The European Commission has approved a new Portuguese guarantee scheme, through which the State guarantees to banks the loans granted through the European Investment Bank (EIB) to companies in Portugal.
President Durão Barroso said that “with this decision the European Commission and the EIB reinforce their contribution to the financing of the economy, which is essential for growth and job creation in Portugal”.
This regime will allow participating banks to continue to secure existing EIB loans, as well as new loans, without compromising their liquidity position.
As the scheme ensures that participating banks do not benefit from any undue advantage from the State guarantee, this mechanism is in line with EU State aid rules.
Currently, the EIB provides loans to companies in Portugal, either directly, guaranteeing these loans to the banks, or through intermediary banks that transfer EIB funds to these companies.
However, as a result of the Portuguese sovereign debt crisis, the rating of the banks fell below the EIB's credit risk criteria.
For this reason, the EIB has imposed three conditions on the banks: a) to be replaced by another guarantor; b) guarantee the entire underlying loan/exposure; or c) repay the loan. In addition, the ratings downgrade affected all Portuguese banks, making most, if not all, of them ineligible for EIB assistance.
As all the proposed solutions had considerable drawbacks, the Portuguese authorities notified a scheme whereby the Portuguese State would guarantee up to EUR 2 billion of the current and new guarantees given by Portuguese banks for an EIB loan portfolio worth up to EUR 800 billion of euros.
The scheme will allow the continuity of the financing provided by the EIB to the real economy and will avoid the disruption of credit granted by the EIB through all the banks participating in the scheme.
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