Brussels: The European Commission has determined that while current State aid rules on guarantees remain pertinent, modifications and simplifications are needed for improved effectiveness.
According to Cyprus News Agency, a Staff Working Document published by the Commission identifies areas requiring enhancements, particularly in estimating aid amounts, the complexity faced by SMEs, and the transference of risk benefits.
The evaluation of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees, known as the ‘Guarantee Notice,’ reveals the need for updates. This assessment, initiated in August 2022, aimed to determine the continued relevance of the Guarantee Notice, which has not undergone revisions since 2008. The findings pinpoint shortcomings and areas ripe for improvement.
Evidence for the evaluation was collected through various channels, including public and targeted consultations, a workshop with entities managing and granting guarantees, and input from Member States. An external study by independent experts also contributed to the review process. The Commission’s findings underscore the Guarantee Notice’s value in providing a framework that enhances predictability and legal certainty, thereby fostering a level playing field among Member States.
However, the evaluation highlighted specific areas necessitating updates. Changes in financial markets, interest rates, and capital requirements since 2008 may lead to underestimation of aid amounts, while the simplified approach for SMEs could result in overestimation. Furthermore, the evaluation noted that lenders might not fully transfer risk-reduction benefits to borrowers, although this does not result in significant aggregate gains for lenders.
The complexity and cost of complying with the Guarantee Notice, particularly for smaller measures and Member States, were also identified as issues. Additionally, the evaluation revealed inadequate data availability on approved guarantee measures, suggesting that the current reporting framework is not functioning effectively. Inconsistencies within the broader State aid framework, particularly concerning market benchmarks and mechanisms for ruling out aid to lenders, were also noted.
To address these issues, the Commission plans to review the Guarantee Notice in early 2026, with a targeted completion by June 2027. Stakeholders will be invited to provide feedback on the proposed revisions to ensure the rules remain clear, consistent, and aligned with current market conditions.