursements thereof, and developments in the operations referred to in Article 5(2), and shall provide those institutions with the relevant documents in due time.

Article 8

Assessment of implementation of the Union’s exceptional macro-financial assistance

During the implementation of the Union’s exceptional macro-financial assistance, the Commission shall re-assess, by means of an operational assessment, the soundness of Ukraine’s financial arrangements, the administrative procedures, and the internal and external control mechanisms which are relevant to the assistance. That operational assessment may be conducted together with the operational assessment provided for under Decision (EU) 2022/1201.

CHAPTER II - REINFORCEMENT OF THE COMMON PROVISIONING FUND

Section - 1



Guarantees by the Member States for the Union’s exceptional macro-financial assistance under this Decision and Decision (EU) 2022/1201

Article 9

Contributions in the form of guarantees by Member States

1. Member States may complement the provisioning in respect of macro-financial assistance kept in the common provisioning fund, by providing guarantees up to a total amount of EUR 3 660 000 000 in respect of the Union’s exceptional macro-financial assistance to Ukraine under Article 1 of this Decision and under Decision (EU) 2022/1201 (the ‘covered MFAs’).

2. Where contributions from the Member States are made, they shall be provided in the form of irrevocable, unconditional and on-demand guarantees through a guarantee agreement to be concluded with the Commission, in accordance with Article 10.

3. The relative share of the contribution of the Member State concerned (contribution key) to the amount referred to in paragraph 1 shall correspond to the relative share of that Member State in the total gross national income of the Union, as resulting from heading ‘General Revenue’ of the budget for 2022, Part A (‘Financing of the Union’s annual budget, Introduction’), Table 4, column (1), set out in the general budget of the Union for the financial year 2022, as definitively adopted on 24 November 2021 (13).

4. The guarantees shall become effective in respect of each Member State as of the date of entry into force of the guarantee agreement, referred to in Article 10, between the Commission and the Member State concerned.

Article 10

Guarantee agreements

The Commission shall conclude a guarantee agreement with each Member State that provides a guarantee referred to in Article 9. That agreement shall set out the rules governing the guarantee, which shall be the same for all Member States, including, in particular, provisions:

(a)establishing the obligation of the Member States to honour guarantee calls made by the Commission in respect of the covered MFAs, once the overall amounts of initial, or subsequently replenished, provisioning set aside in the common provisioning fund in respect of financial liability arising from the covered MFAs have been or are to be fully drawn down;

(b)ensuring that the guarantee calls are made pro rata, applying the contribution key referred to in Article 9(3);

(c)providing that the guarantee calls ensure the Union’s ability to repay the funds borrowed, pursuant to Article 1(2), on the capital markets or from financial institutions following a non-payment by Ukraine, including cases of changes to the payment schedule for whatsoever reason as well as expected non-payments;

(d)ensuring that the guarantee calls may be used to replenish the common provisioning fund for provisioning where it has been drawn down in respect of the covered MFAs;

(e)ensuring that a Member State that has failed to honour a call remains liable to honour it;

(f)regarding the payment conditions.

Section 2 - Provisioning of the covered MFAs and of some ELM financial liabilities in Ukraine



Article 11

Provisioning of the covered MFAs

1. For the covered MFAs, a provisioning rate of 70 % shall apply instead of the general rule set out in Article 31(5), third subparagraph, of Regulation (EU) 2021/947. However, the level of provisioning paid into the common provisioning fund shall be kept at, and if drawn down replenished, without prejudice to Article 10, point (a), of this Decision, to 9 % of the outstanding liability from the covered MFAs until the guarantees referred to in Article 9 are fully drawn on.

2. Amounts resulting from calls on the guarantees referred to in Article 9 shall constitute external assigned revenue for the repayment of financial liabilities from the covered MFAs and payments to the common provisioning fund in accordance with Article 21(2), point (a)(ii), of the Financial Regulation.

3. By way of derogation from Article 211(1), first subparagraph, second sentence, of the Financial Regulation, the amount of guarantees referred to in Article 9(1) shall be included into the amount of authorised financial liability. By way of derogation from Article 211(4), second subparagraph, of the Financial Regulation, the amounts of provisioning referred to in paragraph 2 of this Article shall be taken into account for calculating the provisioning resulting from the provisioning rate in respect of the covered MFAs.

4. By way of derogation from Article 211(4), point (c), of the Financial Regulation, amounts recovered from Ukraine in respect of the covered MFAs shall not contribute to the provisioning up to the amount of the guarantee calls honoured by Member States pursuant to Article 10, point (a), of this Decision. Those amounts shall be reimbursed to those Member States.

Article 12

Reinforcement of provisioning in respect of some financial liabilities in Ukraine guaranteed under Decision No 466/2014/EU

1. By way of derogation from Article 31(8), third sentence, of Regulation (EU) 2021/947, the provisioning rate of 70 % shall apply to loan amounts disbursed after 15 July 2022 under European Investment Bank (EIB) financing operations in Ukraine signed by the EIB before 31 December 2021 and guaranteed by the Union in accordance with Decision No 466/2014/EU (the ‘covered ELM financial liabilities in Ukraine’), and Articles 211, 212 and 213 of the Financial Regulation shall apply, subject to Articles 13 and 14 of this Decision.

2. For the purposes of Article 211(1), second subparagraph, of the Financial Regulation, the provisioning shall reach by 31 December 2027 the level corresponding to the provisioning rate applied to the total amount of outstanding liabilities from covered ELM financial liabilities in Ukraine.

Article 13

Assessment of adequacy of the provisioning rate and review procedure

1. Every six months starting on 30 June 2023, and whenever the Commission concludes that other reasons or events indicate the need to do so, the Commission shall assess whether there are new developments which could impact in a lasting and meaningful manner the adequacy of the provisioning rate, including the rate of the paid-in provisioning, referred to in Articles 11 and 12. The Commission shall in particular identify the presence of a sustained significant change in the credit risk profile of those exposures using data from a period of at least two years.

2. The Commission is empowered to adopt a delegated act in accordance with Article 16 to amend Articles 11 and 12 to adjust the provisioning rate, in particular to reflect the developments referred to in paragraph 1.

Article 14

Provisioning held in the common provisioning fund

1. Instead of the general rule set out in Article 31(6) of Regulation (EU) 2021/947, the financial liability from the covered MFAs shall be covered separately from other financial liabilities under the External Action Guarantee, and the provisioning set aside in the common provisioning fund in respect of the covered MFAs shall be used solely for financial liabilities under the covered MFAs.

Instead of the general rule set out in Article 31(8) of Regulation (EU) 2021/947, the financial liability from the covered ELM financial liabilities in Ukraine shall be covered separately from other financial liabilities under the Guarantee Fund for External Action, and the provisioning set aside in the common provisioning fund in respect of the covered ELM financial liabilities in Ukraine shall be used solely for financial liabilities under the covered MFAs.

2. By way of derogation from Article 213 of the Financial Regulation, the effective provisioning rate shall not apply to the provisioning set aside in the common provisioning fund in respect of the covered MFAs and covered ELM financial liabilities in Ukraine.

3. By way of derogation from Article 213(4), point (a), of the Financial Regulation, any surplus of provisioning referred to in Article 12(2) of this Decision shall constitute external assigned revenue within the meaning of Article 21(5) of the Financial Regulation to the external assistance programme under which Ukraine is eligible.

CHAPTER III - COMMON PROVISIONS


Article 15

Committee procedure

1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 16

Exercise of the delegation

1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2. The power to adopt delegated acts referred to in Article 13(2) shall be conferred on the Commission for an indeterminate period of time from 23 September 2022.

3. The delegation of power referred to in Article 13(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.

5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

6. A delegated act adopted pursuant to Article 13(2) shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

Article 17

Annual report

1. By 30 June of each year, the Commission shall submit to the European Parliament and to the Council, as part of its annual report, an assessment of the implementation of Chapter I of this Decision in the preceding year, including an evaluation of that implementation. That report shall:

(a)examine the progress made in implementing the Union’s exceptional macro-financial assistance;

(b)assess the economic situation and prospects of Ukraine, as well as the implementation of the requirements and conditions referred to in Article 3(1) and (2);

(c)indicate the connection between the requirements and conditions set out in the MoU, Ukraine’s ongoing macro-financial situation and the Commission’s decisions to release the instalments of the Union’s exceptional macro-financial assistance.

2. Not later than two years after the end of the availability period, the Commission shall submit to the European Parliament and to the Council an ex post evaluation report, assessing the results and efficiency of the completed Union’s exceptional macro-financial assistance and the extent to which it has contributed to the aims of the assistance.

CHAPTER I - V


AMENDMENTS TO DECISION (EU) 2022/1201 AND FINAL PROVISION

Article 18

Amendments to Decision (EU) 2022/1201

Decision (EU) 2022/1201 is amended as follows:

(1)in Article 1(2), the second sentence is replaced by the following:

‘The loans under paragraph 1 and under Decision (EU) 2022/1628 of the European Parliament and of the Council (*1) shall together have a maximum average maturity of 25 years.

(*1)  Decision (EU) 2022/1628 of the European Parliament and of the Council of 20 September 2022 providing exceptional macro-financial assistance to Ukraine, reinforcing the common provisioning fund by guarantees by Member States and by specific provisioning for some financial liabilities related to Ukraine guaranteed under Decision No 466/2014/EU, and amending Decision (EU) 2022/1201 (OJ L 245, 21.9.2022, p. 1).’;"

(2)Article 7 is deleted.

Article 19

Final provision

This Decision shall enter into force on the day following that of its publication in the Official Journal of the European Union.