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
PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK
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 Finalizes Standards on Methods of Prudential Consolidation
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 Updates List of Other Systemically Important Institutions in EU
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks
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 Welcome FSB Review of their Remuneration Regime
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 Letter on Addressing Risks from Use of Deposit Aggregators
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 to Amend Banking Act and Rules in Coming Months to Transpose CRD5
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 Delegated Regulation on Specialized Lending Exposures Under CRR
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 Proposes to Enhance Assurance Expectations for Basel Returns
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 Issues Results of Benchmarking Analysis of Recovery Plans of Banks
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.
