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March 31, 2020updated 01 Apr 2020 12:42am

Brussels’ ‘flexible and pragmatic approach’

By Alejandro Gonzalez

Just as the UK government has put in place measures to mitigate the fallout of the coronavirus on businesses and households so this has been the case on the other side of the English Channel. 

The UK scheme provides government-backed loans of up to £5m with no interest for up to 12 months and a guarantee to lenders of 80% on each loan.

The European Commission has temporarily suspended State Aid rules to allow EU member states to introduce urgent economic measures, examples of which are set out below. 

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At the same time, the European Banking Authority (the EU’s regulatory agency) has published a statement encouraging national competent authorities to adopt a flexible and pragmatic approach to the prudential matters in support of their consumer protection obligations. 

Italy has introduced a debt moratorium for solvent SMEs, which includes the postponement of repayments of overdraft facilities, bank advances, mortgages and leasing operations until the end of September 2020. 

For the 18 months thereafter, a state guarantee will cover up to a third of the payment obligations falling under the moratorium.

The Dutch Government is offering up to 90% rebate to entrepreneurs facing at least a 20% loss in turnover so long as they do not make staff redundant.

The largest Dutch banks are jointly introducing measures to offer their SME customers (which were solvent prior to the coronavirus) six months of breathing space. 

Banks are in a position to do so because the European Central Bank and the Dutch Central Bank have given permission for them to take out capital from additional buffers they have built up in recent years.

The Danish State will provide up to a 70% guarantee for new leases and loans to businesses which were solvent prior to the lockdown and have seen a sudden drop in turnover of more than 30%.

In Norway, the government has put forward a loan programme where lenders receive a guarantee on 90% of the value of new loans issued (up to £3.7m) to small and medium-sized enterprises hit by the coronavirus outbreak.

The German promotional bank Kreditanstalt für Wiederaufbau (KfW) will facilitate two schemes.

The first is a loan programme covering up to 90% of the risk for loans for companies of all sizes.

Eligible loans may have a maturity of up to 5 years and can reach €1bn (£880m) per company, depending on the company’s liquidity needs. 

Under the second scheme, the KfW participates together with private banks to provide larger loans as a consortium.

For this scheme, the risk taken by the State may cover up to 80% of a specific loan but not more than 50% of the total debt of a company.

France will provide loan guarantees of up to 90% of the risk guaranteed by the state-backed investment bank, BPI, for a period of up to six years.

Small companies are eligible to take out up to €5m, while medium-sized companies can borrow up to €30m.

Firms can go to their banks and ask for lines of credit for 12 or 18 months, with 90 per cent of the risk covered by the BPI.

Stephen Haddrill is the director-general of the UK’s Finance & Leasing Association.

This post originally appeared on the FLA’s website on 31 March 2020.

 

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