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26 March 2009

Commission authorises UK working capital guarantee scheme


The Commission approved the UK scheme that will offer banks up to £10 billion of guarantees in respect of portfolios of working capital loans to sound, credit-worthy companies.

The Commission approved the UK scheme that will offer banks up to £10 billion of guarantees in respect of portfolios of working capital loans to sound, credit-worthy companies. Banks will obtain capital relief, which the banks have to redeploy to support further lending to businesses. The guarantees will be priced at a level designed to make the scheme self-financing.

 

The UK Government will provide a guarantee of up to 50% in respect of portfolios of working capital loans to sound, credit-worthy companies with an annual turnover of up to £500 million. The UK Government is making these guarantees available to participating banks providing that the capital which is released by the government guarantee will be redeployed to support new loans to businesses. The scheme has a budget of £10 billion and its duration is limited to two years.

 

Only good quality assets are being guaranteed. So-called "impaired assets" are therefore excluded. The scheme is expected to be self-financing and the fees payable by the banks will be set at a level sufficient to absorb some deterioration in the expected loss. The banks have, in turn, to provide new lending to SMEs or mid-sized companies having economic activities in the UK.

 

Press release

 



© European Commission


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