The purpose of the Plan is to provide government guarantees
An explanation of the Cyprus Government Guarantee Scheme of 1 billion euros for the provision of support to businesses and the self-employed, in the context of the Covid-19 outbreak, which was approved by the European Commission on August 17, 2021, was approved by the Ministry of Finance on Thursday.
According to the Ministry of Finance, the purpose of the Plan is to provide government guarantees totaling up to one billion euros (€ 1,000,000,000) to credit institutions, which have been established in the Republic and are licensed by the Central Bank, including subsidiaries of foreign credit institutions. , with a view to granting new low-cost loans to businesses and self-employed persons, in line with the Commission Communication on the provisional framework for State aid measures to support the economy during the current outbreak of COVID-19 .
He notes that the loans must be approved by the Credit Institutions by 31/12/2021.
Furthermore, the Ministry of Finance states that the proposed bill provides for the distribution of government guarantees as follows:
Three hundred million euros (€ 300,000,000) for the issuance of loans to self-employed and Very Small Enterprises, five hundred and fifty million euros (€ 550,000,000) for the issuance of loans to Small, Medium and Large Enterprises and one hundred and fifty million euros (€ 150,000) .000) for the issuance of loans to Large Enterprises.
He states that government guarantees and state support are provided to increase liquidity in the economy by a corresponding amount. More specifically, the provision of government guarantees amounting to one billion euros (€ 1,000,000,000) will offer an increase in liquidity in the economy of about one billion four hundred and thirty million (€ 1,430,000,000).
He adds that government guarantees will not be used to repay existing credit facilities either serviced or non-serviced or existing credit facilities during the restructuring of any credit institution.
In addition, the Ministry of Finance states that the basic principles of the granting of government guarantees are covered by the Law, while the various parameters and conditions of the granting and use of government guarantees will be issued by Decree of the Minister of Finance.
He adds that government guarantees will cover 70% of the losses that may arise from the above loans and the banks the remaining 30% regardless of whether the loan is secured or not.
According to YPOIK, the loans will have a duration of 3 months up to 6 years excluding current accounts whose maximum duration will be 1 year.
Notes that the issuance of current accounts and / or loans without any collateral does not exceed fifty percent (50%) of the amount issued to the Self-Employed and the Very Small Business, to thirty percent (30%) to the Small and Medium Business and at twenty percent (20%) to Big Business.
Also included, according to the Ministry of Finance, are criteria and conditions regarding the granting of government guarantees to credit institutions, as well as in relation to the granting of loans to Independent Employees and Businesses such as the maximum amount of loans that can be granted to them, as well as for what reasons (meeting the needs of liquidity, working capital
He also states that low interest rates are set for the new loans that will be granted, the end of the guarantee that the Republic will receive on an annual basis from the credit institutions, as well as the control mechanisms.
The Ministry of Finance states that, taking into account the comments of the European Union's Directorate-General for Competition, as well as the opinion of the European Central Bank, it amended the basic law on the issuance of Government Guarantees to Credit Institutions for Business Loans Law of 2021, as well as in a revision of the relevant Decree.
Finally, the Ministry of Finance states that the Plan will be implemented with the passage of the Amending Law “On the Issuance of Government Guarantees to Credit Institutions for the Granting of Loans to Businesses and Self-Employed Employees Law of 2021” by the House of Representatives and its issuance Decree by the Minister of Finance.
source: KAPHIMERINI KYPROU