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EU approves new financing tool for European Guarantee Fund for virus-hit companies Reuters via biedexmarkets.com

EU approves new financing tool for European Guarantee Fund for virus-hit companies

© Reuters.

BRUSSELS (Reuters) – The European Guarantee Fund, which is managed by the Investment Bank Group, on Monday secured EU approval to provide guarantees on synthetic securitisation tranches to help companies in 22 EU countries affected by the COVID-19 pandemic.

“With an envisaged dedicated budget of 1.4 billion euros ($1.65 billion), the new product is expected to mobilise at least 13 billion euros of new lending to small and medium-size enterprises (SMEs) affected by the outbreak,” the European Commission said in a statement.

Under the new instrument, the EIB Group, acting as a protection seller, will provide a financial intermediary with a guarantee on a specific risk tranche for a portfolio of existing assets, under the condition that the portfolio in question fulfils certain requirements in terms of maximum size and contains only performing exposures, the EU executive said.