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
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
