The European Commission decided to extend the financial aid to the Portuguese banking system up until the 9th of February 2019. The aid scheme consists in giving aid to eligible credit institutions.
These schemes provide state guarantees for financing agreements and the emission of non subordinated short and medium-term debt of solvent credit institutions incorporated in Portugal. The Portuguese news agency, Lusa, released the information last Thursday. EC’s press releases showed two schemes were approved by the Commission.
Guarantee scheme on European Investment Bank (EIB) lending
Under EU State aid rules, a prolongation of a Portuguese guarantee scheme on European Investment Bank (EIB) lending until 9 February 2019 has also been approved. The scheme covers State guarantees to banks that guarantee EIB loans granted to companies in Portugal.
The Commission found the prolongation of the scheme to be in line with its 2013 Banking Communication because it is well targeted, proportionate and limited in time and scope. It was initially approved in June 2013 and prolonged several times, the last time in November 2017. The prolonged scheme will allow the continuation of funding provided by the EIB to the real economy and prevent the disruption of the credit granted by the EIB through the banks participating in the scheme.
Prolongation of a guarantee scheme for credit institutions
The European Commission has authorised, under EU State aid rules, the prolongation of a guarantee scheme for credit institutions in Portugal until 9 February 2019. The credit institutions can access the scheme under certain conditions should the need arise.
The Commission found the extension of the measure to be in line with its 2013 Banking Communication, according to which the Commission can authorise schemes providing for liquidity measures for banks, which do not have a capital shortfall.
The scheme was initially approved in October 2008 and prolonged several times, the last time in November 2017. The Commission approved the prolongation of the scheme because the measure is well targeted, proportionate and limited in time and scope. In line with the 2013 Banking Communication, the Commission is authorising guarantee schemes on banks’ liabilities for periods of six months. Each prolongation is based on a review of the developments in financial markets and the scheme’s effectiveness.