Brussels approves a new financial product to support small and medium-sized companies after Covid

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Brussels, August 16 (EFE). – The European Commission on Monday gave the green light to a new financial product, which was granted 1,400 million euros from the Pan-European Guarantee Fund, and is planned to mobilize about 13,000 million in new loans to small and medium-sized enterprises (SMEs) from 22 member states affected by the coronavirus pandemic.

Brussels concluded that the synthetic securitization proceeds would “help manage the economic impact of the virus in the 22 participating member states” and that it was “necessary, appropriate and proportionate to treat a serious disruption of the economy”.

The new product consists of collateral on synthetic securitization tranches, a financial technology that allows the European Investment Bank (EIB) group to provide the financial intermediary with protection in the form of a guarantee on a specific risk segment of an existing portfolio of assets. , provided that the portfolio meets certain requirements in terms of volume and profitability.

The goal of the new product is to help financial intermediaries to offer new, riskier loans to small and medium businesses. The aim is to free up the lending capacity of financial intermediaries and prevent their resources from diverting to lower-risk assets instead of lending to small and medium businesses, the European Commission said in a statement.

This is a significant contribution to the pan-European Guarantee Fund’s overall goal of mobilizing up to €200 billion in additional financing in the 22 participating member states, including Spain.

The Executive Vice President of the European Commission, Valdis Dombrovskis, stressed that the new product will allow “financing in the form of new loans to flow to the European Union (EU) companies that really need it.”

“We encourage member states to continue to use the three crisis tools to the fullest extent to support their workers and companies,” he added.

The Pan-European Guarantee Fund, through which projects worth about 17.8 billion euros have been approved so far (which would mobilize 143.2 billion euros), is one of the crisis instruments agreed at the European level to help member states and their companies cope with the crisis that it has caused. from the epidemic.