The Government analyzes with entities financial, companies and supervisors a potential extension in the terms of the guarantees of the Official Credit Institute (ICO) granted with repayment periods of up to five years, in order to give margin to viable companies, but with liquidity problems.
In the conversations would be involved the bank employers AEB and CECA and the business CEOE with the Ministry of Economic Affairs and Digital Transformation in dialogue also with the Bank of Spain, Brussels and even, potentially also the European banking authority EBA, as detailed to Servimedia financial sources.
The early expiration of some operations already in 2021 without normality in economic activities having been restored due to the outbreaks of the pandemic is a triple-sided threat: business employers seek to avoid serious difficulties and even, bankruptcies of companies with viable businesses due to lack of liquidity, which would cause bank defaults at a cost to the Treasury, as the operations are guaranteed by the ICO.
In the line of guarantees worth 100,000 million euros approved by the Government with a repayment term of up to five years the ICO takes, in fact, up to 80% of the risk when the financing is for SMEs and the self-employed, and 70% in large companies. Its guarantee is the same in the subsequent line of 40,000 million launched with repayment terms of up to eight years, but more aimed at investment projects.
The financial sources consulted indicate that some operations will begin to expire already in the first quarter of next year and formulas are being considered to extend maturities to operations already granted, with the complexity that this implies. The difficulty is much more than bureaucratic or change of contract, since it would imply a debt restructuring or refinancing with the consequent requirement of provisions that such operations entail.
When the first operations were granted, in the months of March or April, “there was no visibility“And he was confident that the activity would” go back “in the summer or after it, explain the same sources to justify the tight deadlines of some concessions.
An extension also forces to solve it with the European Union, since the framework agreement with which the Government launched the first ICO program set five years as the deadline, and the approval of Brussels is required so that a change in the program such as a potential expansion is not considered aid from State.
Contacts with the EBA
The sources consulted indicate that the opportunity to carry out a possible extension selectively is being considered for industries, companies or sectors with the potential for recovery when sanitary restrictions allow normal activity to return.
The same sources also frame these analyzes together with the contacts with the European Banking Authority (EBA), which recently decided to withdraw the accounting flexibility that has allowed banks to grant credit deferrals until September 30 without suffering penalties in provisions and capital.
The EBA allowed these moratoriums without having to accumulate the required endowment piggy banks in operations like this and will maintain this facility for operations granted until the 30th, but decided not to maintain it for those that could be granted later.
In practice, this measure means that as of October, customers who defaulted on their credit have to be considered delinquent, forcing the banks to make the corresponding provisions.