1. Bank Lending and Guarantee Schemes Workshop on Support for Euro-Mediterranean industrial cooperation – Dimension 4 of Euro-Mediterranean Charter for Enterprise: Access to Finance Milan 13 December 2011 - Session II Marcel Roy – Secretary General AECM

2. Content 1.Facts and figures about AECM and guarantees in Europe 2.Typologies of Guarantee schemes in EU 3.Main success factors

3. Role of AECM AECM mission consists of: Representation of interests of the member organizations towards the EU institutions and multilateral institutions (banking legislation, EU support programmes, SME policy, state aid regulation, etc.) Platform of exchange of best practices between members (Working groups, seminars, etc.) Promotion of guarantee instrument: – In the EU towards EU member states and institutions, – Outside EU in cooperation with multilateral bodies (e.g. OECD and IFC) – Networking with other Guarantee organizations outside EU

4. Role of AECM Promotion of guarantee instrument: Contacts with other regional guarantee associations: – REGAR in Latin-America: association set up in cooperation with SPGM and Iberaval – ACSIC in Asia – No such association Africa or the Med-Region, but bilateral contacts in Morocco, Jordan, Lebanon and Egypt Participation in multilateral initiatives: – OECD Working Party on SMEs and Entrepreneurship – Joint IFC/AECM Global conference on guarantees in June 2011 in Tallinn (with support of the Dutch gvt.)

5. Role of AECM Promotion of guarantee instrument: Participation in concrete cooperation initiatives: – EU-Tender for New Member States (2003-2007) – GTZ development projects in Viet-Nam and Mongolia – Cooperation via REGAR in Latin-America – Oséo, SPGM, Confidi etc activities in Africa – SPGM projects in » Cabo Verde, » Angola and » Moçambique

6. Why guarantees ? Credit finance is important to SME in the EU, as they Have no or little access to venture capital, mezzanine capital, bond issues, etc Have weak own funds positions => limited capability to auto- finance investment or working capital needs Rely predominantly on loan finance Usually have a relative lack of bankable collateral AECM members facilitate access to finance by providing credit default guarantees for SME that: Are economically healthy Have an economically meaningful project but at the same time do not dispose of sufficient collateral to access bank credit Guarantee schemes’ philosophy :“Help for self-help” principle – non-profit orientation

7. Some figures about AECM 37 guarantee systems in 22 countries AECM key figures (31.12.2010) – Own funds € 7,8 billion – Guarantees issued in 2010 € 31,2 billion – Guarantees in portfolio € 71,0 billion –Leverage > 10 x – Beneficiary SMEs 2 million

8. Some figures about AECM

9. Crisis - contribution of Guarantees AECM member organization provided crucial support to SMEs in face of crisis: Overall growth of new guarantees issued in 2009: 58% Overall growth of total guarantee volume in 2009: 25% Total volume of guarantees issued under the specific crisis programmes: € 11,2 billion – 1/3 of total guarantee activity in 2009. – Of which 67 % dedicated to short term, working capital loans (crisis-related market failure) Specific crisis guarantee instruments have: – benefitted over 120.000 SMEs – contributed to maintaining more than 851.000 jobs

10. Justification for Guarantee support Crisis or no crisis, there is a continued need for guarantees: Overreliance of SME on loan finance – disadvantages in relation to larger companies Market failure for SME access to finance exist all over the EU, independent of business cycle and relative economic development of the market Rising interest rates and more selectivity to be expected: – Basel III implementation – Banks are already adapting to regulation and sovereign debt crisis by tightening credit conditions

11. Content 1.Facts and figures about AECM and guarantees in Europe 2.Typologies of Guarantee schemes in EU 3.Main success factors

12. Typologies of EUGuarantee Schemes In general, we can observe in Europe a great variety of different legal and operational frameworks for guarantee schemes, reflecting local needs. Nevertheless it is possible to identify some main models: 1.Ownership: Fully mutual (e.g. SOCAMA, Confidi) Funded by SME or banking associations (e.g. VDB) Fully public (e.g. KredEx, aws, etc.) Presence of mixed models 2.State support: Public systems – Private systems Counterguarantees: regional, national level or EU – Level Contributions to own funds

13. Typologies of EUGuarantee Schemes 3.Legal form: Cooperative or mutual societies Limited companies Foundations Funds Development banks, agencies, others 4.Supervision: Mono-product banking licences Financial intermediary statute Non-supervised (very few cases)

14. Typologies of EUGuarantee Schemes 5.Distribution : Banking partners Direct guarantees Individual approval Portfolio guarantees 6.Product types: Loan default guarantees Other guarantee types: VC, mezzanine, leasing, project guarantees, export, student loans, housing, etc. Other SME support instruments (subsidized loans, mezzanine finance, venture capital, coaching, mediation services, etc. )

15. Typologies: Example SPGM, Portugal

17. Main features First demand guarantees Conditions: Maximum loan amount guaranteed: € 1.000.000 Short / Medium term loans: maximum coverage rate of 50% (working capital and other short term / medium loans) Long term: Maximum coverage rate of to 75% for long term loans (more than 3 years) Guarantee premium: risk modulation (rating), 0,5% - 4,5%, average 1,4% Counterguarantee: Automatic and compulsory, 50 – 90%, cost 0,2% Process: Distribution channel: Partner banks (framework agreements) Portfolio approach for smaller amounts, individual assessment for larger amounts Automatization and dematerialization of process

18. Typologies: Example SPGM, Portugal

19. Content 1.Facts and figures about AECM and guarantees in Europe 2.Typologies of Guarantee schemes in EU 3.Main success factors

20. Main success factors In the EU, the following are considered as determining success factors : Strong cooperation via the banking sector Involvement of SME associations, where they exist Public support in form of guarantees / Counterguarantees Guarantee recognition as mitigating instrument for Basel - CRD

21. Advantages of a counterguarantee For the guarantee societies : – Risk distribution over more partners – Presence of a public counterguarantee for sovereign risk weight (Basel II / CRD): » Reduction of regulatory own funds requirements – Focus on real market failure objectives (higher risk profile) – Greater leverage effect => greater guarantee volume

22. Advantages of a counterguarantee For the credit institutions – Presence of a public counterguarantee for sovereign risk weight (Basel II / CRD): » Reduction of regulatory own funds requirements – Possibility to expand SME credit portfolio – Added value in terms of risk analysis by the MGS – Remaining own risk in some cases as low as 20% – Better average risk profile in portfolio

23. Advantages of a counterguarantee For the public authorities (I): The counterguarantor also has a number of advantages from the system: – CGS act as an intermediary for SME policy » Presence at regional or local level » Individual analysis and follow-up by CGS » Peer review by entrepreneurs (private schemes) – Greater leverage effect as compared to an isolated state guarantee or other support instruments

24. Advantages of a counterguarantee For the public authorities (II): Important macroeconomic benefit A recent study has demonstrated the added value of German Guarantee Banks for the German State: The aggregate effects of costs and revenue (increased fiscal revenue, reduction of unemployment benefits, payments for defaults, etc.) of the public financial balance were overall positive: GDP increase per year by €1,7 billion on average Increase of jobs by 14.000 per year on average Increase of the state financing balance (revenues - costs) by € 600 million per year on average

25. Thank you for your attention