- First project in Germany under the Pan-European Guarantee Fund to help small and medium-sized companies to recover from the effects of COVID.
- The EIB will guarantee a part of Berenberg’s portfolio of revolving credit facilities. The freed-up capital will be reinvested in new loans.
The European Investment Bank (EIB) will provide loan-by-loan guarantees covering 75% of a portfolio of up to €250 million of the German private bank Berenberg. Berenberg will use the freed-up capital to increase their lending to small and medium-sized companies (SMEs). It is the first project under the Pan-European Guarantee Fund in Germany.
Worldwide, access to finance has become difficult for small and medium-sized companies following the COVID-19 pandemic. As the banking sector addresses deteriorating loan quality with a gradual shift into lower risk assets, SMEs could encounter difficulties in obtaining new financing when restarting business at the end of the pandemic.
To avoid a shortage of credit to SMEs and mid-cap companies, the EIB has set up the €25 billion European Guarantee Fund (EGF) with support from EU Member States.
The EIB and EGF will guarantee a part of Berenberg’s portfolio of revolving credit facilities (RCF), thereby enabling it to expand its loan book and partially fill the lending gap left behind in the banking sector. Through the capital relief, Berenberg can expand its European RCF portfolio and thereby provide liquidity in small tickets to the real economy. This could help SMEs recover more quickly from the pandemic.
“With the help of the EIB and EGF, Berenberg Bank will be able to provide additional liquidity to the real economy in particular for SMEs and MidCaps”, said EIB Vice-President Ambroise Fayolle, responsible for projects in Germany. He added: “This is the first EGF transaction signed with a German Intermediary. Guaranteeing Berenberg’s European RCF portfolio will benefit final recipients in many European countries, thereby making it a truly pan-European operation.”
Background information
The European Guarantee Fund (EGF) was set up by the EIB Group with contributions from EU Member States to shield companies suffering from the COVID-19 crisis. Using nearly €25 billion in guarantees, the EGF allows the EIB and the EIF to quickly make loans, guarantees, asset-backed securities, equity and other financial instruments available to mostly small and medium-sized enterprises and mid-caps. The EGF is part of the European Union’s recovery package aiming to provide a total of €540 billion to boost those parts of the EU economy that have been hit the worst.
Die Berenberg Bank is a highly reputable and extremely financially solid bank established in 1590. It is the oldest bank in Germany and the second oldest bank in the world, with its managing directors remaining personally liable. This is Berenberg’s first operation with the EIB.