New financial product for Spain and 21 other EU countries

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The European Commission approved, under EU State aid rules, the introduction of a new product in the form of guarantees on synthetic securitisation tranches under the European Guarantee Fund managed by the European Investment Bank Group to support companies affected by the coronavirus outbreak in the 22 participating Member States.

With an envisaged dedicated budget of €1.4 billion, the new product is expected to mobilise at least €13 billion of new lending to small and medium-size enterprises (SMEs) affected by the outbreak. “This is a significant contribution to the overall target for the European Guarantee Fund to mobilise up to €200 billion of additional financing in the 22 participating Member States,” the EU said on August 16.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said, “This new product will contribute significantly to the European Guarantee Fund’s overall target to mobilise up to €200 billion for the European economy, by helping to originate at least €13 billion of new lending by financial intermediaries to SMEs, which have been severely hit by the coronavirus outbreak.

“The European Guarantee Fund, which is administered by the European Investment Bank Group, brings together support by 22 Member States and complements the national support schemes. We continue to work closely with Member States and with the other European institutions to find workable solutions to mitigate the economic impact of the coronavirus outbreak, whilst preserving the level playing field in the Single Market,” she added on August 16.

A synthetic securitisation is a financial technique whereby an originating entity, for example a bank, identifies a pool of existing assets – a portfolio of loans – which it holds on its balance sheet, creates tranches with different risk/reward profiles against that pool, and subsequently transfers a part of the risk stemming from the pool by buying protection on a specific tranche from a protection seller. In return, the originating entity pays a premium to the protection.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.


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Written by

Deirdre Tynan

Deirdre Tynan is an award-winning journalist who enjoys bringing the best in news reporting to Spain’s largest English-language newspaper, Euro Weekly News. She has previously worked at The Mirror, Ireland on Sunday and for news agencies, media outlets and international organisations in America, Europe and Asia. A huge fan of British politics and newspapers, Deirdre is equally fascinated by the political scene in Madrid and Sevilla. She moved to Spain in 2018 and is based in Jaen.

Comments


    • Herbert Lichtenwald

      16 August 2021 • 16:49

      funny,
      where did they `earn` this money? the unwanted, undemocratic EU
      they steal it first from you and then give it back to you for interest charges
      or do they `print` it simple?
      lazy people invent games to scam taxpayers – Thats EU
      congratulation UK you left it

      Reply
    • Herbert Lichtenwald

      16 August 2021 • 16:49

      funny,
      where did they `earn` this money? the unwanted, undemocratic EU
      they steal it first from you and then give it back to you for interest charges
      or do they `print` it simple?
      lazy people invent games to scam taxpayers – Thats EU
      congratulation UK you left it

      Reply

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