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.
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.