Due to the prolonged effects of the pandemic on the economy, it was considered that the present conditions require the promotion of the measure of granting loans with government guarantees.
In the light of this, the bill on the Issuance of Government Guarantees to Credit Institutions for the Granting of Loans to Businesses and Self-Employed was drafted.
The aforesaid bill stipulates that the Minister of Finance will be able to issue government guarantees totaling up to €1,000,000,000 to credit institutions, with the aim of granting new low-cost loans to self-employed and/or companies, which were not enterprises in difficulties on 31.12.2019 and are now currently facing financial difficulties due to COVID-19 pandemic.
The bill clarifies that government guarantees are provided to meet liquidity requirements, working capital and investments. Government guarantees may not be used to cover the repayment of existing credit facilities either serviced or non-serviced and/or be used as collateral for the restructuring of existing credit facilities as these relate to new loans which will be granted to businesses or self-employed.
Government guarantees are granted until 30.06.2021 and the duration of the guarantee is determined in a period of not less than 3 months and not more than 6 years.
The government loan guarantee covers any losses that may arise on the loans that will be granted, with a set maximum loss coverage of seventy per cent (70%) for the Republic and thirty per cent (30%) for the financial institutions.
According to the bill, businesses and self-employed are obliged to mortgage any non-mortgaged real estate as collateral for the loan (unless it concerns a second mortgage, the value of which amounts to 110% of the loan amount and the first mortgage is registered for the benefit of the same financial institution) or other assets. Personal guarantees are not accepted as collaterals for the loans that will be granted. Also, the granting of unsecured loans is possible only in cases where the self-employed and companies do not have non-mortgaged real estate or other eligible assets to fully secure the new loans.
Government guarantees are granted for the benefit of financial institutions and for this purpose a contract is concluded between the Republic and the credit institution, at the expiration of which the corresponding government guarantee ceases to be valid. The provision of government guarantees is made against the payment of a corresponding guarantee fee by the credit institution on whose behalf the specific government guarantee is provided. It is also emphasised that, apart from the guarantee fee payable, no other monetary or other transaction is allowed on government guarantees.
The criterion for the distribution of government guarantees on behalf of credit institutions is the contribution of the latter to total domestic deposits on 31.12.2019.
The maximum amount of government guarantee that can be granted to each credit institution will not exceed twenty-five per cent (25%) of the total primary and secondary funds, as at 31.12.2019.
The Minister of Finance requested the political parties to communicate their views on the bill, expressing the government's intention to submit the bill to the Council of Ministers and subsequently to the Parliament, provided that political will is secured to vote in favor of the bill.