{
  "url": "https://openlegislation.uk/eu-decision-2014-660/annex/division-16/division-UNCAPPED/division-1",
  "json_url": "https://openlegislation.uk/eu-decision-2014-660/annex/division-16/division-UNCAPPED/division-1.json",
  "legislation": "eudn/2014/660",
  "legislation_title": "Commission Implementing Decision of 11 September 2014 on the model of funding agreement for the contribution of the European Regional Development Fund and the European Agricultural Fund for Rural Development to joint uncapped guarantee and securitisation financial instruments in favour of small and medium-sized enterprises (2014/660/EU)",
  "legislation_url": "https://openlegislation.uk/eu-decision-2014-660",
  "path": "annex/division/16/division/UNCAPPED/division/1",
  "kind": "division",
  "number": null,
  "heading": "SME INITIATIVE UNCAPPED GUARANTEE INSTRUMENT — OPTION 1",
  "text": "This instrument foresees the utilisation of uncapped guarantees provided by the EIF to cover the credit risk of SME loans, leases or guarantees. The SME Initiative Uncapped Guarantee Instrument is based on risk retained at different levels by EU resources (COSME and/or Horizon 2020), ERDF/EAFRD, together with resources from the EIB Group and potentially alongside national promotional banks and national guarantee schemes.\nUnder the SME Initiative Uncapped Guarantee instrument, the EIF would provide uncapped guarantees up to agreed maximum amounts. The originating financial institutions shall retain a material interest in their respective guaranteed portfolios, by retaining i.e. 20 % economic exposure on each guaranteed loan, in order to ensure the necessary alignment of interest (‘skin in the game’).\nThe Financial Intermediaries will individually receive an uncapped guarantee from the EIF in exchange for the payment of a guarantee fee. The higher risk of the resulting portfolio will be covered by a combination of MS Contribution and COSME or/and Horizon 2020 resources. The lower risk of the resulting portfolio will be retained by a combination of resources from the EIB Group up to agreed maximum amounts and potentially national promotional banks and national guarantee schemes. Such unfunded risk transfer, allowing for the partial transfer of credit risk to third parties without actually removing the portfolio of assets from the balance sheet of the financial institution would provide the opportunity for the originating financial institution to obtain regulatory capital relief, where feasible. Such operation would have to take into consideration the relevant country's regulatory requirements.\nThe origination, due diligence, documentation and servicing of the portfolio, made of eligible SME loans, leases or guarantees Transactions, shall be performed by the Financial Intermediaries in accordance with their usual origination and servicing procedures. The Financial Intermediary (or Sub-financial Intermediary in the case of counter-guarantees) shall retain the direct client credit relationship with each Final Recipient. The Financial Intermediary will provide information about the portfolio on a regular basis to the EIF and the EIF will accordingly pass on all relevant information to risk takers pursuant to the relevant agreements.\nThe Financial Intermediary will fully pass on to the SMEs the State Aid Benefit as defined in the indicative terms and according to the formula specified under sections 5 and 6 below. Moreover, it is considered that the implicit costs (reputational risk, financial risk, administrative risk, risk related to implementation of the compartment) incurred by the Financial Intermediary offset any advantage related to State resources (i.e. the MS contribution) thus ensuring that the Financial Intermediary does not benefit from undue aid.\nUnless expressly provided for, defined terms in this Annex 1 have the same meanings as the corresponding defined terms under this model Funding Agreement.\nIndicative Terms of the Uncapped Guarantees under Option 1\nOnly the MS Contribution is relevant for state aid considerations. Resources from the Commission and EIB and EIF own resources do not constitute state aid.\nGuaranteed loan amount = nominal loan amount (nominal guarantee amount) * Guarantee Rate.\nFor the cases of counter guarantees.\n1.\nMain characteristics\nScope of the Financial Instrument\nThe Financial Intermediary originates a portfolio of New Debt Finance (subject to a minimum Leverage Effect) for which it will receive an uncapped portfolio guarantee (in the form of direct, counter- or co-guarantees) from the EIF in exchange for the payment of a Guarantee Fee.\nThe EIF acts as day-to-day manager of the Financial Instrument managing the MS contribution, the EU Contribution (i.e. contributions under [the COSME Regulation] AND/OR [the H2020 Regulation], the EIF Contribution and the credit risk taken by the EIB and possibly national promotional banks.\nGuarantee\nThe Guarantee is provided by the EIF to the Financial Intermediary in exchange of a Guarantee Fee. The Guarantee shall cover a portion (up to the Guarantee Rate) of the credit risk associated with a portfolio of underlying New Debt Finance (the ‘Portfolio’).\nGuarantee Rate\nUp to 80 % of each and every Transaction in the Portfolio, so that the Financial Intermediary shall retain a material economic interest in the Portfolio, equal at least to 20 % of the economic exposure on it, in order to ensure alignment of interest.\nStructure\nThe Guarantee shall cover, up to the Guarantee Rate, defaulted amounts incurred by the Financial Intermediary in respect of each defaulted eligible Transactions included in the Portfolio.\nThe MS Contribution will be used to cover the highest risk of the Portfolio, up to a percentage that will be a determined having regard to the multiplier effect for the MS contribution agreed in the Funding agreement. This may typically result in 100 % of such amount being absorbed for the coverage of net losses under the Portfolio.\nThe second riskiest part of the Portfolio will be covered by a combination of resources from the EIF, the EU budget and the Managing Authority. The residual risk of the Portfolio shall be covered using a combination of resources from the EIB Group and potentially national promotional banks and national guarantee schemes.\nThe resources provided by the different risk takers shall be defined at a level such that the risk shall be compatible with the risk tolerance of the EIB Group and any other potential risk taker.\nEach Portfolio shall have sufficient homogeneity and sufficient pool diversification in order for the EIF to be able to assign a rating according to its risk assessment methodology.\nDefaulted Amounts\nRelate to unpaid principal and interest incurred by the Financial Intermediary in respect of defaulted Transactions included in the Portfolio.\n2.\nPortfolio\nAvailability Period\nThe EIF and the Financial Intermediary will agree on an availability period (typically up to 3 years) during which Transactions may be included in the Portfolio.\nEligible Final Recipients\nThe Final Recipients have to fulfil the eligibility requirements as per CPR Articles 37(4) and 39 as well as the specific eligibility requirements set out in ERDF and EAFRD Regulations.\nCOSME Eligibility Criteria\nSee Annex 2.\nHorizon 2020 Eligibility Criteria\nSee Annex 2.\nExclusion Process\nIf a Transaction does not comply with Eligibility Criteria it shall be excluded from the Portfolio (and shall not be covered by the Guarantee). In certain limited circumstances and in implementation of the requirements of Article 39(2)(a) of the CPR, the determination of whether such non-compliance was within the control of the Financial Intermediary may result in continued guarantee cover.\nLeverage Effect requirement for MS Contribution\nThe Leverage Effect is calculated as the total New Debt Finance to eligible Final Recipients divided by the MS Contribution. The minimum Leverage Effect has to be at least [X] times the total MS Contribution.\nMinimum leverage requirement for COSME contribution\nGiven the contribution under the COSME Regulation, if applicable, a volume of New Debt Finance to eligible Final Recipients in line with the leverage requirements as set out in the COSME legal basis and Delegation Agreement has to fulfil also the COSME eligibility criteria.\nMinimum leverage requirement for Horizon 2020 contribution\nGiven the contribution under the H2020 Regulation, if applicable, a volume of New Debt Finance to eligible Final Recipients in line with the leverage requirements as set out in the H2020 legal basis and Delegation Agreement has to fulfil also the Horizon 2020 eligibility criteria.\n3.\nPricing\nGuarantee Fee\nThe EIF shall charge to the Financial Intermediary the Guarantee Fee in relation to the Transactions included in the Portfolio.\nThe Guarantee Fee, expressed as [X] % per annum, will be calculated quarterly on the outstanding amount of the Portfolio\nPricing of the MS Contribution\nThe MS Contribution shall be priced at a level which is commensurate with the relevant risk taken with the exception of the cover of the riskiest part of the Portfolio that shall be priced at zero (i.e. the MS Contribution will be provided free of charge).\n4.\nMiscellaneous\nPenalties\nSee Article 7.\nReporting\nSee Annex 5.\nMonitoring and Audit\nSee Article 17.\n5.\nTransfer of benefit\nTransfer of benefit\nThe EIF shall assess the mechanism of transfer of benefit to the Final Recipients. That mechanism shall be included in the process for the selection of Financial Intermediaries and it shall form part of the EIF final decision on whether or not entering into a guarantee agreement and at what conditions. The transfer of benefit shall be applied for the part of the New Debt Finance covered by the Guarantee to the standard interest rate charged to the Final Recipients through a reduction of the credit risk/guarantee premium. It shall be documented accordingly.\nTotal Benefit\nThe Total Benefit shall be defined for the part of the loan covered by the Guarantee as the reduction in the interest rate or the guarantee fee as the case may be as charged by the Financial Intermediary to the Final Recipients, taking into account the underlying credit risk undertaken and the effect and the cost of the Guarantee. As the Financial Intermediary receives no remuneration/funding from the EIF, the assessment of the Total Benefit shall focus only on the credit risk premium. The Financial Intermediary shall take into account the cost of the guarantee (the Guarantee Fee) in the calculation of the new credit risk/guarantee premium for each loan or guarantee.\nThe Total Benefit is given by the following formula:\nTotal Benefit = standard credit/guarantee risk premium — Guarantee Fee\n6.\nState Aid\nState Aid Benefit\nThe State Aid Benefit for the part of the loan covered by the Guarantee is a portion of the Total Benefit, proportional to the MS Contribution in the New Debt Finance portfolio, given by the following formula:\nState Aid Benefit = Total Benefit * % of the MS Contribution in the Guarantee (the guaranteed part of the New Debt Finance portfolio).\nThe State Aid Benefit shall be fully transferred by the Financial Intermediary to the Final Recipient.\nCalculation of the GGE\nAt Final Recipient level, the State Aid Benefit shall be considered as an interest rate subsidy within the meaning of Article 4(2) of the de minimis Regulation.\nThe Gross Grant Equivalent (GGE) shall be calculated according to the following formula:\nGGE = Guaranteed loan amount * maturity (weighted average life) of the loan (guarantee) * State Aid Benefit\nThe Financial Intermediary shall calculate the GGE for each and every loan (guarantee) in the New Debt Finance portfolio and shall communicate it to the EIF. In all cases the GGE cannot be above the threshold set out in the de minimis Regulation.\nState Aid Penalties\nThe EIF shall charge to the Financial Intermediary a State Aid Penalty in case the State Aid Benefit is not fully transferred to the final beneficiary.",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "F",
      "label": "F1",
      "text": "Decision revoked in part (31.12.2020) by The European Structural and Investment Funds Common Provisions Rules etc. (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/783), reg. 10(c); 2020 c. 1, Sch. 5 para. 1(1)"
    },
    {
      "type": "footnote",
      "label": "f1",
      "text": "The specific requirements related to the participation in the compartment include: (a) Minimum Leverage Effect to achieve a Portfolio with a minimum volume of New Debt Finance, which shall comply with the eligibility requirements for the MS Contribution; (b) Minimum volume of New Debt Finance which shall also comply with the parameters for the eligibility under COSME and/or under Horizon 2020; (c) Assessment and control of the eligibility criteria; (d) Penalties, in case the minimum Leverage Effect is not reached at the milestones and if the State Aid Benefit is not transferred; (e) Transfer of benefit undertakings, including the assessment of its mechanism and the reporting to EIF; (f) Calculation of the GGE for each and every loan in the portfolio of new debt finance and the reporting to EIF; (g) Visibility of the EU support in the contractual documentation with the final recipients and the marketing material; (h) Audit and monitoring undertakings in relation to the European Commission and the European Court of Auditors. The above risks and requirements represent an implicit cost for the Financial Intermediary which receives no remuneration for the management activities of the Transaction, including no administrative fees and no performance fee."
    },
    {
      "type": "footnote",
      "label": "f2",
      "text": "Only the MS Contribution is relevant for state aid considerations. Resources from the Commission and EIB and EIF own resources do not constitute state aid."
    },
    {
      "type": "footnote",
      "label": "f3",
      "text": "Guaranteed loan amount = nominal loan amount (nominal guarantee amount) * Guarantee Rate."
    },
    {
      "type": "footnote",
      "label": "f4",
      "text": "For the cases of counter guarantees."
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/eudn/2014/660/annex/division/16/division/UNCAPPED/division/1",
    "retrieved_at": "2026-11-01T15:14:38.904122+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}