(Source: European Investment Bank)
- 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, rsponsible 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.”