HM Treasury to Implement Relaxed EU State Aid Rule from July-End
HM Treasury published a letter that discusses the recent change to the EU State Aid rules, highlighting that more small businesses can now access government-backed loans. The letter, which is from HM Treasury and the Department of Business, Energy & Industrial Strategy, is addressed to UK Finance. EC has relaxed its State Aid rules so that small and micro businesses will be exempt from elements of the "undertaking in difficulty" test and are now eligible for the Coronavirus Business Interruption Loan Scheme (CBILS). The letter sets out the expectations that all accredited CBILS lenders will implement the changes, noting the consequence that businesses whose CBILS applications they have previously declined may now be eligible. Lenders will shortly be receiving guidance on how to identify undertakings in difficulty.
The letter states that businesses that were categorized as "undertakings in difficulty" under the EU State Aid rules were unable to access CBILS. As per the Temporary State Aid Framework, under which CBILS is notified, financial support cannot be awarded to businesses which were "in difficulty" at the end of 2019. By working with key industry bodies, the government sought changes from EC to ensure that businesses that were viable before the COVID-19 outbreak would be able to access support through CBILS. EC has now amended the Temporary Framework to allow such support to micro and small businesses, which were classed as undertakings in difficulty on December 31, 2019. Businesses in this category that have fewer than 50 employees and a turnover of less than GBP 9 million can now apply for CBILS.
The government is working to reflect these changes in the rules for the loan schemes and the changes are due to be in effect from July 30. The letter states that all accredited lenders are expected to implement these changes in their own decision-making processes. This will ensure that even more businesses are receiving support at this difficult time, keeping in mind that lenders may now be able to offer CBILS facilities to businesses that were previously ineligible. Additionally, it has been decided not to amend the rules for the Bounce Back Loan Scheme (BBLS) because BBLS facilities are already available to undertakings in difficulty. The government has been doing more to help viable businesses that have so far been unable to secure government-backed financial support. The British Business Bank will soon circulate new guidance with lenders on identifying undertakings in difficulty, which should be helpful in clarifying how to approach the various elements of the test.
Related Links
Keywords: Europe, UK, Banking, COVID-19, CBILS, Loan Guarantee, Credit Risk, State Aid Rules, SME, Temporary Framework, EC, HM Treasury
Featured Experts

Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
HM Treasury Outlines Approach to Amend PRIIPs Regulation in UKRelated Articles
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA Publishes Report on Asset Encumbrance of Banks in EU
EBA published the annual report on asset encumbrance of banks in EU.
US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA Proposes Guidelines for Establishing Intermediate Parent Entities
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
ECB Letter Sets Out Strategies to Address Issue of Nonperforming Loans
ECB published a letter from Andrea Enria, the Chair of the Supervisory Board of ECB, answering questions raised by the President of the Bundestag (the German federal parliament) on how ECB assesses the financial stability of the euro area in the context of the significant level of nonperforming loans.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA Issues Erratum for Technical Package on Reporting Framework 3.0
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.