EC approved the Italian State guarantee supporting a debt moratorium from banks to small and medium-size enterprises (SMEs) affected by the COVID-19. The scheme was approved under the State aid Temporary Framework, adopted by EC on March 19, 2020, to enable member states to use the full flexibility foreseen under State aid rules to support the economy in the context of the COVID-19 outbreak. The Temporary Framework will be in place until the end of December 2020. Italy notified to EC under the Temporary Framework a State guarantee to support a debt moratorium for SMEs, which includes the postponement of repayments of overdraft facilities, bank advances, bullet loans, mortgages, and leasing operations.
EC found that the Italian measure is in line with the conditions set out in the Temporary Framework. In particular, the guarantee covers a well-defined set of financial exposures and is limited in time. The scheme runs until September 30, 2020 and the guarantee extends for 18 months after the end of the moratorium. Furthermore, the guarantee covers the payment obligations falling under the moratorium. The risk taken by the State is limited to 33%. In any case, before calling on the State guarantee, financial intermediaries must make recovery efforts themselves. To ensure that the measure benefits only SMEs, who experience difficulties due to the COVID-19 outbreak, eligible beneficiaries must not have non-performing exposures prior to March 17, 2020. They also need to certify that their business activity has suffered due to the economic effects of the COVID-19 outbreak.
EC concluded that the guarantee to provide liquidity for SMEs under the moratorium will contribute to managing the economic impact of the COVID-19 outbreak in Italy. The measures are necessary, appropriate, and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) Treaty on the Functioning of the European Union and the conditions set out in the Temporary Framework. On this basis, EC approved the measures under EU State aid rules.
Keywords: Europe, EU, Italy, Banking, COVID-19, SME, State Aid Rules, Temporary Framework, Credit Risk, EC
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleIFSB Consults on Disclosures Standard for Islamic Insurance Entities
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).