The European Investment Bank is considering options presented by the European Commission that could generate up to 100 billion euros ($132 billion) in new lending to small and medium-sized businesses.
“The commission and the EIB are also working with the ECB to develop an EU strategy to alleviate the financing constraints for SMEs,” the Luxembourg-based bank said in a report to European leaders obtained by Bloomberg News. One of the options could “leverage up to 100 billion euros depending on the scale of participation by member states.”
The EIB and the commission, along with the Frankfurt-based European Central Bank, are investigating ways to ease the credit crunch faced by small businesses particularly in the parts of the euro area worst affected by the region’s debt crisis and longest-ever recession. Loans to the private sector have contracted for at least 12 straight months, and ECB President Mario Draghi has called the lending crunch the area’s biggest challenge.
Hinging on the level of changes required to draft regulations, the commission’s three proposals offer different leverage ratios on public funds that could create lending of 58 billion euros, 65 billion euros or 100 billion euros.
The 100 billion option foresees creating a joint securitization instrument, combining national and joint public funds, packaging portfolios of existing and new loans to SMEs. The possibility of pooling risks would also exist under this option, the report said.
The collaboration with the commission and the ECB aims to secure “sufficient funding for the banking sector directed specifically to SME lending,” as well as providing sufficient funding for the banking sector directed specifically to SME lending,” the report said.
“The key to unlocking the leverage effects for such joint instruments is the widest possible participation by member states,” according to the report.