EC and European Investment Fund (EIF) launched new COVID-19 support measures under the Employment and Social Innovation (EaSI) Guarantee Instrument to enhance access to finance for micro-borrowers, micro and social enterprises. Under this scheme, the EIF will provide enhanced terms and conditions for guarantees and counter-guarantees to incentivize financial intermediaries to continue providing financing to micro-borrowers, micro-enterprises, and social enterprises hit by the economic consequences of COVID-19 pandemic. In addition, EC approved Maltese and Polish State aid schemes to support to support the economy in the context of the COVID-19 outbreak. The schemes were approved under the State aid Temporary Framework, adopted by EC on March 19, 2020. The Temporary Framework will be in place until the end of December 2020.
The key features of the new support measures under EaSI Guarantee Instrument include higher risk coverage; broadening of certain parameters, such as an increase of the maximum exposure for micro and social enterprises; and more flexible terms. The new features will be accessible to financial intermediaries that can potentially serve thousands of companies benefiting from guarantees under the EaSI Guarantee Instrument. The objective of the new measures is to further incentivize financial intermediaries to lend money to small businesses, mitigate the sudden increase in perceived risk triggered by COVID-19 pandemic, and alleviate working capital and liquidity constraints of final beneficiaries targeted by the EaSI program.
The EIF does not provide financing directly to micro-entrepreneurs or social enterprises. Through the EaSI Guarantee Instrument, the EIF provides financial intermediaries with a partial credit risk protection for the newly originated loans to eligible beneficiaries. Intermediaries are selected after an application under a call for expression of interest, followed by a due diligence process. Once selected by EIF, these partners act as EaSI financial intermediaries and start originating loans to eligible beneficiaries within the agreed availability period. The EaSI COVID-19 support measures are being made available to the market and rolled out based on an amended EaSI call for expression of interest published on EIF website. Financial intermediaries with existing EIF agreements under the EaSI Guarantee will be able to access the new terms of the guarantees on their request. Micro-borrower, micro, and social enterprises will be able to apply directly to their local banks and lenders participating in the scheme.
In addition, EC has approved Maltese scheme to support small and medium-size enterprises (SMEs) affected by the COVID-19 outbreak. The purpose of the scheme is to provide access to working capital to those SMEs that are facing sudden liquidity shortages due to the COVID-19 outbreak. EC has also approved a scheme for Poland to support companies affected by the outbreak. Poland notified, to EC, about a state guarantee on factoring products under the Temporary Framework. Factoring is a financial service providing liquidity to the real economy, as it involves the payment of invoices before their final due date. It is a source of working capital for companies that is alternative to bank loans. The scheme is open to enterprises of all sizes and will be implemented by the national development bank, Bank Gospodarstwa Krajowego (BGK). Under the scheme, guarantees will be available both for recourse factoring and for reverse factoring.
- Press Release on EaSI Guarantee Instrument
- Press Release on Polish State Aid Scheme
- Notification on Maltese State Aid Scheme
Keywords: Europe, EU, Poland, Banking, EASI Guarantee Instrument, SME, COVID-19, State Aid Rules, Temporary Framework, Credit Risk, Loan Guarantee, EIF, EC
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.