Credit Guarantees Hungarian Model Case of Rural Credit Guarantee Foundation ( AVHGA)

Transcription

1 Credit Guarantees Hungarian Model Case of Rural Credit Guarantee Foundation ( AVHGA) László Tóth Deputy CEO 3 October 2013

2 Case of AVHGA Rural Credit Guarantee Foundation (AVHGA) Rural Credit Guarantee Foundation was established under the PHARE Programme in 1991 Initial capitalisation: EU (PHARE) + Hungarian Ministry of Agriculture + 5 commercial banks Legal form: foundation (not-for-profit) The mission of the Foundation is to improve access to finance of rural and agricultural SMEs Since 2011 operating as a financial enterprise equivalent to banks (Basel 2 - CRD) The Foundation is in partnership with 150 financial institutions (banks, saving cooperatives, leasing and factoring companies) The credit guarantee can cover loans, bank guarantees, factoring and leasing State counter guarantee 85%

3 Case of AVHGA Portfolio EUR 440 million EUR 380 million

4 Case of AVHGA Focus on agricultural and rural development Agriculture and food industry: 73% of the portfolio (2012) Specific products for agriculture and rural development Examples: warehouse receipt financing, loans for agricultural service provider ( integrator ), financing of advances on EU subsidies Pricing: lower fees for targeted groups The fee actually 50% guarantee rate Agricultural sector 0,25% Other sectors 0,3125% Segmentation: designed to help the agricultural SMEs Market fee 50% guarantee rate Working capital loan Investment loan Agricultural sector 1,22% 1,04% Other sectors 2,26% 2,59%

5 Case of AVHGA Other conditions 20-80% coverage rate Duration maximum 25 years Collateral requirement: minimum 20-30%, depending on rating Guarantee assignment process: 5-8 working days Maximum guarantee amount per company = 2,5 Million EUR

6 The Hungarian Guarantee Model Guarantee fee subsidy State Guarantee societies (GS) Banks SMEs Counterguarantee Guarantee Loan State: Co-founder of the guarantee schemes Provider of counter-guarantee (85%) Provider of fee subsidy Regulator Guarantee societies: 5 players, different legal forms Not-for-profit institutions No regional or sectorial focus (excl. AVHGA) No physical network First call guarantee Risk taking up to 80 % No mutuality Individual guarantee vs portfolio guarantee Main players are equivalent to banks under Basel 2

7 The Hungarian Guarantee Model Guarantee fee subsidy State Guarantee societies (GS) Banks SMEs Counterguarantee Guarantee Loan Banks: Own products + government loan programmes Bilateral cooperation agreement with GS Guarantee applications submitted through banks SMEs: All SMEs are eligible for guarantee in principle Clients to pay guarantee fee Clients to provide collateral No direct contact with the guarantee societies

8 Advantages of guarantee for stakeholders Advantages for SMEs: Strengthens the bargaining power of the entrepreneur (state counter-guarantee ) Easier access to finance (lower interest rates, higher loan amount, longer term) Subsidized guarantee fee (since guarantee rate: 0,25-0,3125 % p.a. Advantages for Banks: Risk mitigation (sharing) tool Lower capital requirements (Basel 2) First call immediate return in case of default Advantages for the State Helping SMEs access to finance Boosting economic growth

9 Ways for calculating state aid element of credit guarantee + Market (reference) fee: regulated by EU - Fee actually payable: decision of guarantee inst. = State aid element: EU categories Methods: 1. Proportional method Maximum guarantee amount agriculture 7,5 * 7500 EUR non-agriculture 7,5 * EUR 2. Safe-harbour premium 3. Methodology Used by most of the players

10 Case of AVHGA State aid categories used by AVHGA 1. De minimis aid in the sector of agricultural production - EUR 7 500/ 3 years 2. General de minimis (rural activity, processing and marketing of agricultural products) EUR / 3 years 3. De minimis aid in the fisheries sector EUR / 3 years 4. Agriculture block exemption 5. Notified state aid 6. No state aid category market price

11 Methodology The process through which a guarantee organization calculates its market fee ( reference fee ) and, consequently, the state-aid element of its transactions. Market fee cost of risk + cost of administration + cost of capital Market fee = + Defaults (10-years average in %) source: accounting - Recoveries (10-years average in %) source: accounting + Administration costs + depreciation (10-years average in %) source: accounting + Risk premium (8 % *4% = 0,32%, fixed) source: Guarantee Notice

12 Thank you for your kind attention!