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.
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.
HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.
EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).
BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.
FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.
EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.
The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.