European Stability Mechanism Governance, Accountability, and Transparency

EUROPEAN STABILITY MECHANISM GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY

October 2018 2 | EUROPEAN STABILITY MECHANISM

Klaus Regling Managing Director

In today’s world, uncertainty is part of the macroeconomic and financial environment and can adversely affect countries, businesses, and citizens. International institutions play an important role in mitigating this uncertainty by fostering closer cooperation among countries to reduce the risk of future crises and by providing assistance.

The establishment of the ESM in October 2012 represents the most visible feature of Europe’s response to the euro area crisis. Our institution is called upon to provide financial support to euro area countries in temporary need of assistance in exchange for important economic and financial sector reforms. The ESM’s corporate structure consists of a Board of Governors composed of the 19 euro area ministers of finance, who are accountable to their national parliaments, and a Board of Directors comprising high-ranking officials appointed by the ministers.

This publication describes the ESM’s main corporate governance features. More specifically, it covers the ESM, and its precursor the EFSF, providing information about the institution’s mission, governing bodies, transparency, and accountability arrangements.

Today, the European Economic and Monetary Union is stronger in part due to the efforts and achievements of the ESM. The work on building an ever stronger and safer currency union is ongoing, in which the ESM will continue to play an important role. GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 3

ABOUT THE EUROPEAN STABILITY MECHANISM

The European Stability Mechanism (ESM), in op- The organisation and functioning of the ESM are eration since 8 October 2012, is the crisis resolu- set out in the ESM Treaty and By-Laws, which are tion mechanism for countries of the euro area in available to the general public on the ESM website. need of financial assistance. The institution is de- signed to mobilise funding and provide stability The ESM does not finance its loans with taxpayer money. Instead, it borrows the money from finan- support under strict conditionality to the benefit cial markets. It issues bonds covering a full spec- of the euro area countries which are experiencing, trum of maturities, bills, and other funding instru- or are threatened by, severe financing problems, ments. Thanks to its high creditworthiness, the when this is indispensable to safeguard the finan- ESM is able to borrow money from the markets at cial stability of the euro area as a whole and of its much lower interest rates than those charged to fi- members. nancially distressed countries.

The ESM is an international financial institution Financial institutional investors, such as commer- based in Luxembourg, which is owned and jointly cial banks, central banks, asset managers, insur- governed by a number of countries. In 2012, the ance companies, pension funds, and sovereign then 17 euro area countries signed the internation- wealth funds, buy the ESM’s debt issues. These in- al treaty establishing the ESM. After Latvia (in 2014) vestors regard ESM securities as safe investments, and Lithuania (in 2015) adopted the euro, the ESM’s thanks to the ESM’s high credit rating which is membership grew to 19. based on its strong capital structure.

ESM Board of Governors in 2012 ©European Stability Mechanism 4 | EUROPEAN STABILITY MECHANISM

ESM shareholders

Euro area member states Other EU Member States

The ESM currently has 19 Members. All euro area needed. The financial contribution of each ESM Mem- member states are obliged to join the ESM. ber to the ESM capital is based on the capital key of the European Central Bank. It reflects the respective After a country adopts the euro, its government ap- country’s share of the total population and gross do- plies to join the ESM. The technical terms, including mestic product of the euro area. the country’s capital share, are agreed. Then the ESM Board of Governors approves the application, and the The ESM Members’ contribution key, corresponding new ESM Member ratifies the ESM Treaty. This usually capital subscription, and amount of paid-in capital as takes place about one-to-two months after the coun- of 31 December 2017, are as follows: try adopts the euro as its currency. ESM CONTRIBU- SUB- PAID-IN New ESM Members are not required to join the ESM’s MEMBERS TION KEY SCRIBED CAPITAL predecessor, the European Financial Stability Facility (%) CAPITAL (€ BILLION) (€ BILLION) (EFSF). Belgium 3.4534 24.34 2.78 Germany 26.9616 190.02 21.72 Estonia 0.1847 1.30 0.15 Capital structure Ireland 1.5814 11.15 1.27 Greece 2.7975 19.72 2.25 ESM Members make a contribution to the ESM’s paid- Spain 11.8227 83.33 9.52 in capital, which is invested conservatively in high- France 20.2471 142.70 16.31 quality assets. The paid-in capital underpins the fi- Italy 17.7917 125.40 14.33 nancial strength and high creditworthiness of the ESM Cyprus 0.1949 1.37 0.16 as an issuer. The ESM currently has the most paid-in Latvia 0.2746 1.94 0.18 capital of any international financial institution. Lithuania 0.4063 2.86 0.20 Luxembourg 0.2487 1.75 0.20 The 17 founding ESM Members completed their paid- Malta 0.0726 0.51 0.06 in capital payments in April 2014. New joiners Latvia Netherlands 5.6781 40.02 4.57 and Lithuania began their payments in 2014 and 2015 Austria 2.7644 19.48 2.23 and are expected to complete them in 2026 and 2027, 2.4921 17.56 2.01 respectively. Portugal Slovakia 0.8184 5.77 0.66 Paid-in capital is the portion of the ESM’s total capi- Slovenia 0.4247 2.99 0.34 tal paid in by ESM Members. The other portion of the Finland 1.7852 12.58 1.44 ESM’s capital is committed but will only be called if Total 100 704.80 80.37 GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 5

ESM Members’ contributions are invested and nev- Shareholder relations er used for lending.

The ESM may require its Members to make a capital The ESM highly values shareholder relations and payment. In other words, it may call capital which engagement. The ESM participates in various politi- has been committed and is part of the ESM’s total cal forums where its Members discuss matters of 1 capital. Such a capital call could be made in three relevance to its mandate, such as the Eurogroup , 2 specific situations only: the Eurogroup Working Group , and the Task Force for Coordinated Action3. • when the Board of Governors so decides by mutual agreement; In addition, each year the ESM organises a Share- holders’ Day during which the ESM welcomes • to cover losses; or representatives from the finance ministries of the ESM Members, the European Commission, and the • to avoid default on an ESM payment obligation to European Central Bank for a mutual exchange of its creditors. views. The ESM also maintains a dedicated online shareholder relations platform – the ESM Board The total amount of callable capital is €624.3 billion. Portal, which allows for communication with the To date, ESM has never needed to call this capital. ESM shareholders via a secure online interface.

The ESM welcomed representatives from the finance ministries of ESM Members at its annual Shareholders’ Day in 2017 (left) and in 2016 (right) ©European Stability Mechanism

1 The Eurogroup is an informal body where the finance ministers of the euro area member states discuss matters relating to their shared responsibilities related to the euro.

2 The Eurogroup Working Group (EWG) is composed of high-level representatives from finance ministries of euro area member states. It reviews the economic and financial situation of the euro area member states and contributes to the preparation of the Eurogroup meetings.

3 The Task Force for Coordinated Action is a working group of the EWG where technical experts from finance ministries of euro area member states discuss and review policy issues pertaining to the Eurogroup and the EWG. 6 | EUROPEAN STABILITY MECHANISM

94 | EUROPEAN STABILITY MECHANISM GOVERNANCE OF THE ESM

Members of the Board of Governors

The Board of Governors is the highest decision-making body of the ESM. It comprises government representatives from each of the Board of Governors 19 ESM Members with the responsibility for finance. Representatives from the European Commission and the European Central Bank may participate in its meeting as observers.

NETHERLANDS ESTONIA The ESM statutory bodies foreseen in the ESM elect a Chairperson and a Vice-Chairperson from Sven Sester, Jeroen Dijsselbloem, among its members. Portuguese finance minister Treaty are the Board of Governors and Ministerthe of Board Finance, of Chairman of the Board of Governors, Governor since 9 April 2015, Mário Centeno assumed the role of Chairperson on Directors.Minister of Finance, The Managing Director is the legal repre- replacing Maris Lauri, Governor since 27 September 2012 sentative of the ESM and chairs the meetingsGovernor since 3 Novemberof the 2014 13 January 2018, succeeding former Dutch finance Board of Directors. In addition, the ESM has a Board minister Jeroen Dijsselbloem, who had held the po- BELGIUM IRELAND of Auditors which is an independent oversight body. sition since 2012. Johan Van Overtveldt, Michael Noonan, Minister of Finance, Minister of Finance, The GovernorsGovernor since 15 December are 2014 ministers designatedGovernor by each since 27 September ESM 2012 The Board of Governors meets at least once a year Member to represent it on the ESM Board of Gover- and whenever the affairs of the ESM so require. The annual meeting of the Board of Governors takes nors. GERMANYBefore voting on ESM decisions – dependingGREECE on the country and on the type of decision – certain Gov- place in June each year at the ESM premises in Wolfgang Schäuble, Euclid Tsakalotos, ernorsFederal are Minister requiredof Finance, to follow nationalMinister procedures, of Finance, Luxembourg. The ESM Secretary General sends the Governor since 27 September 2012 Governor since 6 July 2015 documents for the annual meeting no later than 20 which involve approval from the government,replacing Yanis nation Varoufakis, - al parliament, or parliamentary consultation.Governor since 27 January 2015 calendar days prior to the date of the meeting. For any other meetings of the Board of Governors, the The Board of Governors can decide either to be documents are sent 15 calendar days in advance. chaired by the President of the Eurogroup or to

The 2016 Annual Meeting was held on 16 June at the ESM premises in Luxembourg © European Stability Mechanism GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 7

To issue new shares; change the ESM authorised capital; or adapt the maximum lending volume of the ESM. Decisions by mutual agreement To provide financial assistance and establish choice of lending instruments, financial terms, (Unanimity of members participating in vote. Members and conditions; to give a mandate to the European Commission to negotiate a memorandum of who abstain do not prevent the adoption of a decision by understanding in liaison with the European Central Bank. mutual agreement).

To change the list of ESM lending instruments.

To approve the technical terms of new Members’ accession to the ESM.

To approve the By-Laws and the Rules of Procedure of the Board of Governors. Decisions by qualified majority (80% of votes cast). To approve actions for recovering debt from ESM Members.

To appoint the Managing Director and the members of the Board of Auditors; to approve the annual accounts and appoint the external auditors.

The Member of the European Commission in charge If the European Commission and the European Cen- of economic and monetary affairs and the President tral Bank both conclude that failure to urgently de- of the European Central Bank may participate in the cide to provide financial assistance would threaten Board of Governors’ meetings as observers. Other the euro area’s economic and financial stability, an persons, including representatives of institutions or emergency voting procedure will be used requiring organisations, such as the IMF, may also be invited a qualified majority of 85% of votes cast. by the Board of Governors to attend meetings as observers on an ad hoc basis. In line with its Rules of Procedure, the Board of Gov- ernors also adopts decisions by written procedure. The Board of Governors takes its decisions by mu- In this case, the Governors or their alternates cast tual agreement, qualified majority, or simple major- their votes by signing the relevant motion within 98 | EUROPEAN itySTABILITY as specified MECHANISM in the ESM Treaty. For all decisions, 15 calendar days. In urgent cases, the Chairperson a quorum representing at least 2/3 of the ESM of the Board of Governors may shorten the voting Members’ voting rights must be present. period to seven calendar days.

Members of the Board of Directors

The Board of Directors consists of high ranking government officials, generally deputy finance ministers, one from each ESM Mem- Board of Directors ber. Each Governor appoints one Director. The European Commission and the European Central Bank may participate in its meetings as observers.

CHAIR OF THE MEETINGS ESTONIA OF THE BOARD OF DIRECTORS Märten Ross, Deputy Secretary General for Financial Policy Klaus Regling and External Relations, Ministry of Finance, ESM Managing Director appointed on 21 October 2013

BELGIUM IRELAND Steven Costers, Nicholas O’Brien, Counselor General, Ministry of Finance, Assistant Secretary General, Department of appointed on 1 May 2015 Finance, appointed on 3 July 2014 replacing Jozef Kortleven, Member of the Compensation Committee since originally appointed on 28 September 2012 30 September 2014 until 9 October 2016

GERMANY GREECE Thomas Steffen, George Chouliarakis, State Secretary, Federal Ministry of Finance, Alternate Minister of Finance, appointed on 24 September 2012 appointed on 4 February 2015, Member of the Compensation Committee since replacing Anastasios Anastasatos, 9 October 2012, reappointed until 9 October 2017 originally appointed on 13 November 2014 8 | EUROPEAN STABILITY MECHANISM

To maintain ESM precautionary assistance, adequacy of precautionary credit line, or determine whether other financial support is needed. Decisions by mutual agreement (Unanimity of members participating in vote. Members To approve ESM loans and disbursement of tranches subsequent to the first tranche. who abstain do not prevent the adoption of a decision by mutual agreement). To approve primary market purchases, secondary market purchases, or bank recapitalisations, as well as relevant disbursements.

Decisions by Board of Directors are taken by qualified majority unless otherwise stated by the Decisions by qualified majority ESM Treaty. (80% of votes cast). To approve the annual budget, staff rules, conditions of staff employment.

Programme-related meeting documents of the The Board of Directors is supported by two board Board of Governors, such as annotated meeting committees: agendas, summaries of decisions, and supporting documents are made available to the general public Board Risk Committee advises the Board on the ESM’s website. of Directors on the ESM’s current and future risk appetite and reviews and The Board of Directors takes decisions as provided oversees the definition and the Managing for in the ESM Treaty and By-Laws or as delegated Director’s implementation of the ESM risk to it by the Board of Governors. The Managing Di- management framework. The Board Risk rector chairs the Board of Directors’ meetings. De- Committee consists of five Directors, who cisions are taken by qualified majority, unless oth- are appointed by the Board of Directors erwise stated in the ESM Treaty. For all decisions, for a renewable term of three years. It a quorum representing at least 2/3 of the voting meets whenever the affairs of the ESM so rights must be present. The European Commission require, usually quarterly. and the European Central Bank may appoint one observer each to the Board of Directors’ meetings.

The Board of Directors’ meetings usually take place Budget Review and Compensation in Brussels. The documents for the meetings are Committee advises the Board of Directors sent by the ESM Secretary General no later than and Managing Director on budgetary and seven calendar days prior to the date of the meet- staff compensation matters. It assesses ing. In urgent cases, the Managing Director may the execution of the ESM administrative shorten this period. Programme-related meeting budget. It also advises on, or approves, documents of the Board of Directors are also pub- ESM staff rules and related matters as lished on the ESM’s website. well as on any issues referred to it by the Board of Directors or the Managing The Board of Directors, under its Rules of Proce- Director. It consists of five Directors, dure, also adopts decisions by written procedure. appointed by the Board of Directors In this case, the Directors or their alternates cast for a renewable term of three years. It their vote by signing the relevant motion within 15 meets whenever the affairs of the ESM so calendar days. require, usually quarterly. GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 9

Managing Director was appointed when the ESM was established in 2012 and reappointed in 2017 for a second five-year The Managing Director is the ESM’s legal repre- term. sentative. He conducts the current business of the ESM under the direction of the Board of Directors The Managing Director is assisted by the Manage- and is the chief of ESM staff. ment Board in conducting the current business of the ESM, in preparing the decisions of the Board of The Managing Director is appointed by the Board Governors and the Board of Directors, and seeing to of Governors for five years and may be reappointed their implementation. once. The current Managing Director, Klaus Regling,

Klaus Regling Françoise Blondeel Managing Director Chief Corporate Officer

Christophe Frankel David Eatough Deputy Managing General Counsel Director and Chief Finance Officer

Kalin Anev Janse Rolf Strauch Secretary General Chief Economist 10 | EUROPEAN STABILITY MECHANISM

Board of Auditors The Board of Auditors prepares a report on the ESM financial statements, which is published as part of The Board of Auditors inspects the ESM financial the ESM Annual Report. It also draws up its own statements and verifies that they are in order. The annual report to the Board of Governors on its work, Board of Auditors monitors the activities of the ESM audit findings, conclusions and recommendations. internal and external auditors. In addition, it per- The Board of Auditors’ Annual Report, together forms its own independent audits of the regularity, with the ESM management comments issued in compliance, performance, and risk management of response to the report, is provided to the national the ESM. parliaments and the supreme audit institutions of the ESM Members, the European Court of Auditors, The Board of Auditors is composed of five mem- and the European Parliament. bers appointed by the Board of Governors, acting by qualified majority, for a non-renewable term of The Board of Auditors meets around 10 times per three years. Once appointed, the members of the year. It meets at least once a year with the Board of Board of Auditors serve independently in their per- Directors and, periodically, also with the Board Risk sonal capacity. Committee.

Board of Auditors’ members are nominated as follows: • two members are nominated by the supreme audit institutions of two ESM Members, one from the group Board of Auditors’ of half of the ESM Members holding Annual Report to the the highest number of shares of the Board of Governors ESM and the other from the group of for the period ended 31 December 2017 remaining ESM Members, following a rotation system;

Board of Auditors • one member is nominated by the European Stability Mechanism European Court of Auditors; and

• two members are proposed by the Chairperson of the Board of Governors.

Incoming and outgoing Members of the Board of Auditors. From left to right: François-Roger Cazala (8 October 2016 – 7 October 2019), Jean Guill (8 October 2015 – 7 October 2018), Kevin Cardiff (17 December 2016 – 16 December 2019), Irena Petruškevičienė (8 October 2018 – 7 October 2021), Günter Borgel (1 April 2016 – 31 March 2019), Noel Camilleri (8 October 2018 – 7 October 2021), Andrew Harkness (8 October 2015 – 7 October 2018) . © European Stability Mechanism GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 11

ACCOUNTABILITY AND TRANSPARENCY

As an institution with a public mandate, the ESM has a before its Economic and Monetary Affairs Commit- robust governance framework in place which ensures tee. Additional contacts with the European Parliament strong accountability to both ESM Members and other at the level of the Conference of Presidents or with stakeholders. In addition, the ESM has taken a num- individual parliamentary groups and members are ber of dedicated transparency initiatives to ensure that also carried out. Lastly, the European Parliament is all stakeholders and the general public have a better informed about the ESM’s activities when it receives understanding of the ESM mandate, its work, and copies of the ESM Annual Report and the Board of Au- decision-making. The ESM strives to implement Envi- ditors’ Annual Report to the Board of Governors, as ronmental, Social, and Governance (ESG) best practice provided for in the ESM Treaty. within its internal operations. The ESM is committed to preserving the environment as a sustainable user of resources. With its internal policies and procedures, ESM audit oversight the ESM endeavours to ensure that its activities are conducted in accordance with the highest standards Three layers of audit oversight ensure the internal ac- of integrity and operational efficiency. countability of the ESM. These are provided by the independent Board of Auditors, the external auditor, and the internal audit function. Accountability The Board of Auditors has full access to all ESM documents needed for the implementation of its tasks. The National parliaments Board of Auditors not only oversees the work of the ESM internal and external auditors but also conducts The Board of Governors comprises the finance minis- its own independent audits of the ESM. It may report ters of the euro area countries and as such, the Gov- to the Board of Directors on its findings at any time. ernors are accountable to the 19 national parliaments of the ESM Members. Before voting on important An independent external auditor audits the ESM finan- ESM decisions, some ministers must follow national cial statements in accordance with generally accepted procedures, which involve consultation or approval of auditing standards. The external auditor can examine such decisions by their national parliament or respec- all ESM books and accounts and obtain full informa- tive parliamentary committee. Furthermore, for many tion about its transactions. The external auditor’s re- ESM Members, the finance ministers have an obliga- port is published in the ESM Annual Report and on the tion to report on the ESM’s activities to their parlia- ESM’s website. ments on a regular basis, for example, quarterly or annually. The ESM Managing Director, Klaus Regling, The internal audit function works independently and is also periodically invited by national parliaments to reports directly to the Managing Director. The Head provide updates on the ESM’s activities. of Internal Audit also holds regular meetings with the Board of Auditors and reports on the internal audit plan, its findings, and recommendations. European Parliament

ESM pro-actively cooperates with the European Par- liament. Since 2013, on a voluntary basis, the ESM Managing Director has regularly attended hearings 12 | EUROPEAN STABILITY MECHANISM

remit. As such, ESM has published on its website the ESM Whistleblowing Procedure and a voluntary decla- ration of financial interests by the Managing Director.

Another example of the ESM’s engagement with civil society organisations is the public presentation of the Evaluation Report on EFSF and ESM financial assistance programmes at the Centre for European Policy Studies in Brussels. Brussels-based journalists, non- governmental organisations, researchers and staff from various EU institutions took part in the discussion.

Renowned monetary policy expert John B. Taylor speaks at the ESM on 3 April 2017 Scholars and experts regularly visit the ESM to provide © European Stability Mechanism their perspectives and engage with staff on ESM-related topics. The ESM also organises student visits from various universities to explain how the ESM fulfils its Transparency mission and the nature of its activities.

The ESM welcomes visitor groups and expects Transparency for programme-related these engagements to increase in the future given the strong public interest in ESM’s activities. decisions

In June 2016, the Board of Governors approved the Dialogue with the media ESM transparency initiative for programme-related decision-making. As a result, the ESM regularly pub- The ESM considers its sustained engagement with lishes on its website programme-related Board of the public, media, and other stakeholders as key to Governors’ and Board of Directors’ meeting docu- its credibility and reputation. The ESM Managing Di- ments, such as annotated agendas, summaries of rector and senior management give frequent inter- decisions, and background documents. Such docu- views, presentations, speeches, and make regular ments are typically published unless they: contain in- TV appearances. These activities are shared with formation that could be market sensitive; where their the public through the ESM’s Twitter account. Their disclosure would prejudice the legitimate interests of video recordings and transcripts are also available the ESM Member requesting or in receipt of stability on the ESM’s website. support; threaten euro area stability; disrupt financial markets; or for which special safeguards are needed as per the ESM By-Laws.

Engagement with civil society

ESM proactively engages with civil society organisations.

In 2017, Transparency International conducted in- terviews with the ESM Managing Director and senior officers on the ESM governance structure, accountability, integrity, and ethics policies. This exchange informed the Transparency International’s report on ESM Managing Director Regling speaks to Bloomberg ESM “From Crisis to Stability”, which is publicly avail- in January 2017 about positive developments in Europe able. The ESM has followed up on the Transparency despite the uncertain times International’s recommendations that were within its © European Stability Mechanism GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 13

ESM website publication of all official documents, press releases, speeches as well as a wide range of ESM staff research papers. The website also includes ESM legal The ESM website provides easy and comprehensive documents, policies, information on its governance public access to information about ESM activities. structure, and financial and investor relations infor- The website strives to be a real-time reflection of mation. everything that is happening at the ESM with timely

11/09/2018 | PRESS RELEASES

  EFSF reopens 5-year bond, raises €1 billion 12345

ACTIVITIES

Research and  ESM ON TWITTER #ESM/#EFSF Investor Newsletter no. 29: Analysis Overview of long-term funding in 2018 + link to newsletter… ESM staff members' research helps https://t.co/xDp4s1pRLZ improve our understanding of the euro area 3 days 23 hours ago    economy and particularly the effect of  economic policies during crisis episodes. #ESM/#EFSF Investor Newsletter no. 29: Publications Q4 2018 timetable of potential benchmark Greece Videos How the ESM works  FOLLOW @ESM_PRESS Seminars Research staff 16/04/2015 | LENGTH 3:47

FACTS

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 €295 bn 2.5 5 55.5% Total amount of loans disbursed EFSF/ESM disbursed 2.5 times countries have successfully of Greek public debt is held by by ESM/EFSF more in loans than IMF from exited EFSF/ESM programmes: EFSF/ESM (as of 06/08/2018) 2011-2015 Ireland, Spain, Portugal, Cyprus, Greece

EVENTS

 28  Rolf Strauch at Österreichischer 01  Klaus Regling at Eurogroup Press 11  Klaus Regling at Reinventing SEP Europarechtstag OCT Conference OCT Bretton Woods Committee O  28. Sep., 16:00 - 28. Sep., 18:30 01. Oct. (All day) - 01. Oct. (All 11. Oct., 10:45 - 11. Oct., 12:30 Seefeld, Austria day) Bali, Indonesia Luxembourg

LENDING RATES IMPACT ON BUDGETS BEFORE THE ESM

How we calculate our cost of funding and How much programme countries’ budgets Why the temporary firewall set up in 2010 lending rates per programme country save with our low interest rates still remains active today

ESM 0.99 %

EFSF 1.44 %

Note: average lending rates of pool funded loans, over Q2 2018, including

margin and fees 14 | EUROPEAN STABILITY MECHANISM

ABOUT THE EUROPEAN FINANCIAL STABILITY FACILITY

The EFSF was created as a temporary crisis reso- The EFSF’s share capital totals €28,513,396.92, lution mechanism in June 2010. It was set up as a consisting of 2,851,339,692 shares with par value of company under Luxembourg law and its sharehold- €0.01 each. The following table shows the number ers are the euro area countries, with the exception of shares and capital subscription for each share- of Latvia and Lithuania, which both joined the euro holder: area after the ESM had assumed the EFSF’s crisis resolution duties. Member Number of Capital as of State shares 31 December The EFSF provided financial assistance to Ireland, 2017 (in €) Portugal, and Greece. It financed these loans by is- Belgium 98,844,650 988,446.50 suing bonds and other debt instruments on capital markets. The EFSF still exists as a legal entity but Germany 771,706,294 7,717,062.94 since July 2013 it can no longer grant loans. The Estonia 7,294,357 72,943.57 ESM is the sole and permanent mechanism for re- Ireland 45,261,689 452,616.89 sponding to new requests for financial assistance by Greece 80,070,849 800,708.49 euro area countries. Spain 338,392,963 3,383,929.63 The EFSF continues to operate in order to: France 579,522,400 5,795,224.00 • receive loan repayments from beneficiary coun- Italy 509,243,918 5,092,439.18 tries; Cyprus 5,578,757 55,787.57 • make interest and principal payments to hold- Luxembourg 7,119,129 71,191.29 ers of EFSF bonds; and Malta 2,575,437 25,754.37 • roll over outstanding EFSF bonds, as the matu- Netherlands 162,521,534 1,625,215.34 rity of loans provided to Ireland, Portugal, and Austria 79,125,435 791,254.35 Greece is longer than the maturity of EFSF-is- Portugal 71,329,846 713,298.46 sued bonds. Slovenia 13,398,796 133,987.96 A guarantee structure provided by the EFSF share- Slovakia 28,256,464 282,564.64 holders according to defined contribution keys Finland 51,097,174 510,971.74 backs the bonds issued by the EFSF. Ireland, Portu- Total 2,851,339,692 28,513,396.92 gal, Greece, and Cyprus have stepped out as guar- antors of EFSF bonds. GOVERNANCE, ACCOUNTABILITY, AND TRANSPARENCY | 15

GOVERNANCE OF THE EFSF

General Meeting of Chief Executive Officer Shareholders The Chief Executive Officer (CEO) conducts the daily management and affairs of the EFSF. Klaus Reg- The general meeting of shareholders represents ling, the ESM Managing Director, is also the CEO of all 17 shareholders of the EFSF and has the broad- the EFSF. est powers to order, carry out, or ratify acts relating to the operations of the EFSF. It takes place at least once a year in Luxembourg and its decisions EFSF Audit Committee assists the Board of are normally taken by a qualified majority of 80% of Directors in discharging its responsibilities the shares of the company present or represented. in financial reporting, internal control, risk Each share is entitled to one vote. The shareholders management, internal audit and external may act at any general meeting directly or by ap- audit of the EFSF. It consists of five members pointing a proxy. who are appointed by the Board of Directors from among Directors, for a renewable term of office of one year. EFSF Board of Directors

The Board of Directors is comprised of high-level The EFSF and ESM are separate legal entities with representatives of each of the EFSF shareholders, different governing bodies and shareholders. They such as deputy ministers, secretaries of state, or share the same staff and offices in Luxembourg. To director generals of national treasuries. The Direc- formalise such cooperation, the ESM and the EFSF tors are appointed by the shareholders’ general have entered into a service level agreement. meeting for a period not exceeding six years and are eligible for reappointment. They may be removed at any time by a resolution of the general meeting of shareholders.

The Board of Directors performs all acts of admin- istration of the EFSF. It is authorised to transfer, as- sign, and dispose of the assets of the EFSF in such manner as it deems appropriate. The meetings of the Contacts Board of Directors usually take place in Brussels. European Stability Mechanism 6a Circuit de la Foire Internationale The Board of Directors is supported by an Audit L-1347 Luxembourg Committee, established in 2013 in line with the Lux- Tel: (+352) 260 962 0 embourg Law concerning the audit profession. [email protected] Printed in Belgium by Bietlot More information on the European Union is available on the Internet (http://europa.eu). Luxembourg: Publications Office of the European Union, 2018

Print ISBN 978-92-95085-44-2 doi:10.2852/344370 DW-07-17-162-EN-C PDF ISBN 978-92-95085-43-5 doi:10.2852/688253 DW-07-17-162-EN-N

© European Stability Mechanism, 2018 All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the European Stability Mechanism.