Germany: EIB enables Berenberg Bank to expand their SME and mid-cap lending portfolio
2 August 2021
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.”
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.
The European Investment Bank (EIB) and the Croatian Bank for Reconstruction and Development (HBOR) have signed a Guarantee Agreement amounting to €50 million for loans to Croatian mid-caps and large corporates to finance their recovery from the effects of the COVID-19 pandemic. The EIB contribution stems from the European Guarantee Fund (EGF) set up by the EIB Group in 2020 to accelerate the post-COVID-19 recovery of Europe’s economy, safeguard jobs, and provide much needed liquidity to European companies.
The European Guarantee Fund, which started operations in December 2020, has reached €16 billion in approved financing at the end of June. This represents over 65% of the available € 24.4 billion in EU Member States’ guarantees to support financing to European businesses struggling after the economic downturn. Total signatures with beneficiaries of financing under the EGF stood at €8.4 billion, mostly benefitting SMEs.
The European Guarantee Fund (EGF), part of the €540 billion EU recovery package agreed in 2020, has approved funding amounting to almost half its target for 2021. After clearance under the EU state aid notification process in December 2020, the initiative has now approved €11.7 billion in support of European businesses struggling with the economic fallout of the COVID-19 pandemic. This is almost half the fund’s target for 2021. The fund mobilises additional financing, and initiatives financed so far are expected to generate €93.9 billion in funding for the EU economy. With €2.1 billion in financing also signed at the end of April, EGF funding is already reaching businesses across the European Union.