AECM European Association of Guarantee Institutions The financial instruments under the Cohesion Policy 2007 – 2013: How the Member States and the Selected Financial Institutions have respected and preservered the EU financial interest Guy Selbherr Vice President of AECM President of German Guarantee Bank Association VDB

AGENDA AECM - facts, figures & role Guarantee concept and use of Financial Instruments Experiences, lessons learnt, main policy issues 2

AECM - facts, figures & role: Belgium, France, Germany, Italy & Spain Founded in 1992 by 5 members from 41 members in 25 countries In 2015 approximately 79.2 billion EUR Total volume of outstanding guarantees (end of 2014) about 2.9 million active guarantees Number of outstanding guarantees (end of 2014) 3

Guarantee concept in general: who is involved? SME / entrepreneur / Start-up Needs finance Bank Viable project but not enough collaterals Guarantee institution Guarantee = 50 % to 80 % Counter-guarantee institution From regional, national or / and EU level 4

Guarantees via Intermediaries: advantages for SMEs Getting access to finance at all for economically sound projects or at better conditions Provision of expertise: Support services and recognition of qualitative factors in risk analysis Guarantee schemes are not profit-oriented, in mutual schemes participation in management Non competitive – neutral, broad geographic coverage 5

Guarantees: Use of Financial Instruments Portion represented by AECM members of max. portfolio volume (CIP Counter Guarantee) 65 % or billion Euro Supported SMEs by Financial Intermediaries members of AECM (till ) Of total SMEs benefited from CIP Guarantee Facility ( ) 59 % From AECM members to continue being the main intermediaries under COSME / HORIZON / EFCI Strong expectations 6

CIP Intermediaries Lenders SMEs 7 Guarantee institutions: advantages for public authorities LEVERAGE: 48,1x  Result of risk sharing: High leverage effect example: CIP Programme (2007 to 2013)

 “Crowding out” effect on guarantee and counter-guarantee institutions, through EIB/EIF direct guarantees to banks  Consequences of cutting out or strongly reducing guarantee/counter-guarantee institutions presence:  Loss of support of SMEs through extensive knowledge of the SME sector and no more involvement of chambers  Loss of added leverage through first level guarantee and national counter-guarantee (at least multiplier of 2)  Loss of full coverage (geographical & sectoral) 8 Concerns / policy issues for future instruments

9 Two options with a different leverage effect Risk actually taken in case of 50 % guarantee rate 50 % COMMERCIAL BANK 50 % COSME 50 % COMMERCIAL BANK 25 % GUARANTEE BANK 50 % guarantee of intermediary 50 % direct guarantee for commercial bank under COSME Guarantee with the envisaged 50 % COSME counter-guarantee (resp. 25 % of loan) 50 % COMMERCIAL BANK 50 % GUARANTEE BANK 25 % COSME

10 COSME enhance access to finance BUT Maximum maturity 10 years is too short Procedure for loans > 150 k€ not clear enough Covering interests period too short (90 days) Reporting require- ments vs. admini- strative burden More favourable financing conditions for SMEs Financial instruments: good concept but still to improve

11 “Union funding centrally managed by the Commission which is not directly or indirectly under the control of the Member State does not constitute State Aid and should not be taken into account in determining whether the relevant ceiling is complied with.” State Aid issues influence use of Financial Instruments Improved procedure concerning State Aid compliance Still improvements needed in the future Modified duration limitation is still too short. Modified definition of “undertakings in difficulties” quite favourable for SMEs under de minimis, but not practicable under GBER. Need for higher threshold (growing companies, production in low cost countries (local content requirements)) easily exceeds number of employees.

12 Thank you for your attention! “Costs are outweighed by benefits” (proven by studies) 42 AECM Members out of 25 countries “Efficient way to implement policy objectives” Guarantees: