COMMISSION STAFF WORKING DOCUMENT EVALUATION of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees
Date: 2025-10-13
Institutions: Directorate-General for Competition, European Commission
Subjects: EU competition policy, State aid, aid evaluation, aid to undertakings, control of State aid, cost-effectiveness analysis, credit guarantee, policy analysis, risk management, small and medium-sized enterprises

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 13.10.2025  SWD(2025) 330 final  COMMISSION STAFF WORKING DOCUMENT  EVALUATION  of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees {SWD(2025) 331 final}  
 
 
Table of contents 

GLOSSARY .................................................................................................................................................. 3 

1 

INTRODUCTION .............................................................................................................................. 10 

1.1 

1.2 

1.3 

1.4 

Background....................................................................................................... 10 

Purpose of the evaluation ................................................................................. 11 

Scope of the evaluation .................................................................................... 12 

Evaluation criteria ............................................................................................ 12 

1.5  Methodology..................................................................................................... 12 

2  WHAT WAS THE EXPECTED OUTCOME OF THE INTERVENTION? ..................................... 14 

2.1 

2.2 

2.3 

2.4 

The need for a Guarantee Notice ...................................................................... 14 

The objective of the Guarantee Notice ............................................................. 16 

The scope of the Guarantee Notice (‘input’) .................................................... 17 

The description of the Guarantee Notice (‘input’ and activities’) .................... 17 

2.5  What the Guarantee Notice is expected to achieve (results and impacts) ........ 20 

2.6 

Point of comparison of the evaluation .............................................................. 21 

3 

HOW HAS THE SITUATION EVOLVED OVER THE EVALUATION PERIOD? ....................... 22 

3.1  Macroeconomic developments and the evolution of EU Credit Markets ........ 22 

3.1.1  Macro-economic developments.................................................................... 22 

3.2 

3.3 

Regulatory developments applicable to credit institutions ............................... 24 

Key figures and types of guarantee measures .................................................. 25 

3.3.1  Overall use of guarantee measures ............................................................... 25 

3.3.2  Types of guarantee measures........................................................................ 27 

3.4 

Case practice ..................................................................................................... 30 

4 

EVALUATION FINDINGS (ANALYTICAL PART) ....................................................................... 33 

4.1 

To what extent was the intervention successful and why? ............................... 33 

4.1.1  Effectiveness................................................................................................. 33 

4.1.2  Efficiency ..................................................................................................... 49 

4.2 

Coherence ......................................................................................................... 56 

4.3 
EU added value - How did the Guarantee Notice make a difference and to 
whom?  .......................................................................................................................... 60 

4.4 

Relevance of the Guarantee Notice .................................................................. 60 

1 

 
 
 
5  WHAT ARE THE CONCLUSIONS AND THE LESSONS LEARNT? ........................................... 60 

5.1 

5.2 

Conclusions ...................................................................................................... 60 

Lessons learnt ................................................................................................... 62 

ANNEX I. PROCEDURAL INFORMATION ............................................................................................. 66 

ANNEX II. METHODOLOGY AND ANALYTICAL MODELS USED ................................................... 68 

1 

CONSULTATION ACTIVITIES ....................................................................................................... 68 

1.1 

Public consultation ........................................................................................... 68 

1.1.1  Targeted consultation ................................................................................... 68 

1.2 

1.3 

Expert study ...................................................................................................... 69 

Other data sources ............................................................................................ 70 

2 

KNOWN LIMITATIONS AND MITIGATING MEASURES OF THE EVALUATION ................. 70 

2.1 

2.2 

2.3 

Limitations in data quality ................................................................................ 70 

Limitations in the study: Benchmark methodologies ....................................... 70 

Limitations in the study: assessment of effectiveness, efficiency and coherence 
 .......................................................................................................................... 71 

3  METHOD OF THE EVALUATION .................................................................................................. 72 

ANNEX III. EVALUATION MATRIX ....................................................................................................... 73 

ANNEX IV. OVERVIEW OF BENEFITS AND COSTS ........................................................................... 75 

ANNEX V. SYNOPSIS REPORT ............................................................................................................... 82 

1 

CALL FOR EVIDENCE ..................................................................................................................... 82 

1.1 

1.2 

Overview of respondents of the call for evidence ............................................ 82 

Summary of key messages ............................................................................... 82 

2 

PUBLIC CONSULTATION ............................................................................................................... 83 

2.1 

2.2 

Overview of respondents of the public consultation ........................................ 83 

Summary of key messages ............................................................................... 83 

3 

EXPERT CONSULTATION .............................................................................................................. 85 

3.1 

Synopsis of the key messages........................................................................... 85 

ANNEX  VI.  CASE  PRACTICE  PRIOR  TO  2000  AND  COMPARISON  OF  GUARANTEE 

NOTICE OF 2000 AND 2008 ............................................................................................................ 89 

2 

 
 
 
 
 
Term 

Definition 

GLOSSARY 

Adverse selection  Adverse selection  refers  to  a situation when  the  quality  of products 
that are traded in a market degrades due to the fact that the quality of 
the  product  is  not  observable  by  the  buyers  (“lemons  problem”). 
Since  buyers  cannot  distinguish  higher  quality  items  from  lower 
ones,  the  market  price  reflects  the  average  quality  of  products  for 
sale. Faced with such prices, sellers of high quality products drop out 
of the market, which lowers the average quality – and the price – of 
the products sold. In credit markets, adverse selection may result in 
“credit  rationing”,  where  lenders  may  not  want  to  provide  any 
funding  to  a  certain  category  of  borrowers,  even  if  the  latter  are 
willing  to  pay  high  interest  rates.  This  extreme  form  of  adverse 
selection  can  be  overcome  by  the  provision  of  guarantees  or 
collateral  requirements.  Thus,  from  the  point  of  view  of  national 
authorities, a certain degree of adverse selection may be desirable if 
this  results  in  the  provision  of  funding  to  targeted,  albeit  high-risk, 
firms that would not received it otherwise. 

Aid element 

Monetary size of the selective advantage in a State aid measure. 

Aided measures  Measures that involve an element of aid. 

Borrowers in 
financial 
difficulty 

The  definition  of  financial  difficulty  is  set  out  in  section  2.1  of  the 
Community  guidelines  on  State  aid  for  rescuing  and  restructuring 
firms in difficulty (OJ C 244, 1.10.2004, p. 2). In broad terms, a firm 
must be defined by Member States as facing financial difficulties if it 
is  unable  to  stem  losses  either  through  its  own  resources  or  funds 
from its shareholders or creditors, which would, in the absence of a 
public intervention, condemn it to go out of business.  

BRRD 

CDS 

Bank  Recovery  and  Resolution  Directive  (Directive  2014/59/EU  of 
the  European  Parliament  and  of  the  Council  of  15  May  2014 
establishing  a  framework  for  the  recovery  and  resolution  of  credit 
institutions  and  investment  firms  and  amending  Council  Directive 
82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC, 
and 
2005/56/EC, 
2013/36/EU,  and  Regulations  (EU)  No  1093/2010  and  (EU)  No 
648/2012, of the European Parliament and of the Council, OJ L 173, 
12.6.2014, p. 190-348.) 

2011/35/EU, 

2007/36/EC, 

2012/30/EU 

Credit  default  swap  (CDS)  is  a  bilateral  contract  between  two 
parties, where one party (‘protection buyer’) agrees to make periodic 
payments  to  its  counterpart  (‘protection  seller’)  in  exchange  for 
compensation in the event of the default of a third party (‘debtor’) on 
its debt obligations.  

3 

 
 
 
 
 
 
 
 
Comparable 
market 
transactions 

Comparable non-
guaranteed loans 

Competition 
distortions 

CRD 

Credit rationing 

In  the  absence  of  specific  market  information  on  a  given  debt 
transaction, the debt instrument's compliance with market conditions 
may  be  established  on  the  basis  of  a  comparison  with  comparable 
market  transactions  (that  is  to  say  through  benchmarking).  In  the 
case  of  loans  and  guarantees,  information  on  the  financing  costs  of 
the  undertaking  may,  for  example,  be  obtained  from  other  (recent) 
loans  taken  by  the  undertaking  in  question,  from  yields  on  bonds 
issued by the undertaking or from credit default swap spreads on that 
undertaking.  Comparable  market  transactions  may  also  be  similar 
loan or guarantee transactions undertaken by a sample of comparator 
companies,  bonds  issued  by  a  sample  of  comparator  companies  or 
credit default swap spreads on a sample of comparator companies, as 
described in point 111 of the Notice on the Notion of Aid. 

In the  case of guarantees,  if no corresponding price benchmark can 
be  found  on  the  financial  markets,  the  total  financing  cost  of  the 
guaranteed  loan,  including  the  interest  rate  of  the  loan  and  the 
guarantee  premium,  should  be  compared  to  the  market  price  of  a 
similar non-guaranteed loan, as described in point 111 of the Notice 
on the Notion of Aid. 

In the State aid context, competition distortions are generally found 
to exist when the State grants a financial advantage to an undertaking 
in  a  liberalised  sector  where  there  is,  or  could  be,  competition  (see 
Section 6.2. of the Notice on the Notion of Aid) 

Capital  Requirements  Directive  (Directive  2013/36/EU  of  the 
European Parliament and of the Council of 26 June 2013 on access 
to the activity of credit institutions and the prudential supervision of 
credit 
investment  firms,  amending  Directive 
2002/87/EC  and  repealing  Directives  2006/48/EC  and  2006/49/EC, 
OJ L 176, 27.6.2013, p. 338–436) 

institutions  and 

Credit rationing refers to a situation in which lenders are unwilling to 
provide credit to borrowers at the prevailing market interest rates. In 
real world situations, credit rationing also arises in situations where 
the lender would only agree to provide the funding with substantial 
amount of collateral or guarantees. 

Crowding out 

Crowding out refers to a situation where the public supply of a good 
or  services  replaces  the  supply  of  the  same  good  or  services  that 
would  have  been  provided  by  market  operators,  typically  on  the 
grounds that the public supply is offered at below market terms. 

CRR 

Capital Requirements Regulation (Regulation (EU) No 575/2013 of 
the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential  requirements  for  credit  institutions  and  investment  firms 
and amending Regulation (EU) No 648/2012, OJ L 176, 27.6.2013, 
p. 1–337.) 

4 

 
 
 
 
 
 
 
 
de minimis 
Regulation 

Commission  Regulation  (EU)  No  1407/2013  of  18  December  2013 
on  the  application  of  Articles  107  and  108  of  the  Treaty  on  the 
Functioning  of  the  European  Union  to  de  minimis  aid,  OJ  L  352, 
24.12.2013, p. 1–8. 

DG Competition  Commission Directorate-General for Competition 

EAPB 

ECB 

Effective interest 
rate (EIR) 
safeguard 

European Association of Public Banks 

European Central Bank 

The  EIR  safeguard  aims  to  introduce  a  floor  for  the  implied 
guarantee  premium  from  the  interest  rate  charged  by  the  lender  on 
the  guaranteed  loan.  The  calculations  for  the  floor  rely  on  a 
theoretical  no-arbitrage  equilibrium  condition  whereby  a  lender 
would  be  indifferent  between  being  exposed  to  pure  credit  risks 
arising from (a) a guaranteed loan; and (b) a mixed portfolio of credit 
default swap (CDS) exposures to both the borrower and the Member 
State providing the guarantee. The mixed portfolio will be composed 
to ensure that the risks borne by the lender under option (b) would be 
equivalent to those under option (a).  

EIR 

Effective Interest Rate 

External Credit 
Assessment 
Institution 
(ECAI) 

Credit  rating  agencies  that  are  registered  or  certified  in  accordance 
with  Regulation  1060/2009  on  credit  rating  agencies  or  a  central 
bank issuing credit ratings which are exempt from the application of 
Regulation 1060/2009. 

FCG 

GBER 

Italian Guarantee Fund 

General  Block  Exemption  Regulation 
(EU)  No 
651/2014  declaring  certain  categories  of  aid  compatible  with  the 
internal market in application of Articles 107 and 108 of the Treaty.) 

(Regulation 

GFDD 

Global Financial Development Database 

Gross grant 
equivalent 

Gross  grant  equivalent  measures  the  aid  element,  discounting  the 
amount of aid provided by an aided measure through its lifetime and 
resulting  in  a  present  value  of  what  that  aid  would  amount  to  if 
provided in the form of a grant.  

5 

 
 
 
 
 
 
 
 
 
 
 
 
Guarantee 
measure 

A  guarantee  is  a  financial  obligation  in  which  a  third  party  is 
contractually obliged to cover a proportion of the debt obligations of 
a borrower in  the event  the latter defaults. Although  guarantees  are 
usually  associated  with  a  loan,  other  financial  obligations,  such  as 
bonds,  may  also  be  covered  by  a  guarantee.  A  guarantee  measure 
may  refer  to  an  individual  guarantee  (i.e.  on  a  single  financial 
obligation)  or  a  guarantee  scheme  (i.e.  guarantees  provided  on 
financial obligations of a number of borrowers). 

Guarantee Notice  Commission  Notice on the application of Articles 87 and 88 of the 
EC  Treaty  to  State  aid  in  the  form  of  guarantees,  OJ  C  155, 
20.6.2008, p. 10-22. 

Guarantee 
schemes 

Guarantee  measures  involving  guarantees  provided  to  a  broader  set 
of undertakings. 

HHI 

IAS 39 

IFRS 9 

Individual 
guarantees 
Internal Ratings 
Based Approach 
(IRB Approach) 
(A-IRB and F-
IRB) 

ISSG 

LGD 

Market 
conformity 

Herfindahl-Hirschmann Index 

International Accounting Standard 39 

International Financial Reporting Standards 9 

Guarantee measures involving guarantees to individual undertakings. 

Denotes  a  rating-based  approach  based  on  internal  models,  as 
provided  for 
in  Regulation  575/2013  (Capital  Requirements 
Regulation). In the Advanced IRB approach (A-IRB Approach), the 
credit institutions use own estimates of loss given defaults (LGD) as 
model inputs. In the foundational IRB approach (F-IRB Approach), a 
credit  institution  uses  supervisory  LGDs  and  conversion  factors  as 
model inputs. 

Inter-service steering group 

Loss-given-default 

Market conformity means ‘in line with market terms’, i.e. terms that 
would be granted by a profit-oriented market  economy  operators in 
the same circumstances and under normal market conditions, for the 
same company, bearing the same risk. This comparison with market 
operators  is  called  the  ‘market  economy  investor  principle’  and  is 
used  by  Union  courts  to  determine  whether  a  public  body’s 
investment or guarantee leads to the granting of an advantage, one of 
the conditions of State aid. For more details, see Section 4.2. of the 
Notice on the Notion of Aid. 

6 

 
 
 
 
 
 
 
 
 
 
 
 
MEO Test 

Minimum 
Premium Rate 

Moral hazard 

Market Economy Operator Test, which is described in section 4.2 of 
the Notice on the Notion of Aid. More specifically, the MEO test is a 
tool  to  assess  whether  a  public  intervention  constitutes  State  aid 
under  EU 
the  State’s  actions  are 
remunerated at terms that are comparable to what a private investor 
would accept under normal market conditions. If the State’s actions 
are  deemed  to  be  market  conform  following  the  application  of  the 
MEO test, then the intervention is considered to be free of aid.  

law. It  examines  whether 

A  single  credit  risk  element  for  the  calculation  of  export  credit 
subsidies  and  guarantees.  Article  21  of  the  OECD's  Export  Credit 
Arrangement foresees the identification of a common element, or the 
so-called  “Minimum  Premium  Rate”,  which  is  to  be  applicable  for 
both  market  conform 
rate  and  guarantee  premium 
calculations. 

interest 

In  the  literal  sense  of  the  term,  moral  hazard  refers  to  the  adverse 
effects  (i.e. greater risk-taking) of having  an insurance coverage on 
the  behaviour  of  the  covered  party.  More  generally,  moral  hazard 
arises  in  situations  where  the  actions  of  one  party  to  a  contract  are 
not  observable  or  verifiable  by  the  other  party  to  the  contract  (i.e. 
“hidden  action”  problem).  For  the  purposes  of  this  report,  moral 
hazard  refers  to  situations  where  the  provision  of  the  public 
guarantee  may  undermine  the  screening,  monitoring  and  risk 
management efforts of the lender. The extent of these adverse effects 
are inversely related to the guarantee coverage ratio. In other words, 
moral  hazard  would  be  at  a  maximum  if  the  guarantee  measure 
provides a 100% coverage of the risks of the lender. 

No-aid measures  Measures that do not involve an element of aid. 

No-arbitrage 
condition 

Non-performing 
loan (NPL) 

The  condition  states  that  there  should  be  no  opportunities  for  a 
market operator to generate profits by exploiting price differences in 
different markets or at different times.  
A loan becomes non-performing when there are indications that the 
borrower is unlikely to repay the loan, or if more than 90 days have 
passed without the borrower paying the agreed instalments.  

Notice on the 
Notion of Aid 

Commission  Notice  on  the  notion  of  State  aid  as  referred  to  in 
Article 107(1) TFEU, OJ C 262, 19.7.2016, p. 1–50. 

Notional or 
nominal amount 
of debt 
OECD’s Export 
Credit 
Arrangement  

The  amount  that  the  debtor  owes  to  the  creditor  at  the  time  of 
reference (i.e. the outstanding debt). 

OECD  Arrangement  on  Officially  Supported  Export  Credits  is an 
agreement  among  participating  countries  to  establish  a  framework 
for export credit support measures that are backed by the State.  

7 

 
 
 
 
 
 
 
 
 
Pari passu 
transaction 

As detailed in points 86 to 88 of the Notice on the Notion of Aid, a 
transaction  can  be  deemed  to  be  a  pari  passu  transaction  when  the 
State  and  private  operators  have  comparable  starting  positions  (e.g. 
same  prior  exposures  to  the  borrower),  enter  into  a  guarantee 
agreement  with  the borrower  at  the same time,  when the terms and 
conditions of the two guarantees are the same, and when the private 
guarantee is not merely symbolic or marginal. 

Pass-through 

Pass-through  refers  to  a  situation  where  an  entity  (e.g.  a  financial 
intermediary)  that  receives  an  advantage  (e.g.  a  guarantee)  fully 
passes  that  advantage  to  the  “ultimate  beneficiary”  (e.g.  the 
borrower). 

Reference Rate 
Communication 

Communication from the Commission on the revision of the method 
for setting the reference and discount rates, OJ C 14, 19.1.2008, p. 6–
9. 

Risk based – 
Effective interest 
rate – CDS 
methodology 

A combination of three calculation methods, whereby the guarantee 
premium  is  first  determined  by  a  risk-based  methodology,  which  is 
then  subject  to  floors  as  determined  by  effective  interest  rate 
methodology  and/or market  benchmarks  based on the credit default 
swap. 

Risk weighted 
assets (RWA) 

SAFE 

Safe harbour 
methodology 

Safe harbour 
premium 

Sample of 
comparable 
undertakings 
Section 6 data 

A  measure  of  the  riskiness  of  a  financial  institution’s  exposures  to 
particular  counterparties,  whereby  the  total  nominal  value  of  the 
asset  is  weighted  by  a  factor,  i.e.  risk  weight,  that  reflects  the 
riskiness of the exposure.  
Survey on the Access to Finance of Enterprises is conducted by the 
Commission  and  the  ECB  since  2008  on  a  quarterly  basis.  SAFE 
database  provides  firm-level  data  on  the  financial  situation  of 
enterprises,  the  need  for  and  availability  of  external  financing,  and 
the  firm’s  expectations  about  prices,  costs,  and  employment.  The 
survey  results  are  broken  down  by  firm  size,  sector,  country,  firm 
age, financial autonomy and ownership. 
A methodology based on the fixed guarantee premiums for SMEs as 
described in section 3.3. of the Guarantee Notice. 

A guarantee premium described under Section 3.3 of the Notice, that 
is  considered  sufficiently  high  to  avoid  a  (material)  selective 
advantage to the guarantee buyer. 

Sample  of  comparator  companies  as  described  in  point  111  of  the 
Notice on the Notion of Aid. 

The  analysis  based  on  reports  submitted  by  Member  States  in  line 
with Section 6 of the Guarantee Notice. 

8 

 
 
 
 
 
 
 
 
 
Selective 
advantage 

In the State aid context, a public measure is selective if it grants an 
advantage  to  certain  undertakings,  categories  of  undertakings  or  to 
certain  economic  sectors  (for  more  details,  see  Section  4.1  of  the 
Notice on the Notion of Aid). 

Self-financing 
guarantee scheme 

The  self-financing  nature  of  the  scheme  and  the  proper  risk 
orientation  are  viewed  by  the  Commission  as  indications  that  the 
guarantee  premiums  charged  under  the  scheme  are  in  line  with 
market  prices,  as described in  points  (d) to  (f) of section 3.4 of the 
Guarantee Notice. 

SMEs 

SRMR 

SSM 

Study 

SWD 

TFEU 

Small  and  medium-sized  enterprises,  as  defined  in  the  Commission 
Recommendation of 6 May 2003 concerning the definition of micro, 
small and medium-sized enterprises. 

Single Resolution  Mechanism Regulation (Regulation 806/2014/EU 
of  the  European  Parliament  and  of  the  Council  of  15  July  2014 
establishing uniform rules and a uniform procedure for the resolution 
of credit institutions and certain  investment  firms in  the framework 
of a Single Resolution Mechanism and a Single Resolution Fund, OJ 
L 225, 30.7.2014, p. 1–90). 

Single Supervisory Mechanism. 

The external  study commissioned by the Commission  services with 
the  specific  aims  to  assess  the  effectiveness,  efficiency,  and 
coherence  of  the  Guarantee  Notice  over  the  evaluation  period.  The 
Study was conducted by Prometeia and its academic partners. It was 
carried out in the course of 2024. The Study is ‘backward-looking’, 
focusing on the period 2010 to 2023.  

Staff Working Document. 

Treaty  on  the  Functioning  of  the  European  Union,  OJ  C  326, 
26.10.2012, p. 47–390. 

Zombie firms 

A  firm  which  fulfils  cumulatively  the  following  characteristics  for 
two  consecutive  years:  (i)  a  negative  return  on  assets;  (ii)  negative 
net  investments;  and  (iii)  a  low  debt  servicing  capacity,  which  is 
characterised as net earnings over financial debt.  

9 

 
 
 
 
 
 
 
 
 
 
 
1 

INTRODUCTION 

This Staff Working Document (“SWD”) summarises the results of the evaluation of the 
Guarantee Notice, launched in August 2022.  

1.1  Background 

The Guarantee Notice was first adopted in 20001 and last revised in 20082. It sets out the 
Commission’s  approach  to  State  aid  granted  in  the  form  of  guarantees  and  provides 
detailed guidance to Member States on the principles on which the Commission intends 
to base its interpretation of Articles 107 and 108 of the Treaty on the Functioning of the 
European Union (TFEU)3 in the context of State guarantees.  

A  typical  guarantee  measure  involves  three  parties,  where  the  guarantor  undertakes  to 
pay  the  lender’s  credit  losses  if  the  borrower  fails  to  meet  its  payment  obligations 
towards the lender and defaults on its loan. In this respect, credit guarantees transfer the 
risks that are typically borne by the lender to the guarantor. When the guarantee covers 
less  than  the  full  amount  of  credit  losses,  the  ‘guarantee  coverage’  is  partial  since  the 
lender also bears some of the losses. In addition to credit guarantees, guarantees may also 
cover the losses of other guarantors (which are often referred to as ‘counter-guarantees’), 
the losses of debt investors, or the losses of an exporter if a foreign buyer does not pay 
for  goods  (‘export  guarantees’).4  However,  given  their  predominance,  the  term 
“guarantee” will refer to credit guarantees in the rest of the text, unless otherwise noted. 

Public  guarantee  measures  may  be  put  in  place  involving  no  element  of  aid  (‘no-aid 
measures’), implying that the guarantor, or the State, receives a remuneration in line with 
what  a  market  operator  would  accept  in  exchange  for  the  guarantees  it  has  provided. 
However,  guarantee  measures  may  also  involve  a  certain  amount  of  aid  (‘aided 
measures’).  The  aim  of  these  aided  measures  is  to  enable  borrowers  to  obtain  funding 
either at lower interest rates than what would otherwise be available on the market or in 
situations  where  no  funding  would  be  available  at  any  interest  rate.  The  Commission’s 
assessments of aided measures focus primarily on the existence and compatibility of aid 
at the level of the borrower. However, aided guarantee measures may also entail aid to 
the  lender,  where  the  advantages  that  a  lender  obtains  from  the  risk  transfer  are  not 
‘passed through’ to the borrower in full.  

Section 3.4 of the Guarantee Notice sets out the qualitative criteria and conditions for the 
calculation of market conform guarantee premiums. While the calculation methodologies 
that take these criteria and conditions into account tend to be complex, section 3.3 of the 
Guarantee Notice also offers a simpler alternative for small and medium-sized enterprises 
(SMEs)  i.e.,  the  so-called  “safe  harbour  premiums”.  In  addition  to  the  calculation  of 
market  conform  premiums,  section  4  of  the  Guarantee  Notice  also  sets  outs  conditions 
for  the  quantification  of  the  aid  amount  (or  the  ‘gross  grant  equivalent’)  for  aided 
measures, which are defined as the difference between the market conform premium and 
the  guarantee  premium  actually  paid.  This  element  of  the  Guarantee  Notice  is  also 

1   Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form 

of guarantees, OJ C 71, 11.3.2000, p. 14–18. 

2   Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form 

of guarantees, OJ C 155, 20.6.2008, p. 10-22. 

3   Treaty on the Functioning of the European Union, OJ C 326, 26.10.2012, p. 47–390. 
4   The Guarantee Notice is not applicable to export guarantees.  

10 

 
 
referenced  for  the  calculation  of  the  aid  amount  under  the  General  Block  Exemption 
Regulation (GBER)5 and the de minimis Regulation6. Lastly, section 2.3 of the Guarantee 
Notice  provides  examples  where  aid  to  the  lender  may  be  present,  including  for  cases 
when the State guarantee is provided for an existing loan without the terms of this loan or 
financial  obligation  being  adjusted,  or  when  the  guaranteed  loan  is  used  to  pay  back 
another, non-guaranteed loan. 

In  August  2022,  the  Commission  launched  the  process  of  evaluating  the  Guarantee 
Notice, in particular its Sections 2.3 (on how aid to the lender can be avoided), 3.3 (safe 
harbour premiums for aid-free guarantees to SMEs) and 3.4 (methodologies to establish 
aid-free guarantee schemes). 

1.2  Purpose of the evaluation 

The  purpose  of  this  evaluation  was  to  check  whether  the  Notice  remained  ‘fit  for 
purpose’  and  to  identify  any  shortcomings.  The Guarantee  Notice  has  not  been  revised 
since  2008  and  does  not  contain  any  fixed  review  clause  or  expiry  date.  Furthermore, 
there  was  a  growing  need  to  evaluate  the  Guarantee  Notice  due  to  changing  market 
conditions  since  the  global  financial  crisis  that  erupted  in  2008,  changing  capital 
requirements and risk assessment methodologies that have been put in place, and of the 
growing number of approved guarantee methodologies.7 

Against this background, the evaluation analyses how the Notice has functioned since its 
adoption in 2008 and to what extent it achieved its main objectives, which comprise of: 

i. 

ii. 

Providing  guidance  on  market-compliant  guarantee  premiums  to  rule  out  the 
presence of State aid and prevent distortions of competition; 

increasing  legal  certainty  for  stakeholders  and  increasing  transparency  on  the 
Commission’s  policy,  so  that  its  decisions  are  predictable  and  ensure  equal 
treatment; and, 

iii. 

introducing  easy-to-apply  rules,  especially  for  SMEs  to  improve  their  access  to 
finance. 

The  evaluation  will  furthermore  inform  the  Commission  about  the  necessity  for  a 
revision of the Notice.  

The  SWD  reflects  the  findings  and  views  of  the  Commission’s  staff  and  does  not 
represent the formal position of the Commission itself. It verifies the extent to which the 
evaluation  criteria  –  effectiveness,  efficiency,  value  added,  relevance  and  policy 
coherence  –  have  been  met  and  summarises  those  findings.  Thus,  the  SWD  does  not 
make  any  policy  proposals  or  prejudge  the  final  nature  or  the  content  of  any  act  or 
decision by the Commission.  

5   Regulation (EU) No 651/2014 declaring certain categories of aid compatible with the internal market 

in application of Articles 107 and 108 of the Treaty.  

6   Regulation  (EU)  No  1407/2013  on  the  application  of  Articles  107  and  108  of  the  Treaty  on  the 

Functioning of the European Union to de minimis aid.  

7   See  section  3 for further details on the evolution of market conditions, regulatory developments and 

insights from recent case practice.  

11 

 
 
1.3  Scope of the evaluation 

The  evaluation  covers  only  the  Notice  and  its  implementation  through  approved 
guarantee methodologies.  It  does  not  cover any other secondary  State aid  legislation or 
the broader financial services legislation under which lenders and other relevant financial 
institutions operate. However, for the purposes of the coherence analysis in section 4.2, 
the evaluation does assess whether the Guarantee Notice is consistent in relation to other 
State aid legislation and guidance.  

The public guarantee measures cover both individual guarantees and guarantee schemes 
on commercial loans with an aid element or without an aid element that were notified to 
the  Commission,  extended  to  all  types  of  companies,  including  SMEs.  The  evaluation 
period extends from the entry into force of the Notice in 2008 until the present day while 
the  external  study  (see  also  section  1.5)  covers  data  on  guarantee  measures  over  the 
period 2010-2022. In terms of geographical scope, the evaluation covers the 27 Member 
States. 

Annex  III  provides  more  details  on  the  evaluation  matrix,  including  the  questions  that 
this evaluation aims at addressing.     

1.4  Evaluation criteria  

The  evaluation  assesses  five  main  criteria,  namely  the  effectiveness,  efficiency, 
coherence, relevance, and EU added value of the Guarantee Notice: 

-  Effectiveness: Extent to which the Guarantee Notice contributed to determining 
market-compliant  guarantee  premiums,  limiting  distortion  of  competition  in 
product and credit markets as well as between financial intermediaries; 

-  Efficiency: Extent to which the requirements of the Guarantee Notice have been 
proportionate to the cost of implementing guarantee schemes and helped simplify 
the 
implementation  of  schemes,  especially  for  small  and  medium-sized 
enterprises;  

-  Coherence: Extent to which the Guarantee Notice is internally coherent (i.e. how 
much do the rules in the Guarantee Notice complement each other) and externally 
coherent (i.e. how consistent is the Notice with other EU legislation); 

-  Relevance:  Extent  to  which  the  Guarantee  Notice  has  remained  relevant  over 
time amidst the macroeconomic, market and regulatory developments since 2008; 
and, 

-  EU added value: Extent to which the Guarantee Notice has provided added value 

compared to a situation without such guidance. 

1.5  Methodology 

The evaluation was launched by a call for evidence in August 2022 and was based on the 
following elements: 

-  A public consultation conducted between 29 August 2022 and 19 December 2022 

with high-level questions addressed to the general public. 

12 

 
-  A  targeted  consultation  conducted  between  29  August  2022  and  19  December 
2022  in  the  form  of  a  request  for  information  to  Member  States  and  a  targeted 
questionnaire. The targeted questionnaire aimed at selected stakeholders directly 
involved  in  or  affected  by  the  provision  of  State  guarantees  or  with  relevant 
expertise in the field of credit risk, featuring questions of a more technical nature 
than the public consultation. 

-  A  request  for  information  (‘REQ’)  was  launched  alongside  the  targeted 
consultation  to  gather  the  necessary  data  on  existing  State  guarantee  measures. 
The aim was to use the information to assess the effectiveness of those measures. 
The request for information was submitted to Member States via their Permanent 
Representations  to  the  EU,  and  they  were  able  to  reply  in  all  24  official  EU 
languages. 

-  An  external  study  (‘the  study’)  undertaken  by  a  team  of  external  independent 
experts (‘independent experts’) in the course of 2024 and focussed on three areas: 
(i)  characteristics  of  guarantee  measures  and  identification  of  existing  types  of 
methodologies  based  on  data  collection  on  past/present  measures;  (ii) 
development  of  benchmark  methodologies  based  on  the  literature  review  on 
pricing  of  guarantees;  and  (iii)  quantitative  and  qualitative  assessment  of  the 
effectiveness, efficiency and coherence of the Guarantee Notice by analysing the 
information on existing pricing methodologies put in place by the Member States 
and  the  developed  benchmark  methodologies.  The  Commission’s  services  were 
closely involved in defining the study’s research questions and methodology, had 
regular  follow-up  meetings  with  the  independent  experts,  thoroughly  reviewed 
the study’s findings and challenged them to ensure their robustness. 

-  Other  sources  of  information  such  as  the  Commission’s  case  practice  or  annual 
reports by Member States based on Section 6 of the Guarantee Notice. For further 
information on the methodology, see Annex II. 

In the evaluation process, a comprehensive dataset was constructed with the help of the 
independent  experts  to  analyse  the  Guarantee  Notice’s  application  and  pricing 
methodologies.  The  comprehensive  dataset  includes  several  samples  developed  for  the 
purpose of the external study, which are as follows8: 

-  Sample  A.  Provides  detailed  information  on  a  total  of  283  guarantee  measures 
between  2010  and  2022,  based  on  information  obtained  from  the  REQ,  DG 
Competition’s State Aid Register (SAR)  and interactions of independent experts 
with guarantee granting and administering bodies of specific Member States. 

-  Sample  B1.  Provides  data  on  the  parametrisation  details  for  the  pricing 
methodologies contained in Sample A, based on similar information sources.  

-  Sample  B2.  Provides  data  on  the  parametrisation  details  for  benchmarks 
developed  by  the  independent  experts,  based  on  publicly  available  market 
indicators.  

8   See Annex II for more details.  

13 

 
 
-  Sample  C.  Provides  the  data  used  for  the  empirical  estimations  referred  to  in 
section  4,  covering  from  2010  to  2022.  The  data  sources  a  number  of  publicly-
available and paid information sources (see Annex II for more details).  

2  WHAT WAS THE EXPECTED OUTCOME OF THE INTERVENTION? 

This  section  explains  the  elements  of  the  intervention,  from  addressing  the  identified 
needs to the expected outcomes and the intended results. The intervention logic describes 
the elements of the intervention, which is further elaborated in Figure 1. 

Figure 1: Intervention logic of the Guarantee Notice 

2.1  The need for a Guarantee Notice 

The  Guarantee  Notice  responded  to  a  need  for  a  clear  and  predictable  framework  for 
granting State guarantees by providing guidance on how to achieve market conformity of 
guarantee premiums. Establishing market conform terms is essential not only to establish 
no-aid  measures,  but  also  to  calculate  the  amount  of  aid  a  Member  State  may  grant  in 
aided-measures.  If  provided  at  below  market  terms,  State  guarantees  may  enable  a 
borrower to obtain more advantageous financial terms for a loan than those available on 
financial  markets,  which  may  be  considered  as  State  aid  within  the  meaning  of  Article 
107(1) of the TFEU. In addition to market conformity, the Guarantee Notice is also used 
to  minimise  a  potentially  distortive  effect  of  State  guarantees  through  the  provision  of 
selective advantages to the lender. Putting these elements together, the Guarantee Notice 
addresses  the  need  for  a  clear  and  predicable  framework  by  establishing  conditions  for 
determining market-conform guarantee premiums, calculating the aid element and ruling 
out aid to unintended beneficiaries. 

In  general  terms,  a  guarantee  premium  is  deemed  by  the  Commission  to  be  market 
conform if it is in line with what a market operator would expect as remuneration for a 
similar  transaction  under  normal  market  conditions.  The  specific  conditions  for  the  so-

14 

EffectsNeedsA clear and predictable framework for granting State guarantees on loansResultsGuarantee premia reflect genuine risks coveredPredicable and transparent premium settingImpactsPrevent distortions in the real economy and financial marketsMaintainlevel playing fieldExternal factorsMacroeconomy, creditmarketsentiment, MemberStates’use of financialinstrumentsOtherEU policiesState aidlegislation, Notion of Aid, Reference Rate Communication.EU policyintervention underevaluationObjectivesIncrease legalcertaintyforstakeholdersEasy-to-applyrulesforSMEsInputsGuidelinesto determinemarketpremiums and to calculatethe aidamountSafeharbourpremiums for SMEsActivitiesMemberStates set-upguaranteemethodologies, subjectto Commission approvalMemberStates provideaid-free and aidedguaranteesOutputsAidmeasuresusingState guaranteesAid-free public guaranteesState guaranteesforSMEs based on transparent and simplified procedure 
 
called ‘Market Economy Operator Test’ or the ‘MEO Test’ are described in section 4.2 
of  the  Commission  Notice  on  the  notion  of  State  aid  as  referred  to  in  Article  107(1) 
TFEU (the ‘Notice on the Notion of Aid’).9   

The  Commission’s  market  conformity  assessments  typically  focus  on  whether  the 
transaction's  compliance  with  market  conditions  can  be  directly  established  through 
transaction-specific  market  data  or,  in  cases  where  such  transactions  are  absent  or  the 
data is unavailable, whether other methods could be used. More specifically, the Notice 
on  the  Notion  of  Aid  sets  the  following  ranking  for  the  determination  of  market 
conformity of a guarantee measure:  

-  The  most  direct  way  to  rule  out  aid  is  when  the  remuneration  that  the  State 
obtains  in  return  for  a  guarantee  is  equivalent  to  the  guarantee  premium  that  is 
charged by a private operator, or a private guarantor, in a pari passu transaction, 
where  the  private  guarantee  is  on  the  same  exposure  and  subject  to  the  specific 
conditions described in points 86 to 88 of the Notice on the Notion of Aid.10  

-  When  a  pari  passu  transaction  does  not  exist,  market  conformity  may  also  be 
established  by  market  benchmarks  on  “comparable  market  transactions”  for  the 
same undertaking or on “a sample of comparable undertakings”, as described in 
point 111 of the Notice on the Notion of Aid. In the absence of any comparable 
transactions, the interest rate on the guaranteed loan, including the guarantee fee, 
should be compared to the market price of “comparable non-guaranteed loans”. 

-  Where no acceptable market benchmarks exist, the Member States may develop 
their own methodologies to  calculate their own  market  proxies. As described in 
point 114 of the Notice on the Notion of Aid, the guidance for the calculation of 
the market proxies is provided by the Guarantee Notice.11 

Due to data limitations and the lack of observable and comparable transactions, most of 
the  guarantee  measure  assessments  conducted  by  the  Commission  focus  on  the  third 
option, the development of market proxies. By providing the sufficient conditions to rule 
out  the  presence  of  aid,  the  Guarantee  Notice  also  binds  the  Commission  in  its 
assessments of guarantee measures.12 

As  noted  in  point  109  of  the  Notice  on  the  Notion  of  Aid,  the  assessment  of  State 
guarantee measures requires an assessment of the “triangular situation involving a public 
entity  as  a  guarantor,  a  borrower  and  a  lender”.  Under  point  116  of  the  Notice  on  the 

9   OJ C 262, 19.7.2016, p. 1–50. 
10   As detailed in points 86 to 88 of the Notice on the Notion of Aid, a transaction can be deemed to be a 
pari  passu  transaction  when  the  State  and  private  operators  have  comparable  starting  positions  (e.g. 
same prior exposures to the borrower), enter into a guarantee agreement with the borrower at the same 
time,  when  the  terms  and  conditions  of  the  two  guarantees  are  the  same,  and  when  the  private 
guarantee is not merely symbolic or marginal. 

11   One  valid question is why the Commission may be involved in the assessment of a no-aid measure. 
Indeed,  under  Article  108(3)  TFEU,  Member  States  are  only  required  to  notify  the  Commission  for 
measures involving aid. However, the Commission is also often involved in the assessment of no-aid 
measures when Member States notify such measures for a variety reasons, most notably to obtain legal 
certainty.  

12   The  binding  nature  of  the  Guarantee  Notice  for  determining  the  sufficient  conditions  to rule  out  aid 
was  confirmed  by  the  decision  of  the  Court  of  Justice  of  the  European  Union  (First  Chamber), 
C-211/20 P, Valencia Club de Fútbol v Commission. 

15 

 
 
Notion of Aid, all “foreseeable effects” of the measure “should be examined from an ex 
ante point  of  view”. Such  an  examination  would  therefore  consider  not  only  the  direct 
advantages to the borrower but also unintended advantages to the lender.13 A lender may 
obtain such indirect  advantages by holding onto,  or not  fully  passing-through, the risk-
reduction benefits they obtain through public guarantees, i.e. by not reducing the interest 
rates  sufficiently.  The  possibility  that  a  lender  may  obtain  indirect  advantages  in  the 
context  of  State  guarantees  are  highlighted  in  point  2.3.1  of  the  Guarantee  Notice  that 
describes specific situations by way of examples. Attention is also drawn to the fact that 
“such  aid  might,  in  principle,  constitute  operating  aid,”  which,  in  turn,  could  assist  in 
preserving or restoring the viability, liquidity or solvency of the lender. As a result, such 
aid could qualify as extraordinary public financial support under the Bank Recovery and 
Resolution  Directive  (‘BRRD’)14  and  the  Single  Resolution  Mechanism  Regulation 
(‘SRMR’)15  and  could,  in  principle,  trigger  a  determination  that  the  lender  is  failing  or 
likely  to  fail.  Therefore,  it  is  important  that  any  advantage  channelled  through  lenders 
benefits only the final beneficiaries.  

2.2  The objective of the Guarantee Notice  

Before the Guarantee Notice of 2000 was adopted, Member States had to notify all aided 
guarantee  measures,  while  the  Commission  provided  limited  details  on  its  approach  to 
the assessment of how it would assess the existence of aid in these measures. There was 
thus  a  lack  of  certainty  for  stakeholders  regarding  the  presence  and  amount  of  aid  in 
public guarantees. 

In  1989,  the  Commission  addressed  two  letters16  on  State  guarantees  to  the  Member 
States, pointing out that it would regard all guarantees given by a State as falling within 
the scope of Article 107(1). According to the letters, the Commission would have to be 
notified  of  any  plans  by  Member  States  to  set  up  guarantee  measures,  even  if  these 
measures  were  intended  as  no-aid  measures.  In  1993,  the  Commission  adopted  a 
communication17  which  echoed  these  positions.  Thus,  without  a  notification,  Member 
States did not have any legal certainty on whether the pricing of guarantees provided by 
public bodies or authorities would be considered by the Commission as market-conform. 
In addition, the Member States were provided very little guidance on when a guarantee 
measure  could  be  considered  as  being  free  of  aid.  The  Guarantee  Notice  of  2000  was 

13   The possibility that “an advantage can be conferred on undertakings other than those to which State 
resources are directly transferred (indirect advantage)” is also confirmed in point 115 of the Notice on 
the Notion of Aid. 

14   Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC,  2011/35/EU,  2012/30/EU  and  2013/36/EU,  and  Regulations  (EU)  No  1093/2010  and 
(EU) No 648/2012, of the European Parliament and of the Council, OJ L 173, 12.6.2014, p. 190-348. 
15   Regulation 806/2014/EU of the European Parliament and of the Council of 15 July 2014 establishing 
uniform rules and a uniform procedure for the resolution of credit institutions and certain investment 
firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund, OJ L 225, 
30.7.2014, p. 1–90. 

16   Commission letter to the Member States, SG(89) D/4328 of 5 April 1989 and Commission letter to the 

Member States, SG(89) D/12772 of 12 October 1989.  

17   Commission  Communication  to  the  Member  States  on  the  application  of  Articles  92  and  93  of  the 
EEC  Treaty  and  of  Article  5  of  Commission  Directive  80/723/EEC  to  public  undertakings  in  the 
manufacturing sector (OJ C 307, 13.11.1993, p. 3). 

16 

 
 
adopted  to  address  these  concerns,  outlining  the  specific  conditions  for  excluding  the 
existence of aid as well as distinguishing between aid to the borrower and the lender.  

The Guarantee Notice of 2008 updated the Commission’s approach on State guarantees 
and  gave  more  detailed  guidance  about  the  principles  used  for  the  assessment  while 
retaining  the  content  of  the  Guarantee  Notice  of  2000.  It  introduced  safe-harbour 
guarantee  premiums  for  SMEs  as  an  additional  way  to  establish  market  conform 
premiums in a transparent and predictable way. 

The  objective  of  the  Guarantee  Notice18  of  2008  is  to  provide  Member  States  with 
detailed guidance on the Commission’s approach to its assessments of notified guarantee 
measures  and  to  determine  whether  a  guarantee  constitutes State  aid  according  to  the 
Article 107(1) of the TFEU. For this, the Guarantee Notice sets out conditions to guide 
Member States to establish market conform guarantee premiums and to calculate the aid 
amount,  or  the  gross  grant  equivalent,  contained  in  aided  measures.  By  adopting  the 
Guarantee Notice, the Commission has therefore intended to make its policy in this area 
as transparent as possible, thereby ensuring that its decisions are predictable and ensuring 
a level playing-field among the Member States.  

2.3  The scope of the Guarantee Notice (‘input’) 

Any guarantee granted directly by the State, i.e. by central, regional or local authorities, 
and  any  guarantee  granted  by  undertakings  under  the  dominant  influence  of  public 
authorities  may  constitute  State  aid  under  Article  107(1)  of  the  Treaty.  The  Guarantee 
Notice applies without prejudice to Article 345 TFEU and is thus not aimed at providing 
a preference between public or private ownership. 

Guarantees  are usually associated with  a loan or  other financial obligation, where  risks 
arising from the default of the borrower are transferred to the guarantor. The Guarantee 
Notice not only covers guarantees on loans, but also distinct19 guarantees on other forms 
of  financial  transactions,  such  as  counter-guarantees  provided  to  a  first-level  guarantor 
are also covered. Export credit guarantees are excluded from the scope of the Guarantee 
Notice.  

In  terms  of  the  scope  of  beneficiaries,  the  Guarantee  Notice  covers  both  guarantee 
measures  involving  guarantees  to  individual  undertakings  (“individual  guarantees”)  or 
guarantees  provided  to  a  broader  set  of  undertakings  (“guarantee  schemes”).  The 
Guarantee Notice applies to all economic sectors, including the agriculture, fisheries and 
transport sectors.  

2.4  The description of the Guarantee Notice (‘input’ and activities’) 

As described in point 114 of the Notice on the Notion of Aid, the Guarantee Notice sets 
out  the  sufficient  principles  and  conditions  that  may  be  used  in  the  assessment  of  the 
calculation of market benchmarks for guarantee transactions.  

18   See Annex VI on the case practice of guarantee measures before the adoption of the Guarantee Notice 

in 2000 as well as the key amendments of the 2008 Guarantee Notice. 

19   The Guarantee Notice covers guarantees granted to a distinct, i.e. an identifiable beneficiary, and does 
not cover so-called portfolio guarantees, when the guarantee is not  connected to distinct, identifiable 
beneficiaries. 

17 

 
 
The  Commission  considers  that  there  is  State  aid  to  the  borrower  in  following  specific 
cases where: 

-  The  State  accepts  a  premium  lower  than  the  market  premium,  enabling  the 
borrower to obtain better financial terms for a loan than those normally available 
on the financial markets; 

- 

- 

the State provides guarantees that are not limited in amount or duration; or, 

the State guarantee is not linked to a specific transaction, such as when the State 
guarantees rule out the bankruptcy or insolvency of the borrower.  

Section  2.3.1  of  the  Guarantee  Notice  also  describes  specific  examples  where  the 
Commission would consider aid to be present if the guarantee is provided on an existing 
loan  or  if  the  guaranteed  loan  is  used  to  pay  back  another,  non-guaranteed  loan  to  the 
same credit institution. In these cases, it is possible that the lender may also receive part 
of the aid if no adjustments are made to the terms and conditions applicable to the loan to 
account for the fact that credit risks associated with the default of the borrower have been 
transferred to the State.  

The  Commission  sets  out  in  section  3  of  the  Guarantee  Notice  the  conditions  that  are 
sufficient to rule out the existence of aid. In general terms, if an individual guarantee or a 
guarantee scheme does not bring any advantage to a business, it will not constitute State 
aid.  

To determine whether an advantage is being granted through an individual guarantee or a 
guarantee scheme, the Commission should base its assessment on the ‘market economy 
guarantor  principle’,  which,  as  described  in  section  4.2  of  the  Notice  on  the  Notion  of 
Aid, examines whether the State’s actions are remunerated at terms that are comparable 
to what a private investor would accept under normal market conditions. The Guarantee 
Notice  sets  out  general  conditions  to  determine  whether  this  principle  is  met  for 
guarantee measures.  

Overall,  the  Commission  considers  that  individual  State  guarantees  and  guarantee 
schemes  do  not  constitute  aid  if  the  following  conditions  described  in  section  3.2  (for 
individual guarantees)  and section 3.4 (for guarantee schemes) of the Guarantee Notice 
are met cumulatively: 

a.  The borrower is not in financial difficulty20, as described in point (a) of sections 
3.2  and  3.4  of  the  Guarantee  Notice,  corresponding  to  the  differentiated 
description  of  this  condition  for  individual  guarantees  and  guarantee  schemes, 
respectively; 

b.  the  extent  of  the  guarantee  can  be  properly  measured  and  must  be  linked  to  a 
specific  financial  transaction,  valid  for  a  fixed  amount  and  limited  in  time,  as 
described in point (b) of sections 3.2 and 3.4 of the Guarantee Notice21; 

20   Financial difficulty is defined as in Community guidelines on State aid for rescuing and restructuring 

firms in difficulty, OJ C 244, 1.10.2004, p. 2. 

21   As  an  additional  requirement  applicable  only  for  guarantee  schemes,  the  State  must  publish  the 
eligibility criteria as well as the size, amount and duration of the guarantees, as described in point (g) 
of section 3.4 of the Guarantee Notice. 

18 

 
 
c.  the guarantee does not cover more than 80% of the outstanding loan, as described 

in section 3.2, point (c) and 3.4, point (c) of the Guarantee Notice22; 

d.  the  remuneration  that  the  State  receives  in  exchange  for  the  guarantee  must  be 

commensurate with the risks it assumes, which is described as follows: 

o  For  individual  guarantees  provided  to  a  single  entity,  a  market  conform 
remuneration,  as  described  in  point  (d)  of  section  3.2  of  the  Guarantee 
Notice, must be paid, corresponding to either (i) a comparable benchmark 
that  can  be  found  on  the  financial  markets  or,  (ii)  if  no  such  benchmark 
can  be  found,  the  interest  rate  of  the  loan  and  the  guarantee  premium, 
taking into account the characteristics of the guarantee and the exposure, 
including  amount  and  duration  of  the  transaction,  collateral  provided, 
other economic conditions, and the risk rating of the borrower; 

o  For  guarantee  schemes  provided  to  several  entities,  a  market  conform 
remuneration  has  to,  in  all  likelihood,  remain  “self-financing”,  as 
described in points (d) and (e) of section 3.4 of the Guarantee Notice. In 
addition,  under  point  (f)  of  section  3.4  of  the  Guarantee  Notice,  the 
guarantee premiums must cover the “normal risks associated with granting 
the  guarantee”,  administrative  costs,  and  the  opportunity  cost  of  setting 
aside capital for regulatory purposes for the duration of the guarantee. 

Existing measures that fall within the scope of section 3.2 or section 3.4 of the Guarantee 
Notice,  complying  with  the  conditions  described  above,  will  be  referred  to  as  ‘existing 
risk-based methodologies’ or ‘risk-based methodologies’ in the rest of the text.  

For  SMEs  whose  ratings  are  higher  than  CCC/Caa,  section  3.3  (for  individual 
guarantees) and 3.5 (for guarantee schemes) of the Guarantee Notice also provide the so-
called  ‘safe  harbour  premiums’,  which  serve  as  a  simpler  method  to  set  the  market 
conform  premiums.  These  fixed  premiums  will  be  referred  to  as  ‘existing  safe  harbour 
premiums’ in the rest of the text.  

These fixed premiums are differentiated by the rating of the recipient SMEs. Guarantee 
schemes  for  SMEs  can  also  use  a  single  premium  determined  for  the  whole  scheme  as 
long as the scheme remains self-financing, and the guarantee amount per SME does not 
exceed  EUR  2.5  million,  as  described  under  Section  3.5  of  the  Guarantee  Notice. 
Existing  measures  that  have  been  assessed  in  line  with  these  specifications  will  be 
referred to as ‘existing single premium methodologies’ in the rest of the text.  

For aided measures, the aid amount, or the gross grant equivalent, is measured using the 
guidelines  provided  under  section  4  of  the  Guarantee  Notice.  In  broad  terms,  the  aid 

22   The guarantee coverage limitation of 80% does not apply to guarantees on debt securities, or if a the 
guarantee  aims  to  finance  company  that  is  entrusted  with  a  Service  of  General  Economic  Interest 
(SGEI),  in  compliance  with  Community  rules  such  as  Commission  Decision  2005/842/EC  of  28 
November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public 
service  compensation  granted  to  certain  undertakings  entrusted  with  the  operation  of  services  of 
general economic interest (OJ L 312, 29.11.2005, p. 67), and the Community framework for State aid 
in the form of public service compensation (OJ C 297, 29.11.2005, p.  4). Moreover, a Member State 
may argue that a guarantee coverage above 80% is free of aid provided that it notifies the measure to 
the Commission to substantiate its claim. 

19 

 
 
element will be determined by the difference between the appropriate market price of the 
guarantee, as calculated by an approved methodology in line with sections 3.2 or 3.4 of 
the Guarantee Notice or by the safe harbour rates in line with sections 3.3 and 3.5 of the 
Guarantee Notice, and the actual price paid for that measure.  

As  set  out  in  section  5  of  the  Guarantee  Notice,  aided  measures  within  the  scope  of 
Article 107(1) TFEU must be examined by the Commission with a view to determining 
whether or not they are compatible with the common market. 

Finally, section 6 of the Guarantee Notice requires Member States to monitor and submit 
reports to the Commission, in accordance with the general monitoring obligations23 under 
State aid rules. For measures involving aid, the reports should be provided at least at the 
end  of  the  period  of  validity  of  the  measure  and  for  the  notification  of  an  amended 
scheme. However, the Commission may choose a more frequent reporting schedule on a 
case-by-case basis. The reporting covers a number of elements, including, but limited to, 
the  number  and  value  of  guarantees  issued  and  outstanding,  the  number  and  value  of 
defaulted  guarantees,  guarantor’s  income  from  guarantee  premiums  and  recovery 
(defaulted  positions),  administrative  costs  borne  by  the  guarantor,  and  guarantee 
indemnifications.24  For  no-aid  measures,  the  Commission  may  also  request  such 
reporting,  clarifying  on  a  case-by-case  basis  the  frequency  and  the  content  of  the 
reporting requirements. 

The  Guarantee  Notice  thus  provides  a  comprehensive  and  differentiated  set  of  guiding 
provisions that allow Member States to provide guarantees on aided and aid-free terms, 
individually or within a scheme, subject to individual guarantee methodologies or using 
safe harbour premiums. 

2.5  What the Guarantee Notice is expected to achieve (results and impacts) 

By  adopting  the  Guarantee  Notice,  the  Commission  aimed  to  (i)  reduce  the  number  of 
State guarantees requiring a Commission decision and (ii) help the Member States design 
no-aid guarantee measures without any notifications to the Commission, thus ensuring a 
much quicker implementation. In addition, by transparently outlining  the conditions for 
the establishment of market conform guarantee premiums and the calculation of the aid 
amounts, the Commission aimed to ensure that its decisions are predictable while at the 
same time ensuring a level playing-field among the Member States. With the application 
of the safe harbour premiums for SMEs, the Commission also wanted to offer a simple 
and  transparent  method  to  determine  the  level  of  the  guarantee  premium  in  order  to 
facilitate their access to finance, especially through the use of guarantee schemes.  

23   Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing  Council Regulation (EU) 
2015/1589  laying  down  detailed  rules  for  the  application  of  Article  108  of  the  Treaty  on  the 
Functioning of the European Union (OJ L 140, 30.4.2004, p. 1). 

24   For aided schemes, the reporting should cover (a) the number and amount of guarantees issued; (b) the 
number and amount of guarantees outstanding at the end of the period; (c) the number and value of 
defaulted  guarantees  (displayed  individually)  on  an  annual  basis;  (d)  the  annual  income  from  the 
premiums charged, income from recoveries, and other revenues (e.g. interest received on deposits or 
investments);  (e)  the  annual  costs  (administrative  costs  and  indemnifications  paid  on  mobilised 
guarantees); (f) the annual surplus or shortfall; and (g) the accumulated surplus or shortfall since the 
beginning of the scheme. For aided individual guarantees, only the relevant information mentioned in 
in points (d) to (g) should be similarly reported. 

20 

 
 
By facilitating the establishment of market conform guarantee premiums, the Guarantee 
Notice  aimed  at  ensuring  that  the  premiums  reflect  genuine  risks  covered.  This  helps 
preventing distortions in the real economy and in financial markets.  

2.6  Point of comparison of the evaluation 

Since  1989  (see  Annex  VI),  the  Commission  has  adopted  a  stance  through  several 
communications  that  public  guarantees  on  loans  may  constitute  State  aid.  The 
Commission communicated that an assessment of the aid element of guarantees requires 
an  analysis  of  the  borrower's  financial  situation  and  that  the  aid  element  would  be  the 
difference  between  the  market  conform  guarantee  premium  and  the  premium  actually 
paid, it fell short of providing concrete guidance on how Member States were to calculate 
the market conform premium. 

Since  the  communications  adopted  prior  to  the  2000  Guarantee  Notice  provided  no 
details on the calculation of a market conform premium, Member States needed to notify 
all aided guarantee measures.  

The  Guarantee  Notice  of  2000  highlighted  the  principles  needed  for  an  assessment, 
excluding companies unable to obtain loans on market conditions, limiting the guarantee 
cover  to  80%  of  the  outstanding  loan  notional  amount  and  introduced  the  notion  of 
schemes  being  self-financing  as  proxy  for  market  conformity  of  the  premiums  and  the 
need  to  review  premiums  at  least  once  a  year.  These  conditions  were  further  expanded 
and  described  more  in  detail  in  the  Guarantee  Notice  of  2008.  A  particular  need  was 
identified for the development of safe harbour premiums, with Member States contacting 
the  Commission  services  to  verify  the  market  conformity  of  simplified  pricing 
methodologies in schemes. In the absence of the safe harbour premium provided by the 
Guarantee  Notice,  there  was  no  simplified  assessment  method  to  determine  the  market 
premium.  This  hampered  the  access  to  finance  for  SMEs  and  was  eventually  remedied 
with the 2008 Guarantee Notice.  

Since  the  Guarantee  Notice  of  2000  and  2008  represent  a  clear  inflection  point  for  the 
guidance provided to Member States on the calculation of the market conform guarantee 
premiums, the point of comparison for this evaluation will be what is expected to have 
happened in the absence of both the 2000 and 2008 Guarantee Notices.  

Notably, in the absence of a Guarantee Notice, Member States would have to rely solely 
on the jurisprudence of the Court of Justice on the notion of aid and the summary thereof 
in  the  Commission’s  Notice  on  the  Notion  of  Aid  for  establishing  market-conform 
guarantees  and  measuring  the  aid  element  in  aided  measures.  Also,  the  Commission 
would have to take decisions on guarantee methodologies using the TFEU directly as its 
legal  basis.  Given  the  large  and  diverse  number  of  methodologies  that  Member  States 
have  in  place,  this  would  have  significantly  deteriorated  the  State  aid  enforcement 
capacity  of  the  Commission.  In  addition,  the  Commission  would  have  no  already 
established detailed  reference to rely  on when investigating complaints from  applicants 
with  legal  standing.  Lastly,  it  would  reduce  the  legal  certainty  of  Member  States  for 
establishing no-aid measures that are not notified to the Commission as there would be 
no detailed Commission guidance available for them to consult concerning guarantees.  

21 

 
3  HOW HAS THE SITUATION EVOLVED OVER THE EVALUATION PERIOD? 

3.1  Macroeconomic developments and the evolution of EU Credit Markets 

The  Guarantee  Notice’s  provisions  are  related  to  macroeconomic  developments  in  two 
ways.  First,  market  credit  risk  margins  vary  in  line  with  the  financial  cycle.  The  safe 
harbour  premiums  of  the  Guarantee  Notice,  in  contrast,  have  remained  fixed.  This 
implies that the suitability of the safe harbour premiums  to  serve as market  proxy may 
have  varied25.  Second,  the  ability  and  willingness  of  private  creditors  to  supply  credit 
may vary in line with the financial cycle. Public authorities typically provide guarantees 
in  a  stable,  or  even  countercyclical  way.  The  relevance  of  the  Guarantee  Notice,  by 
providing  guidance  to  public  authorities  and  facilitating  the  provision  of  public 
guarantees, may thus be higher in times where companies face greater access-to-finance 
problems. 

3.1.1  Macro-economic developments 

Since  the entry into force of the Guarantee Notice  in  2008,  the EU credit markets 
have faced a sequence of macro-economic shocks. The global financial crisis erupted 
in  2008  and  spread,  in  the  years  2008-2011,  through  the  European  financial  and  real 
economy sectors. The crisis has triggered the European Central Bank (“ECB”) to lower 
interest rates and engage in quantitative easing, which has led to very low interest rates 
until 2022 when the ECB started to normalise monetary policy. Inflationary pressure has 
increased  in  the  wake  of  the  COVID-19  pandemic  and  the  Russian  military  aggression 
against Ukraine. This resulted in shocks to the real economy and led the ECB to increase 
interest rates significantly. Since 2024, interest rates have been decreasing again.  

Figure 2: CDS prices iTraxx Europe index (5 years) 

1000

900

800

700

600

500

400

300

200

100

0

ITraxx Cross-over

iTraxx

Source: Bloomberg 

25   The  Guarantee  Notice  allows  that  the  safe  harbour  premiums  may  be  revised  to  take  account  of  the 
market  situation.  The  Commission  has  not  made  use  of  this  possibility  since  the  Guarantee  Notice 
came into force.  

22 

 
 
 
These  macroeconomic  developments  have  influenced  the  evolution  of  credit  risk 
margins.  Figure  2  shows, as  example, the volatility of the credit default swap (“CDS”) 
prices  of  the  5  years  iTraxx  index  and  the  iTraxx  Crossover  index26  for  European 
companies since 2010. CDS prices are a widely used market proxy for credit risk. 

The macro-economic developments have also had an impact on the ability of companies 
to  access  market  funding,  especially  for  SMEs.  Figure  3  shows  the  SAFE27  composite 
financing gap and its components covering the evaluation period. The financing gap on 
credit lines and bank loans was elevated in the period up to Q1 2014 and in the period 
following  Russian  military  aggression  against  Ukraine  starting  from  Q2  2022.  This 
evolution  broadly  mirrors  the  evolution  of  CDS  markets  and  shows  that  on  average 
European companies could not fully meet their financing needs.  

Figure 3: SAFE Composite financing gap and its components 

Source: SAFE.  

Notes: The financing gap indicators combine both financing needs and the availability of bank loans, 
trade  credit,  equity,  debt  securities  and  credit  lines  at  firm  level.  For  each  of  the  five  financing 
instruments, the indicator of the perceived change in the financing gap takes a value of 1 (-1) if the 
need increases (decreases) and the availability decreases (increases). If enterprises perceive only a 
one-sided  increase  (decrease)  in  the  financing  gap,  the  variable  is  assigned a  value  of  0.5  (-0.5). 
The  composite  financing  gap  is  computed  at  firm  level  by  adding  together  the  financing  gaps  for 
each  relevant  source  of  financing  and  then  dividing  this  total  by  the  number  of  these  sources.  A 
positive value for the indicator points to an increase in the financing gap. Values are multiplied by 
100  to  obtain  weighted  net  balances  in  percentages.  In  the  chart,  the  centre  of  each  bubble 

26   The iTraxx Europe Crossover Credit Derivate Index is composed of up to 75 European corporates with 
a rating below investment grade. The 5 years series covers credit guarantees with an average maturity 
of 5 years.  

27   The  survey  on  the  access  to  finance  of  enterprises  (SAFE)  provides  information  on  the  latest 
developments  in  the  financial  situation  of  undertakings,  including  on  trends  in  the  need  for  and 
financing 
of 
availability 
(https://www.ecb.europa.eu/stats/ecb_surveys/safe/html/index.en.html) 

external 

23 

 
 
 
 
 
 
represents the financing gap of the corresponding source of financing, while the size represents the 
shares of firms using the instrument.28  

3.2  Regulatory developments applicable to credit institutions 

The  regulatory  requirements  faced  by  financial  institutions  are  crucial  for  determining 
whether  a  guarantee  measure  can  be  deemed  to  be  self-financing.  In  particular,  all 
regulated  financial  institutions  have  to  set  aside  a  proportion  of  their  exposures  to  a 
borrower  or  other  counterparties  as  regulatory  capital  to  cover  for  possible  losses.  For 
example,  the  amount  of  required  capital  that  a  lender  has  to  set  aside  for  its  loan 
exposures is directly linked to riskiness, or the ‘risk-weighted assets’, of the lender’s loan 
portfolio.  The  same  also  applies  for  guarantees,  in  that  a  regulated  financial  institution 
has to set aside capital for its guarantee exposures. Thus, to be deemed as self-financing, 
a  guarantee  measure  should  ensure  that  the  State  is  renumerated  for  not  only  its  direct 
costs,  such  as  expected  guarantee  payments  or  administrative  costs,  but  also  the 
opportunity cost of setting aside capital. 

Since  2008,  the  regulatory  and  risk  management  framework  for  credit  institutions  has 
considerably evolved.  

-  The capital requirements for credit institutions have been increased following the 
global financial crisis through the Capital Requirements Regulation (‘CRR’) and 
the  Capital  Requirements  Directive  (‘CRD’).  Before  the  financial  crisis,  credit 
institutions were holding around 8% of capital against their risk-weighted assets29. 
Under the CRR and CRD, credit institutions typically hold capital of around 15% 
of  their  risk  weighted  assets,  consisting  of  Pillar  1  and  Pillar  2  capital 
requirements.  On  average,  EU  credit  institutions  face  capital  requirements  of 
15.6%  as  of  end-2024,  according  to  data  by  the  European  Central  Bank30.  In 
addition, revised definitions of default in the CRR and in supervisory guidelines 
have  contributed  to  more  harmonised  and  stricter  criteria  for  identifying 
defaults31. 

-  The implementation of International Financial Reporting Standard 9 (IFRS 9) has 
had  a  significant  impact  on  the  credit  risk  assessment  process  of  credit 
institutions,  by,  among  other  things,  requiring  the  use  of  more  forward-looking 
information  in  the credit risk appraisal.  IFRS 9  employs an expected credit loss 
accounting  model,  while  previously  credit  institutions  employed  International 
Accounting Standard 39’s (IAS 39) incurred loss accounting model32. The use of 
forward-looking data tends to be complex and requires robust data and models33. 
Together  with  enhanced  disclosure  requirements  under  IFRS  9,  these  new 

28   See  https://www.ecb.europa.eu/stats/ecb_surveys/safe/html/ecb.safe202411~451cceb0f4.en.html  for 

more details. 

29   https://www.dbresearch.com/PROD/RPS_EN-

PROD/PROD0000000000450356/Where_do_European_banks_stand%3F_10_years_after_the_.pdf 

30   https://www.bankingsupervision.europa.eu/banking/srep/html/index.en.html  
31   https://www.eba.europa.eu/activities/single-rulebook/regulatory-activities/credit-risk/guidelines-

application-definition  

32   https://eba.europa.eu/publications-and-media/press-releases/eba-publishes-final-guidelines-credit-

institutions-credit  

33   https://assets.kpmg.com/content/dam/kpmg/na/pdf/IFRS9-for-Banks.pdf  

24 

 
 
standards have also increased the pressure on credit institutions to manage credit 
risks more effectively.  

-  The  establishment  of  the  Single  Supervisory  Mechanism  (SSM)  and  the 
introduction  of  new  supervisory  tools  such  as  regulatory  stress  testing  have 
contributed  to  a  harmonised  and  greater  sophistication  of  the  credit  risk 
management practices of credit institutions in the EU. 

-  Finally,  in  2014  a  harmonised  bank  crisis  management  and  deposit  insurance 
framework (CMDI34) was established. This framework has links to the Guarantee 
Notice, e.g. when it comes to indirect aid to lenders. 

3.3  Key figures and types of guarantee measures 

EU  Member  States  have  made  extensive  use  of  guarantees  subject  to  the  Guarantee 
Notice  since  the  last  revision  of  the  Guarantee  Notice  in  2008.  Since  the  Guarantee 
Notice  does  not  provide  for  sufficient  reporting  requirements  for  the  purpose  of  this 
evaluation,  the  Commission  services  and  the  experts  conducting  the  external  study 
undertook  significant  efforts  to  provide  an  as  comprehensive  as  possible  description  of 
the public guarantees implemented by Member States since 2010 (see section 1.5 above). 
The comprehensive data (i.e. ‘Sample A')35, which underpins the figures and tables in this 
section,  is  not  complete,  but  the  Commission's  services  consider  that  it  amounts  to  a 
sample  that  is  sufficiently  representative  to  allow  for  a  description  of  the  main 
characteristics of the use of State guarantees across Member States.36  

3.3.1  Overall use of guarantee measures  

The data gathered by the external study estimates that in the period 2010 – 2022, public 
authorities  granted  guarantees  for  an  amount  of  EUR  22.1  billion  under  the  Guarantee 
Notice, which amounts to 0.13% of the EU’s GDP of EUR 16.8 trillion in 2023. Figure 4 
shows the guaranteed amount per Member State (total amounts and as % of 2023 GDP). 
There  are  significant  disparities  across  Member  states  -  Italy  and  Germany  issue 
substantial  amounts  of  guarantees  based  on  the  Guarantee  Notice,  but  these  represent 
only  a  small  percentage  of  their  economic  output  (around  0.2%  and  0.1%  of  GDP 
respectively). The opposite is the case for Member states like Romania, Lithuania, Latvia 
and Cyprus where the guarantees represent between 0.8% (Cyprus) and 1.3% (Latvia) of 
their respective GDP. 

34   The CMDI framework consists of three legislative texts, acting together with national  legislation: the 
BRRD, the SRMR and the Deposit Guarantee Schemes Directive (DGSD – Directive 2014/49/EU).  
35   Sample  A  contains  data  on  283  guarantee  measures  within  the  Scope  of  the  Guarantee  Notice, 
covering  the  period  2010  to  2022.  Each  measure  includes  96  datapoints,  whereas  the  average 
completeness rate of the datapoints across all measures is 63% (see page 28 of the external study).  

36   See page 25 of the external study.  

25 

 
 
Figure 4: Total guaranteed amount (2010-2022) and share over total GDP (2023) by 
Member State 

Source: External study (‘Sample A’) 

The  comprehensive  database  contains  both  information  on  aided  and  no  aid  measures. 
The  information  on  market  conform  guarantees  is  likely  to  be  incomplete,  as  Member 
States are not, in principle, required to report market conform public guarantees. Figure 5 
shows  that  ca.  34  %  of  guaranteed  amount  (29%  in  terms  of  number  of  measures) 
consists of no-aid guarantees. Considering this likely underreporting of market conform 
guarantees, this shows that Member States make ample use of public guarantees not only 
for aid schemes, but also for market conform measures.  

Figure 5: Guaranteed amount and number of measures by market conformity 

100%

80%

60%

40%

20%

0%

Number of cases

Guaranteed amount

Aid

Market conform (no Aid)

Source: External study (‘Sample A’) 

26 

                                                                                                             
 
 
Figure 6: Active measures and guaranteed amounts by year, 2010-202237 

150

125

100

75

50

25

0

5

4,5

4

3,5

3

2,5

2

1,5

1

0,5

0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Number of measures (RHS)

Guaranteed amounts (bn EUR, RHS)

Source: External study (‘Sample A’) 

Figure  6  shows  the  amount  of  public  guarantees  provided  under  the  Guarantee  Notice 
over the observation period. The number of ‘active’ measures (i.e. measures under which 
Member  states  granted  new  guarantees)  declined  as  of  2020  as  Member  States  made 
ample use of the EU Temporary State aid Frameworks as basis for the granting of State 
guarantees. In response to the COVID-19 pandemic and the Russian military aggression 
against  Ukraine,  the  Commission  has  implemented,  starting  in  March  2020  and  going 
beyond  the  end  of  the  observation  period  of  December  2022,  a  series  of  State  aid 
Temporary  Frameworks38,  which  offered  public  authorities  alternative  flexible  ways  to 
offer public guarantees outside the scope of the Guarantee Notice39. 

3.3.2  Types of guarantee measures 

Table  1  shows  the  number  of  cases  under  the  different  methodologies  covered  by  the 
Guarantee  Notice  (see  Section  2.4  for  the  methodologies  within  the  scope  of  the 
Guarantee Notice). Overall, the most frequently used calculation methods are, by far, the 
risk-based  and  the  safe  harbour  methodologies/approaches.  The  following  subsections 
provide more detailed information on these. 

37   The  data  on  guaranteed  amounts  shows  a  similar  trend  as  active  measures,  but  exhibits  occasional 
spikes, which are largely attributable to some measures being reported as active only in a specific year. 
38   The  first  Temporary  Framework  was  the  ‘Communication  from  the  Commission  Temporary 
Framework for State aid measures to support the economy in the current COVID-19 outbreak’, 2020/C 
91  I/01,  C/2020/1863,  OJ  C  91I,  20.3.2020,  p.  1–9,  which  was  amended  several  times  and  then 
replaced  by  the  ‘Communication  from  the  Commission  Temporary  Crisis  Framework  for  State  Aid 
measures  to  support  the  economy  following  the  aggression  against  Ukraine  by  Russia’,  2022/C  131 
I/01, C/2022/1890, OJ C 131I, 24.3.2022, p. 1–17. This framework was replaced, after the observation 
period  of  the  data,  by  the  ‘Communication  from  the  Commission  Temporary  Crisis  and  Transition 
Framework for State Aid measures to support the economy following the aggression against Ukraine 
by Russia’, 2023/C 101/03, C/2023/1711, OJ C 101, 17.3.2023, p. 3–46. 

39   The  Temporary  Frameworks  provide  for  a  simple  parameterisation  of  guarantees  which  does  not 

require to establish market benchmarks premiums and to calculate the aid element. 

27 

 
  
 
Table 1: Pricing methodologies and number of measures40 

Pricing Methodology 

No. cases 

Guaranteed Amounts 
(million EUR) 

Individual guarantee 
Effective interest rate 
EU Reference Rate 
OECD methodology 
Risk based 
Risk based - Effective interest rate - CDS 
Safe harbour 
TOTAL 

Source: External study (‘Sample A’) 

8 
1 
6 
1 
140 
1 
88 
245 

1,348 
9 
776 
436 
12,022 
2 
5,056 
19,649 

Notes:  The  ‘Individual  guarantee  methodology’  is  approved  under  section  3.2  of  the  Guarantee 
Notice  relating  to  an  individual  guarantee  provided  on  a  loan  to  a  single  entity.  The  ‘Effective 
interest  rate’  methodology  determines  the  guarantee  premium  using  the  interest  rate  charged  on 
the guaranteed loan. The ‘OECD methodology’ is a risk-based approach to compute premium rates 
for  untied  loan  guarantees  based  on  the  OECD's  Arrangement  on  Officially  Supported  Export 
Credits.  The  ‘Risk-based  methodology’  is  approved  under  section  3.4  of  the  Guarantee  Notice 
relating  to  a  guarantee  scheme  provided  on  loans  to  multiple  entities  or  under  section  3.5  of  the 
Guarantee  Notice  using  single  premium  schemes.  The  ‘Risk  based  –  Effective  interest  rate  –  CDS 
methodology’ is a combination of the three calculation methods, whereby the guarantee premium is 
first  determined  by  a  risk-based  methodology,  which  is  then  subject  to  floors  as  determined  by 
effective  interest  rate  methodology  and/or  market  benchmarks  based  on  the  credit  default  swaps 
(CDS).  The  ‘Safe  harbour  methodology’  is  based  on  the  fixed  guarantee  premiums  for  SMEs  as 
described in section 3.3. of the Guarantee Notice.  

Figure  7  shows  the  distribution  of  the  different  pricing  methodologies  per  Member 
States.  Some  Member  states  rely  almost  only  on  the  safe  harbour  method  (Belgium, 
Estonia,  Croatia,  Ireland,  Latvia,  Malta,  Spain  and  Romania,  while  others  rely  almost 
only on the risk-based method (Sweden, Denmark, Austria, Germany, Greece, Hungary, 
Italy).  

Figure 7: Distribution of premium calculation method by Member States 

By number of cases 

By guaranteed amounts 

Source: External study (‘Sample A’) 

Risk-based methodologies 

Figure 8 shows the number of decisions approving pricing methodologies under Section 
3.4 of the Guarantee Notice over time. Most of the pricing methodologies were approved 

40   For  38  out  of  the  283  measures,  amounting  to  EUR  2.45  bn  guaranteed  amounts,  that  are  part  of 

Sample A, it was not possible to identify the pricing methodology. 

28 

 
 
 
around the year of the Guarantee Notice publication in 2008. Since 2021, a bulk of more 
sophisticated  pricing  methodologies,  combining  elements  of  the  Risk-based,  Effective 
Interest  Rate  and  CDS  approaches  altogether,  have  been  adopted  for  Croatia,  Greece, 
Italy, and Portugal41. 

Figure 8: Number of pricing methodology approval decisions by year and premium 
calculation methodology 

Member  States  can  also  devise  guarantee  methodologies  under  Section  3.4  of  the 
Guarantee Notice with a simplified option of using single premiums. Figure 9 shows the 
share of single premium schemes of the risk-based (section 3.4) guarantee schemes. The 
data  shows  that  Member  states  have  made  significant  use  of  single-premium  schemes 
under Section 3.4 of the Guarantee Notice, which account for almost a quarter of all risk-
based  methodologies  in  terms  of  number  of  cases  and  guaranteed  amounts).  Single 
premium  schemes  can  only  be  used  for  guarantees  of  amounts  of  less  than  EUR  2.5 
million  to  SMEs.  It  is  expected that they  involve lower administrative  costs  as  they do 
not require a rating of the beneficiary company.  

Figure 9: Share of guarantees granted under single premium methodologies (‘Y’) vs. 
all risk-based guarantee schemes 

100%

80%

60%

40%

20%

0%

By guaranteed amount

By number of cases

N

Y

41   Since 2023, the Commission has approved or amended eight methodologies. 

29 

 
 
 
 
 
 
Guarantees granted under the safe harbour premiums 

Member States have implemented schemes and provided individual guarantees to SMEs 
on an aided or no-aid basis using the fixed safe harbour rates listed in Section 3.3. of the 
Guarantee Notice. The fixed safe harbour premiums for SMEs were originally introduced 
as  a  simple  and  attractive  way  for  Member  States  to  provide  aid-free  guarantees. 
However, as they are fixed and do not respond to market developments, they may have 
become  less  attractive  relative  to  approved  methodologies.  Public  guarantees  under  the 
safe harbour premium account for 36% of all public guarantees (see Table 1 above).  

3.4  Case practice 

This section reviews some of the issues and problems faced by the Commission services 
working  on  the  assessment  of  the  guarantee  measures  that  are  based  on  the  Guarantee 
Notice.  

Use of safeguards to rule out aid to lenders 

As  already  noted  in  sections  2.1  and  2.4,  the  Guarantee  Notice  highlights  that  aid  to 
lenders may result in operating aid, which should, under point 116 of the Notice on the 
Notion  of  Aid,  be  “examined  from  an ex  ante point  of  view”.  In  order  to  rule  out  such 
aid,  recent  guarantee  decisions  have  incorporated  a  so-called  “effective  interest  rate 
(EIR) safeguard”.42  In simple terms,  the safeguard  aims to  elicit  a floor for the  implied 
guarantee premium from the interest rate charged by the lender on the guaranteed loan.43 
The  Commission  services  have  experienced  some  issues  in  the  application  of  the 
safeguard  relating  to  the  unavailability  of  evidence/data  on  the  correct  funding  and 
administrative  costs  to  be  subtracted  from  the  interest  rate  to  estimate  the  credit  risk 
margins and the sensitivity of the calculated floor to estimations errors.44 As a response to 
these issues, the Commission services and the Member States have agreed on specifically 
tailored solutions to determine what costs may be netted off the interest rates and, where 
necessary, by incorporating an adjustment factor over the applicable floor. 

Validity of safe harbour premiums and older methodologies 

Over the past few years, there have been a number of decisions oriented towards SMEs 
for which the Member States have opted to develop a methodology under section 3.4 of 

42   These  more  sophisticated  methodologies  include  the  2021  Portuguese  guarantee  methodology 
(SA.61340),  the  2022  Greek  guarantee  methodology  (SA.102741),  the  2022  Croatian  guarantee 
methodology (SA.64359), and the 2022 Italian guarantee methodology (SA.100837).  

43   More specifically, the calculations rely on a theoretical no-arbitrage equilibrium condition whereby a 
lender would be indifferent between being exposed to credit risks arising from (a) a guaranteed loan; 
and (b) a portfolio of credit default swap (CDS) exposures to both the borrower and the Member State 
providing the guarantee. The portfolio will be composed to ensure that the risks borne by the lender 
under option (b) would be equivalent to those under option (a). In particular, while the exposures to the 
borrower would replicate the credit risks borne by the lender for the non-guaranteed part of the loan, 
the exposures to the Member State would cover the counterparty credit risk, i.e. the possibility that the 
guarantor may fail to honour its obligations, for the guaranteed portion. 

44   The issues are as follows: First, since the costs faced by a lender on a typical lending transaction may 
be  quite  distinct  from  those  associated  with  CDS  instruments,  the  calculation  necessitates  a  careful 
estimation  of  the  interest  rate  cost  components  (e.g.,  administrative,  funding,  etc.)  that  need  to  be 
subtracted from the interest rate. Second, the implied premium is highly sensitive to small changes in 
the credit risk margin, especially for measures with a high guarantee coverage ratio. Together with the 
first point, this implies that small errors in the estimation of the cost components may be magnified. 

30 

 
 
the Guarantee Notice, rather than relying on the safe harbour premiums under section 3.5 
of  the  Guarantee  Notice.  The  interactions  of  the  Commission  services  with  Member 
States demonstrate that this development may be explained by the possibility that the safe 
harbour premiums might have become less attractive in the wake of the global financial 
crisis, driven by significantly changing market dynamics, especially the low-interest rate 
environment,  which  could  have  made  the  fixed  premiums  obsolete,  at  least  for  certain 
risk  categories.  More  broadly,  a  similar  situation  is  also  present  for  some  of  the 
methodologies  with  no  specific  expiry  dates,  which  do  not  incorporate  the  changing 
market conditions and practices into the calculation of the market conform premiums.  

Role of self-financing condition 

In their assessments of guarantee schemes, the Commission services have found that the 
guidance provided with respect to the condition that the scheme must be self-financing, 
as  described  under  points  (d)  and  (e)  of  section  3.4  of  the  Guarantee  Notice,  is  not 
sufficiently  clear.  In  particular,  there  have  been  many  discussions  with  Member  State 
authorities  on  whether  point  (f)  of  section  3.4,  which  requires  that  the  premiums  must 
also  cover  the  “normal  risks  associated  with  granting  the  guarantee”,  would  be 
automatically satisfied if the self-financing condition was met.  

Limited use of market benchmarks 

There  has  been  a  very  limited  use  of  market  benchmarks  to  determine  the  market 
conform  guarantee  premiums.  This  has  been  a  particularly  challenging  task  in  smaller 
Member States or those with less developed financial markets. More generally, typically 
no  comparable  market  transactions  exist  for  the  same  undertaking  or  for  a  sample  of 
comparable  undertakings,  as  described  under  point  111  of  the  Notice  on  the  Notion  of 
Aid and section 2.1 above. Part of the reason is that the market for private guarantees on 
corporate  loans  is  relatively  small,  except  for  niche  segments  such  as  export  credit,  at 
least for the moment. In addition, the Guarantee Notice appears to discuss the possibility 
of  using  market  benchmarks  to  set  the  market  conform  premiums  only  for  individual 
guarantees  under  section  3.2  of  the  Guarantee  Notice,  which  could  be  the  reason  for 
which  Member  State  authorities  usually  do  not  even  consider  such  a  possibility  for 
guarantee  schemes  under  section  3.4  of  the  Guarantee  Notice.  Moreover,  the  example 
cited in footnote 17 of section 3.4 of the Notice to compute the capital cost as 0.32% has 
been extrapolated by some Member States to  apply  to  all risk categories. The resulting 
premium  of 0.32%  for the remuneration of adequate capital  plus  an administrative cost 
between  0.10%  to  0.40%  plus  annualized  expected  losses  for  credit  risk  generally 
underestimates the guarantee premium derived from all market benchmarks. As a result, 
Member States are intrinsically motivated to avoid the use of market benchmarks, which 
would force them to charge higher premiums to avoid a selective advantage. 

Omission of sovereign risk 

The  existing  risk-based  methodologies  based  on  sections  3.2  (individual  guarantees)  or 
3.4  (guarantee  schemes)  of  the  Guarantee  Notice  typically  have  no  consideration  for 
sovereign  risk. However, in  market  transactions,  the default likelihood of the guarantor 
has a direct impact on the premium.  In particular, when the guarantor is  more likely to 
default on its financial obligations, the guarantee it provides is less valuable. Discussions 
with  Member  States  reveal  that  this  omission  may  result  in  slightly  higher  premiums, 
although the impact is usually limited, especially for Member States with relatively high 
ratings.  

31 

 
Guarantees on financial transactions other than loans or debt 

Although  sections  1.3  and  1.4  of  the  Guarantee  Notice  suggests  that  the  conditions 
outlined in sections 3 and 4 of the Guarantee Notice could be applicable to guarantees on 
financial transactions that are not loans, there is very little guidance on how the relevant 
conditions  would  translate  in  those  situations.  For  example,  performance  guarantees 
incorporate specific elements that are not clearly addressed by the Guarantee Notice, e.g. 
if and how the risk parameters on a single borrower would matter. As another example, 
most of the conditions outlined in sections 3 and 4 of the Guarantee Notice would not be 
applicable to guarantees on liabilities. The Commission services therefore refrained from 
using  the  Guarantee  Notice  as  the  basis  of  their  assessments  for  guarantee  measures 
involving financial transactions other than loans.  

Portfolio guarantees 

The Commission services have assessed several proposed measures involving guarantees 
provided on a portfolio of loans of a lender. These cases present specific challenges and 
require a careful interpretation of the conditions outlined in section 3.4 of the Guarantee 
Notice. First, point (b) of section 3.4 of the Guarantee Notice requires that the guarantee 
must  be  linked  to  a  specific  financial  transaction,  for  a  fixed  maximum  amount  and 
limited in  time. An  ex ante  guarantee on a portfolio, which a lender would  fill  up as it 
sees fit, may not adhere to this criterion. Second, it is not clear how the risk assessments 
mentioned  in  points  (d)  and  (f)  of  section  3.4  of  the  Guarantee  Notice  would  be 
conducted  for  a  portfolio  of  loans,  or  whether  the  State  as  a  guarantor  would  be  in  a 
position to assess risk factors associated with each individual exposure in a portfolio. 

Capital remuneration 

 Point  (f)  of  section  3.4  of  the  Guarantee  Notice  requires  the  guarantee  premium  to 
incorporate the opportunity costs of setting aside capital for regulatory purposes for the 
duration  of  the  guarantee.  Footnote  17  of  the  Guarantee  Notice  provides  an  example 
involving the amount of capital to be set aside for exposures to a BBB-rated undertaking 
as  8%  of  the  risk  weighted  assets.  As  noted  in  section  3.2  above,  however,  the  capital 
requirements  have  increased  substantially  since  2008.  As  a  result,  the  Commission 
services have required Member States to consider a higher requirement amount to 10.5% 
of  risk  weighted  assets.  In  some  recent  cases,  the  discussions  with  Member  States  also 
involved the appropriateness of setting the required return on capital at 400 basis points, 
as described under point (f) of section 3.4 of the Guarantee Notice, especially given the 
fact that return on equity for figures have shown some wide variability since 2008.    

Risk assessment systems and ratings 

In  some  cases,  the  guarantee  methodologies  following  sections  3.2  or  3.4  of  the 
Guarantee  Notice  rely  on  the  ratings  of  individual  exposures  based  on  the  risk 
assessments made by the lender. In others, the methodologies rely on internal ratings of 
the  guarantor  or  a  public  rating  mechanism.  In  all  cases,  a  correspondence  needs  to  be 
established between the rating scales used by the lender/guarantor and the scales used by 
international  credit  rating  agencies  (S&P,  Moody’s,  Fitch),  which  are  referenced  in  the 
Guarantee  Notice.  Moreover,  the  Commission  services  typically  require  the  lender’s 
rating systems to be those that are used for the calculation of the capital requirements and 
other risk assessments.  

32 

 
4  EVALUATION FINDINGS (ANALYTICAL PART) 

4.1  To what extent was the intervention successful and why? 

4.1.1  Effectiveness 

Effectiveness refers to the assessment of how successful the Guarantee Notice has been 
in assisting Member States to set up methodologies that help identify accurately market-
consistent  benchmarks  or  proxies  for  guarantee  premiums,  while  preventing  potential 
unwanted effects.  

4.1.1.1 

 Accuracy of identified proxies 

The  independent  experts  have  developed  several  benchmarks  that  provide  the  basis  for 
the evaluation of the accuracy of the methodologies currently in use under the scope of 
the Guarantee Notice. The benchmarks are developed from quantitative approaches that 
are anchored in how market operators price the credit risk, which is a key component of 
the guarantee premium, as well as market benchmarks, following the academic literature 
on  credit  risk  and  credit  derivatives.  The  benchmarks  are  therefore  used  as  market 
indicators against which the accuracy of a methodology is assessed.  

The  benchmarks  proposed  by  the  independent  experts  have  been  subject  to  explicit 
approval  of  the  Contracting  Authority.  The  benchmarks  were  developed  to  describe 
market conform guarantee premiums where each benchmark is derived using a specific 
methodological  approach  identified  by  the  independent  experts.  Where  necessary,  the 
independent experts were requested to make the necessary adjustments to ensure that the 
benchmarks  could  be  calculated  using  data  that  is  typically  available  to  a  creditor  or  a 
guarantor,  without  resulting  in  an  undue  amount  of  administrative  cost  or  complexity. 
The assessments also identified the main strengths and weaknesses of each benchmark.  

The four types of benchmarks using alternative methodological approaches identified by 
the independent experts and approved by the Commission services are as follows: 

(1) Risk-based benchmark derives the guarantee premiums in a similar way as the 
loan pricing models readily used in the banking industry.45 More specifically, the 
methodology  derives  the  fee  premiums  in  line  with  credit  risk  premiums  set  by 
commercial  banks,  ensuring  that  a  guarantee  scheme  that  uses  the  methodology 
would be in line with point (f) of Section 3.4 of the Guarantee Notice. This would 
mean that the premiums paid by the beneficiaries are just enough to cover all the 
relevant  costs,  including  the  expected  losses  that  the  guarantor  would  bear 
through  the  triggering  of  the  guarantees,  administrative  costs  of  running  such  a 
scheme, and the opportunity costs associated with setting aside regulatory capital 
corresponding to the risky exposures. To that extent, the benchmark methodology 
is  not  based on  a theoretical  market  equilibrium  concept  and  simply  produces  a 
fee that ensures  that the guarantor  earns just enough profits to  earn its expected 
return on capital.46  

45   For references, see section 2.2.3 of the External Study. 
46   The independent experts have developed two guarantee premiums using the risk-based methodology, 
distinguishing  between  the  internal  rating  based  (IRB)  approach  and  the  standardised  approach  to 

33 

 
 
 
(2) Credit default swap (CDS) and bond-based benchmarks are closely linked to 
the pricing estimations used in the credit derivatives market to determine the cost 
of  a  guarantee  provided  by  a  protection  against  the  default  of  a  borrower.  The 
methodology  identifies  guarantee  premiums  corresponding  to  borrowers  with  a 
specific  risk  rating  by  extracting  the  probabilities  of  default  from  CDS  spreads 
and bond yields with identical risk ratings using market data (i.e. iTRAXX, Bank 
of America Merrill Lynch indices). Extrapolations are made where the available 
market data does not cover all of the relevant risk categories contained in sample 
B2. Adjustments are also made to incorporate costs, such as administrative costs, 
that  would  typically  not  be  embedded  in  the  market  prices  of  CDS  and  bond 
transactions.  Unlike  the  risk-based  methodology,  this  methodology  derives  the 
probabilities  of  default  from  observable  market  data  based  on  a  market 
equilibrium  concept,  or  a  so-called  “no-arbitrage”  condition  based  on  the 
assumption  that  in  a  competitive  market  a  market  operator  would  be  indifferent 
between being a protection buyer or a seller.  

(3) Effective interest rate (EIR)47 benchmark is also based on a market benchmark 
and uses the pricing information available given by observed interest rates. More 
specifically, the methodology extracts a borrower’s default risk from the effective 
interest  rate  that  the  lender  charges  on  that  partially  guaranteed  loan.  The 
formulation  is  closely  linked  to  the  approaches  used  in  more  recent  existing 
methodologies  approved  by  the  Commission,  although  the  independent  experts 
have  developed  a  more  bottom-up  approach  by  using  the  market  information  to 
derive  the  borrower’s  default  risk  rather  than  dissecting  the  interest  rate  to  its 
basic components, such as credit risk spread and various costs, i.e. administrative 
costs,  cost  of  capital,  etc.48  The  methodology  also  relies  on  a  no-arbitrage 
condition  based  on  the  assumption  that  a  market  operator  would  be  indifferent 
between  providing  a  loan  or  holding  onto  the  principal  amount.  Due  to  limited 
data  availability  on  interest  rates  for  guaranteed  loans,  the  independent  experts 
have  employed  statistical  techniques  to  associate  the  interest  rate  charged  (on  a 
guaranteed loan) with a borrower’s default risk.  

(4) Safe  harbour  benchmark  is  a  simplified  approach  for  guarantees  on  loans  to 
SMEs. Unlike the other methodologies, it takes as a given the borrower’s credit 
risk  rating,  which  are  then  converted  to  (cumulative  or  annualized)  default 
probabilities,  to  estimate  the  corresponding  guarantee  premium.  To  that  extent, 

calculate the minimum regulatory requirements and the corresponding cost of capital, where the latter 
approach also takes into account the SME supporting factors, where relevant. Since most of the larger 
banks  use  the  IRB  approach  for  corporate  loans,  the  standardised  approach  is  not  referred  to  in  the 
comparisons below. 

47   The effective interest rate (EIR) takes into account all the costs borne by borrowers, including, most 
notably,  the  interest  rate  on  the  loan  as  well  as  any  other  fees,  with  the  exception  of  any  guarantee 
premiums paid to the State in exchange for the public guarantees.  

48   For  more  specifics  on  recent  decisions  that  have  approved  the  use  of  the  EIR  methodology  as  a 
backstop or a floor for the risk-based methodologies, see the Commission decisions on the Portuguese 
pricing  model  proposed  for  guarantee  schemes  under  the  SNGM  (Sistema  Nacional  de  Garantia 
Mutua)  (SA.61340);  Croatian  methodology  to  compute  guarantee  premiums  to  mid-caps  and  large 
undertakings  (SA.64359);  the  Italian  calculation  method  ISMEA  (Institute  of  Agricultural  Food 
Market Services) for the provision of direct guarantees at market conditions for undertakings active in 
the  agricultural,  agri-food  and  fisheries  sectors  (non-aid)  (SA.100837);  and  the  Greek  calculation 
methodology for guarantee premiums to banks for large corporate financing (SA.102741).  

34 

 
 
the simplicity comes with a cost: The guarantor should be able to obtain a reliable 
credit rating for each borrower. This could be done either by the guarantor’s own 
risk  assessment  system  or,  more  realistically,  based  on  the  risk  ratings  that  are 
assigned  to  the  borrower  by  the  lender.  The  methodology  is  similar  to  the 
approach  described  in  Sections  3.3  or  3.5  of  the  Guarantee  Notice.  However, 
there are three key differences. First, the guarantee premiums calculated under a 
safe harbour benchmark methodology also differ across a second dimension, the 
maturity  of  the  guarantee,  which  was  not  considered  in  the  Guarantee  Notice. 
Second,  the  correspondence  between  ratings  and  default  probabilities  are 
established by using either the Risk-based methodology or the CDS- and bond-
based methodology. Third, under the benchmarks developed by the independent 
experts, the correspondence tables between the rating and the guarantee premium 
have to be regularly updated based on market dynamics.  

To  facilitate  comparisons  between  the  existing  and  the  benchmark  methodologies,  the 
independent  experts  have  constructed  a  database  of  both  benchmark  and  existing 
methodologies  (samples  B1  and  B2)  containing  a  set  of  common  input  parameters, 
including most notably the default probability of the borrower, the type of borrower (e.g. 
SME,  large),  guarantee  coverage  ratio  (i.e.  the  ratio  of  the  total  loan  principal  that  is 
guaranteed)  and  the  maturity  (or,  more  specifically  weighted  average  life)  of  the 
guaranteed loan. These common input parameters have been constructed as a sample of 
typical  operations  and  were  fed  through  the  different  methodologies  to  obtain  the 
resulting  guarantee  premiums.  To  determine  how  these  input  parameters  were 
distributed,  the  independent  experts  have  utilised  the  granular  data  (“REQ  Q11”) 
collected by the Commission  from  Member States (e.g. on maturity of guaranteed loan 
and guarantee coverage ratios).  

Although  the  EIR  methodology  is,  arguably,  the  most  natural  benchmark,  especially 
since  the  pricing  of  the  loan  and  the  guarantee  share  many  common  elements,  the 
unavailability of data on interest rates is a major challenge. Once again,  REQ Q11 was 
used  to  establish  a  statistical  relationship  between  default  probabilities  and  effective 
the  Risk-based 
interest  rates  charged  following 
methodology.  This  statistical  relationship is  then  used  to  construct  estimates  where  the 
interest rate data is missing. This approach was not possible for lower maturity brackets 
due  to  limited  availability  of  data.  As  a  result,  The  independent  experts  have  truncated 
the data on interest rates for maturities lower than 5 years to the 5-7 year bucket.   

the  approach  described  under 

Since interest rates on guaranteed loans can only be estimated, the  guarantee premiums 
calculated  by  the  independent  experts  using  the  EIR  methodology  may  exhibit  three 
specific sources for estimation errors:  

-  The first source of error is related to whether sovereign risk is considered or not 
in the derivation of the guarantee premium from the effective interest rate. Since a 
public  guarantee  effectively  exposes  the  lender  to  the  joint  failure  of  both  the 
sovereign  and  the  borrower,  omission  of  this  risk  may  result  in  unrealistically 
high guarantee premiums.  

-  The second source of error is related to the fact that the equation used to calculate 
the  guarantee  premiums  under  EIR  methodology  is  very  sensitive  to  the 
borrower’s default risk. This implies that even a small misspecification of some 
of  the  key  variables  could  result  in  a  much  larger  impact  on  the  calculated 

35 

 
guarantee premiums. The independent  experts specifically identify lending costs 
as a potential source of error and shows that increasing funding cost assumptions 
by 40 basis points, or 0.4 percentage points, would lower the calculated guarantee 
premiums by 1.6 percentage points.  

-  As  a  third  potential  source  of  error,  most  of  the  existing  methodologies  do  not 
contain  a  safeguard  to  rule  out  or  minimise  (indirect)  aid  to  lenders.  Thus,  one 
cannot exclude the possibility that the estimated interest rates may be positively 
biased,  resulting  in  unrealistically  high  guarantee  premiums.  Indeed,  using 
existing  data  from  REQ  Q11,  the  independent  experts  have  shown  that  nearly 
67%  of  the  guarantee  loans  have  actual  interest  rates  that  are  greater  than  the 
interest rates calculated under the risk-based approach.   

With these elements in mind, Figure 10 provides a comparison of the average guarantee 
premiums  corresponding  to  borrowers  with  different  risk  attributes,  with  a  S&P/Fitch 
equivalent  ratings  of  BBB,  BB  or  B,  which  represent  nearly  97%  of  Sample  B1, 
excluding existing safe harbour premiums. The guarantee coverage ratio is fixed at 80%. 
The  comparisons  exclude  the  administrative  cost  in  order  to  focus  on  the  overall  risk 
sensitivity  and  time  variability  of  the  comparisons.  For  the  reasons  outlined  above,  the 
comparisons  also  rely  on  lower-end  estimates  for  the  guarantees  produced  by  the  EIR 
approach. 

Figure 10: Comparison of average guarantee premiums (net of administrative costs) 
for BBB to B-rated borrowers across maturity buckets 

Note: In all comparisons, guarantee coverage was set at 80%. The BBB, BB, and B risk categories are as 
described  by  S&P  and  Fitch.  RISK  stands  for  guarantee  premiums  calculated  under  the  risk-based 
methodology using the IRB-based regulatory requirements to calculate the capital costs. CDS and BOND 
stand for CDS-and bond-based methodologies, respectively. EIR stands for the lower-end estimates for the 
guarantees produced by the EIR methodology. Due to limited data availability, fee estimations produced by 

36 

 
 
EIR-methodology were not available for shorter maturities than 5 years. EXISTING stands for the average 
guarantee premiums the existing risk-based methodologies in sample B1.  

As  it  is  immediately  clear  from  Figure  10,  the  guarantee  premiums  produced  by  the 
existing methodologies are almost always lower than those produced by the benchmark 
methodologies.  The  differences  are  particularly  large  for  longer  maturity  buckets  and 
higher risk categories.  

Another striking finding is the variation of guarantee premiums calculated under different 
benchmark methodologies. It is clear that both EIR and bond-based methodologies result 
in  higher  guarantee  premiums  for  lower  maturities,  especially  for  lower  ratings.  This 
finding  may  reflect  the  fact  that  lenders  and  investors  are  more  likely  to  provide  loans 
and  debt  to  borrowers  with  higher  risk  at  only  short  maturities.  It  is  also  notable  that 
market-based  benchmarks,  such  as  the  CDS-  and  bond-based  methodologies,  result  in 
generally higher fees than the risk-based methodology. This is most likely due to the fact 
that market-based approaches often incorporate elements that are not taken into account 
in  the  risk-based  benchmark,  which  is  entirely  based  on  the  fundamental  idea  that  the 
guarantee  scheme  remains  self-financing.  To  that  end,  the  premiums  produced  by  the 
risk-based methodology should be seen as a floor for the market prices.  

Adding a time dimension, Figure 11 depicts how the guarantee premiums as calculated 
under  the  existing  methodologies  compare  to  the  benchmark  methodologies  for  the 
period  between  the  first  quarter  of  2015  and  the  last  quarter  of  2023  for  loans  with  a 
maturity between 7 to 10 years. The comparison for BBB+ to BBB- rated borrowers was 
omitted  due  to  limited  data  on  existing  methodologies.  The  data  for  EIR-based 
methodology  was  also  omitted  due  to  limited  data  availability  for  shorter  maturities, 
which  significantly  undermines  the  time-series  data.  The  guarantee  coverage  ratio,  i.e. 
the ratio of the total loan principal that is guaranteed, is once again fixed at 80%.  

 Figure 11: Comparison of average guarantee premiums (net of administrative costs) 
for BB and B-rated borrowers over 2015-2023 

Note: In all comparisons, guarantee coverage was set at 80% and the maturity of the guaranteed loan at 7-
10 years. The BB and B risk categories are as described by S&P and Fitch. The results for BBB were not 

37 

 
 
 
 
displayed due to limited number of observations. RISK stands for guarantee premiums calculated under the 
risk-based  methodology  using  the  IRB-based  regulatory  requirements  to  calculate  the  capital  costs.  CDS 
and BOND stand for CDS-and bond-based methodologies, respectively. EXISTING stands for the average 
guarantee premiums the existing risk-based methodologies in sample B1.  

It is clear from Figure 11 that the guarantee premiums generated by existing risk-based 
methodologies  have  remained  lower  than  all  other  benchmarks.  Moreover,  the  existing 
risk-based  methodologies  do  not  appear  to  take  into  account  the  market  dynamics  and 
changing risks. Indeed, the guarantee premiums as calculated by all of the three depicted 
benchmarks  have  responded  positively  to  the  COVID-19  crisis  in  2020  and  Russia’s 
military aggression against Ukraine in 2022. However, the fees generated by the existing 
risk-based methodologies have remained relatively flat in both instances.   

Turning to safe harbour methodologies, Figure 12 provides a comparison of the existing 
safe-harbour premiums, as described in Sections 3.3 or 3.5 of the Guarantee Notice, and 
different  safe  harbour  benchmark  methodologies  for  borrowers  with  different  risk 
attributes, ranging from a S&P/Fitch equivalent rating of BBB+ to a B-, which represents 
the entirety of Sample B1 for safe harbour benchmarks. Once again, the coverage ratio is 
fixed at 80%.  

Figure 12: Comparison of average safe harbour guarantee premiums for BBB to B-
rated borrowers across maturity buckets 

Note: In all comparisons, guarantee coverage was set at 80%. The BBB, BB and B risk categories are as 
described  by  S&P  and  Fitch.  RISK  stands  for  guarantee  premiums  calculated  under  the  risk-based 
methodology using the IRB-based regulatory requirements to calculate the capital costs. CDS and BOND 
stand  for  CDS-and  bond-based  safe  harbour  methodologies,  respectively.  EXISTING  stands  for  the 
averages for existing safe harbour premiums in sample B1.  

The comparison of the safe harbour guarantee premiums summarised in Figure 12 shows 
that  for  lower-risk  borrowers  with  a  rating  between  BBB+  to  BBB-,  the  guarantee 
premiums  calculated  using  the  existing  methodology  are  generally  lower  than  those 
produced  by  the  benchmark  methodologies.  For  higher  risk  profiles,  the  existing  safe 
harbour  premiums  appear  to  be  comparable  to  those  generated  by  the  benchmark 
methodologies.  For  example,  for  borrowers  with  a  BB+  to  BB-  rating,  the  existing 
methodology is entirely comparable with the risk-based safe harbour methodology, with 
the  exception  of  very  short  maturities  below  1  year.  For  higher-risk  borrowers,  the 
existing safe harbour premiums range from 3.8% for borrowers with a rating of B+ or B 
and going all the way up to 6.3% for a borrower with rating of B-. These fees are higher 

38 

 
 
than  those  generated  by  both  risk-based  and  CDS-based  methodologies,  although  the 
bond-based methodology always produces the highest possible fees.  

The  differences  between  the  benchmark  safe  harbour  methodologies  with  the  existing 
methodology become even more pronounced once one adds the time dimension, which is 
shown  in  Figure  13.  The  comparison  for  BBB+  to  BBB-  rated  borrowers  was  omitted 
due  to  limited  data  on  existing  methodologies.  Although  the  safe  harbour  premiums 
under  the  existing  methodology  have  been  unaltered  since  the  beginning  of  the 
application  of  the  Guarantee  Notice,  the  guarantee  premiums  on  existing  methodology 
show  some  limited  amount  of  variability  due  to  changes  in  the  distribution  of  credit 
ratings within each depicted segment, i.e. distribution of B-, B and B+ rated borrowers 
within the B-rating segment.  

Figure 13: Comparison of average safe harbour guarantee premiums for BB and B-
rated borrowers over 2015-2023 

Note: In all comparisons, guarantee coverage and the maturity of the guaranteed loan were set at 80% and 
7-10 years, respectively. The BB and B risk categories are as described by S&P and Fitch. RISK stands for 
guarantee  premiums  calculated  under  the  risk-based  methodology  using  the  IRB-based  regulatory 
requirements to calculate the capital costs. The results for BBB were not displayed due to limited number 
of observations. CDS and BOND stand for CDS-and bond-based safe harbour methodologies, respectively. 
EXISTING stands for the averages for existing safe harbour premiums in sample B1.  

The time-series evolution of guarantee premiums depicted in Figure 13 closely follow the 
general results as depicted in Figure 12. In particular, the existing safe harbour guarantee 
premiums  remain  below  CDS-  and  bond-market  safe  harbour  methodologies  for  BB-
rated borrowers and comparable to  the risk-based safe harbour methodology.  However, 
the  existing  safe  harbour  premiums  are  higher  than  those  produced  by  the  risk-based 
methodology  for  higher  risk  B-rated  borrowers  and  remain  comparable  (on  average)  to 
the CDS-based safe harbour methodology, except in more recent years. In addition, much 
like  in  Figure  12,  the  CDS-  and  bond-market  methodologies  are  responsive  to  market 
dynamics, whereas the existing safe harbour premiums remain unchanged.  

The  main  takeaways  from  the  results  discussed  in  this  section  can  be  summarised  as 
follows: 

-  The guarantee premiums  produced by the existing risk-based methodologies are 
almost  always  lower  than  those  produced  by  the  benchmark  methodologies, 

39 

 
 
across  different  risk  categories,  maturities,  and  time  horizons.  The  differences 
between  the  guarantee  premiums  produced  by  the  benchmark  and  existing  risk-
based methodologies are particularly large for longer maturity buckets and higher 
risk categories.  

-  For safe harbour methodologies, the comparisons show a more nuanced picture. 
The  existing  safe  harbour  premiums  are  below  those  generated  by  benchmark 
methodologies  only  for  lower  risk  BBB-rated  borrowers.  For  higher  risk 
borrowers, the existing methodology produces fees that are higher than the risk-
based safe harbour methodology.  

-  More  generally,  existing  methodologies  exhibit  lower  sensitivity  to  market 
dynamics  and  changing  risk  conditions,  which  are  clearly  taken  into  account  in 
the  CDS-based 
the  market-based  benchmarks  such  as 
methodologies.  

the  bond-  and 

-  These  results  imply  that  the  existing  methodologies  may  not  be  sufficiently 
accurate  in  producing  market  conform  fees  across  different  risk  categories  and 
over time, especially for existing risk-based methodologies.  

4.1.1.2 

 Crowding out of private investors 

The question of whether a public guarantee may crowd out private involvement is closely 
linked to the question of whether the same borrower could obtain  the same loan from a 
commercial  lender  without  a  guarantee.  To  get  a  better  grasp  of  this  issue,  it  may  be 
worthwhile  to  first  explain  why  a  borrower  may  not  be  able  to  obtain  such  a  loan,  or, 
more succinctly, why some borrowers may be rationed out of the credit market.  

A defining aspect of credit markets is the asymmetric information that exists between a 
lender  and  a  borrower.  Lenders  are  concerned  that  the  interest  rate  on  a  loan  should 
adequately cover, among other things, the risk of default of the borrower. Assuming that 
the  only  observable  information  on  the  riskiness  of  a  loan  is  whether  the  borrower 
accepts a loan offer, the interest rate charged may well affect the riskiness of the pool of 
borrowers that agree to  such an offer.  Less risky  and less cash-strapped  borrowers will 
not  accept  higher  interest  rates  since  they  can  find  cheaper  alternatives  or  make  do 
without  borrowing  at  all.  Thus,  only  higher  risk  borrowers  will  accept  loans  carrying 
high interest rates. Charging a higher interest rate would thus increase the riskiness of a 
lender’s loan portfolio and, beyond a certain interest rate, may even lower its profits. This 
so-called adverse selection problem results in credit rationing, whereby a lender may not 
offer  any  loans  beyond  a  certain  interest  rate,  (Stiglitz  and  Weiss,  1981)49.  Although 
lenders  may  also  use  collateral  requirements  to  screen  their  borrowers  (Bester,  1985)50, 
the outcome remains less-than-optimal since borrowers with limited collateral, e.g. start-
ups, young entrepreneurs, or less affluent borrowers, may still be credit rationed, (Stiglitz 
and Weiss, 1992)51.  

49   Stiglitz,  J.  E.,  &  Weiss,  A.  (1981).  Credit  Rationing  in  Markets  with  Imperfect  Information.  The 

American Economic Review, 71(3), 393–410. 

50   Bester,  H.  (1985).  Screening  vs.  Rationing  in  Credit  Markets  with  Imperfect  Information.  The 

American Economic Review, 75(4), 850–855. 

51   Stiglitz, J. E., & Weiss, A. (1992). Asymmetric Information in Credit Markets and Its Implications for 

Macro-Economics. Oxford Economic Papers, 44(4), 694–724. 

40 

 
 
Putting these points together, crowding out is less likely to occur if a borrower is rationed 
out of the market, implying the presence of a market failure.  

Crowding  out  could  be  distortive  if  publicly  guaranteed  loans  replace  private  loans  or 
prevent the development of private guarantee markets for similar loans. In either case, the 
public  guarantor  is  effectively  competing  with  other  commercial  entities  that  would 
otherwise provide the funding. Crowding out also implies that lenders shift some or all of 
the risks that they would have otherwise taken to the State, (Gale, 1990)52.  

The  empirical  literature,  which  is  reviewed  in  section  3.1.2.1  of  the  External  Study, 
generally  supports  the  positive  impact  of  public  guarantees  on  funding  availability  and 
growth rate of debt of new businesses in France, Italy, Spain, and Portugal, (Lelarge et 
al.,  201053;  De  Blasio  et  al.,  201854;  Bonfim  et  al.,  202355;  Jimenez  et  al.,  202456).  The 
empirical tests conducted by the independent experts confirm these results. In particular, 
using  the  European  Commission’s  and  the  ECB’s  Survey  on  the  Access  to  Finance  of 
Enterprises  (SAFE)  database  covering  the  entire  EU-27,  the  independent  experts  show 
that firms that have obtained a public guarantee  at one point in time will be 12% more 
likely  to  participate in  the credit market  and  2%  less likely  to  be  rationed out  of  credit 
markets  in  subsequent  periods,  which  are  statistically  significant  even  when  the  firm-
level effects are controlled. In addition, using a large firm-level dataset from the Italian 
Guarantee  Fund  (FCG),  which  contains  more  granular  information  than  the  SAFE 
database,  the  independent  experts  also  show  that  obtaining  a  guaranteed  loan 
significantly improves the debt growth levels by around 14% in subsequent periods.  

Using  the  SAFE  databases,  the  independent  experts  also  investigated  statistically  the 
extent to which public guarantees bridge the gap between SMEs and large firms in terms 
of participation in credit markets and credit rationing, after controlling for country, time 
and  firm-specific  factors.  If  the  impact  of  public  guarantees  on  this  gap  is  relatively 
small, then one may suspect that the guarantees may not be adequately targeting  SMEs 
with  limited  access  to  financing.  Based  on  this  analysis,  SMEs  without  any  guarantees 
are around 19% less likely to participate in the credit market when compared to the larger 
firms  without  any  guarantees.  Public  guarantees  help  bridge  74%  of  this  gap,  which  is 
clearly significant. However, for credit rationing the findings are less positive: SMEs are 
around 7% more likely to be rationed out of credit markets compared to larger firms and 
that public guarantees bridge only 27% of this gap. 

These results effectively rule out full crowding out. It is clear that some of the recipients 
of  public  guarantees  would  not  have  participated  in  the  credit  markets  and  would  be 
rationed  out.  However,  it  is  also  unlikely  that  no  crowding  out  takes  place,  especially 
since the impact of public guarantees on credit rationing is relatively small. Finally, the 
extent to which partial crowding out may be present remains an open question.  

52   Gale, W. (1990). Federal lending and the market for credit. Journal of Public Economics. 42(2), 177-

193. 

53   Lelarge, C. & Sraer, D. & Thesmar, D. (2010). Entrepreneurship and Credit Constraints Evidence from 

a French Loan Guarantee Program, NBER Working Paper 

54   De Blasio, G. & De Mitri, S. & D'Ignazio, A. & Russo, P. F. & Stoppani, L. (2018). Public guarantees 

to SME borrowing. A RDD evaluation., Journal Banking & Finance 96, 73-86. 

55   Bonfim,  D.  &  Custódio,  C.  &  Raposo,  C.  (2023).  Supporting  small  firms  through  recessions  and 

recoveries, Journal of Financial Economics 147, no. 3, 658-688. 

56   Jiménez,  G.  &  Laeven,  L.  &  Martinez-Miera,  D.  &  Peydró,  J.  (2024).  Public  Guarantees,  Private 
Banks’  Incentives,  and  Corporate  Outcomes:  Evidence  from  the  COVID-19  Crisis,  ECB  Working 
Paper Series 

41 

 
 
The main takeaways from the results discussed above can be summarised as follows: 

-  The  empirical  results  suggest  that  public  guarantees  do  provide  some  form  of 

additionality, ruling out full crowding out.   

-  Additional empirical analysis shows that public guarantees may not be sufficient 
in  bridging  the  entire  gap  that  exists  between  SMEs  and  large  corporations, 
especially  in  terms  of  rationing.  This  result  makes  it  more  likely  that  some 
amount of crowding out does take place.   

-  Putting these two elements together, it is possible that some of the measures could 
be crowding out private (non-guaranteed) lending and potentially preventing the 
development of private guarantee markets. These distortions imply that the State 
may  effectively  be  competing  with  commercial  entities  that  would  otherwise 
provide the funding, although the limitations make it impossible to determine the 
extent and the conditions under which such distortions could be materialising.  

4.1.1.3 

 Unintended selective advantages 

There  are  two  ways  in  which  public  guarantees  may  provide  unintended  selective 
advantages.  

First, lenders may not pass through to the ultimate borrowers the reduced risk costs they 
obtain through a public guarantee. The straightforward way to do this is by lowering the 
interest rate on the guaranteed loan. If the interest rate differential between a guaranteed 
loan and an identical non-guaranteed loan is smaller than the reduced risk costs, then a 
partial pass through is present.  

Second,  the  use  of  public  guarantees  may  result  in  higher  risk-taking,  by  undermining 
either  the  lenders’  monitoring  or  screening  incentives,  resulting  in  a  misallocation  of 
resources through the provision of funding to financially non-viable or less viable firms. 
Thus, public guarantees may be allocated to firms facing financial distress, including the 
so-called “zombie firms”, or the guarantees may lower entry and exit rates in a market, 
implying  that  certain  firms  that  would  have  otherwise  exited  the  market  may  remain 
within the market thanks to a public guarantee.57,58   

The results from the empirical literature are somewhat mixed on these channels through 
which public guarantee measures may provide unintended selective advantages to lenders 
or to zombie firms.  

57   Following Storz, M. & Koetter, M. & Setzer, R. & Westphal, A. (2017). Do We Want These Two To 
Tango?  On  Zombie  Firms  and  Stressed  Banks  in  Europe,  ECB  Working  Paper  N.2104,  the 
independent experts define a zombie firm as one that fulfils all of the following characteristics for two 
consecutive  years:  (i)  a  negative  return  on  assets;  (ii)  negative  net  investments;  and  (iii)  a  low  debt 
servicing capacity, which is characterised as net earnings over financial debt.  

58   Public  guarantees  cannot  be  provided  to  “borrowers  in  financial  difficulty”  under  point  of  (a)  of 
Sections 3.2 and 3.4 of the Guarantee Notice, where the definition of financial difficulty is  set out in 
section 2.1 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty 
(OJ  C  244,  1.10.2004,  p.  2).  In  broad  terms,  a  firm  must  be  defined  by  Member  States  as  facing 
financial  difficulties  if  it  is  unable  to  stem  losses  either  through  its  own  resources  or  funds  from  its 
shareholders or creditors, which would, in the absence of a public intervention, condemn it to go out of 
business.  

42 

 
 
-  De Blasio et al. (2018) find that interest rates of guaranteed and non-guaranteed 
loans are statistically indistinguishable, implying an incomplete pass through. The 
authors also show that the likelihood that a firm becomes unable to repay its debt 
is higher for firms that are eligible for a guarantee.  

-  Lelarge et  al.  (2010), in  turn,  find that  obtaining  a guaranteed loan helps  newly 
created  French  firms  pay  substantially  lower  interest  rates.  Default  probabilities 
for those are also higher, but not because the recipients are ex ante non-viable but 
because public guarantees increase default rates59.  

-  Bonfim  et  al.  (2023)  uses  Portuguese  data  to  confirm  that  the  guaranteed  loans 
have  lower  interest  rates.  The  authors  also  show  that  firms  eligible  for  loan 
guarantees  tend  to  have  lower  default  probabilities.  Interestingly,  these  results 
only apply in the immediate aftermath of the global financial crisis, covering the 
years between 2008 and 2013. In more stable times, both the interest rates and the 
default  probabilities  for  guaranteed  and  non-guaranteed  loans  are  statistically 
indistinguishable.  

As noted in  section  2.4  above, section 2.3.1 of  the Guarantee Notice acknowledges the 
possibility that the lenders may receive part of the aid if proper adjustments are not made 
to the terms and conditions applicable to the loan to account for the fact that credit risks 
associated with the default of the borrower have been transferred to the State. However, 
the  Guarantee  Notice  is  not  very  prescriptive  on  what  those  adjustments  should  be 
calculated and when they would be deemed to be sufficient.  

With regard to aid to firms in financial distress, point (a) of sections 3.2 and point (a) 3.4 
of  the  Guarantee  Notice  explicitly  rule  out  the  possibility  that  measures  providing 
guarantees to borrowers in financial difficulty may be seen by the Commission as free of 
aid.60 

Do lenders pass through risk reduction advantages to borrowers? 

The empirical tests conducted by the independent experts to determine the extent of pass 
through focus on whether a borrower with a guaranteed loan is offered a lower interest 
rate than a borrower without a guarantee, after controlling for a number of country, time, 
firm-size  and  other  firm-specific  factors.  The  results  based  on  the  EU-wide  SAFE  data 
show that obtained a publicly guaranteed loan within the past six-month period reduces 
the interest rates by 4 percentage points. However, this effect almost entirely disappears 

59   The  authors  explain  that  firms  with  guaranteed  loans  may  be  more  inclined  to  file  for  a  formal 
bankruptcy procedure, rather than exiting the market informally, e.g. due to presence of the State as a 
stakeholder and the need to trigger the guarantee. Altavilla, C. & Ellul, A. & Pagano, M. & Polo, A. & 
Vlassopoulos,  T.  (2021).  Loan  Guarantees,  Bank  Lending  and  Credit  Risk  Reallocation,  CSEF 
Working  Paper  No.  629,  Core,  F.  &  De  Marco  F.  (2023).  Information  Technology  and  Credit: 
Evidence from Public Guarantees, Management Science, Forthcoming and Pelosi, M. & Rodano, G. & 
Sette, E. (2022). Zombie Firms and the Take-up of Support Measures During Covid-19, Bank of Italy 
Occasional Paper 650 confirm that guarantee recipients are not  ex ante riskier since firms that are in 
the  middle  of  the  risk  distribution  are  more  likely  to  receive  guaranteed  loans  compared  to  those  in 
distress.  

60   As described in section 2.4, for the purposes of the Guarantee Notice, financial difficulty is defined as 
in  Community  guidelines  on  State  aid  for  rescuing  and  restructuring  firms  in  difficulty,  OJ  C  244, 
1.10.2004, p. 2. 

43 

 
 
once firm-specific effects, such as firm size, age, sector, country of origin, are controlled 
for.   

The empirical tests conducted using the Italian Guarantee Fund (FCG) dataset provides a 
more  positive  picture.  Although  the  dataset  does  not  incorporate  information  on  non-
guaranteed loans by construction, the independent experts utilise an alternative empirical 
specification  to  test  whether  loans  with  a  higher  guarantee  coverage  obtain  a  lower 
interest rate. The results show that a one percentage point increase in the coverage ratio 
results in a statistically significant reduction of 2.1 basis points in the interest rate for the 
guaranteed loan.  

The  independent  experts  also  analysed  the  question  of  whether  such  a  reduction  is 
sufficient or whether it may still point at a possibility that the lender still benefits from 
the  transaction.  To  determine  a  natural  benchmark  for  an  interest  rate  reduction,  the 
experts  leverage  on  the  theoretical  formulations  utilised  to  derive  the  risk-based 
benchmark methodology (see description in section 4.1.1.1). In particular, in order for the 
guarantee measure to  remain  self-financing,  the  formulations predict that  a one percent 
increase in the guarantee coverage should result in an interest reduction between 2.8 and 
4.6 basis points. A smaller reduction would imply that the lender is better off and may be 
benefiting (indirectly) from the measure. Given the 2.1 basis point reduction found in the 
empirical  specifications  described  above,  there  is  evidence  that  actual  pass-through  is 
incomplete and that the actual interest rate reduction corresponds to approximately 46% 
and 75% of the reduction that would need to be granted to maintain the measure as being 
self-financing.  

Do  public  guarantees  provide  funding  to  non-viable  firms  or  undermine  market 
dynamics? 

The independent experts extended the Italian Guarantee Fund (FCG) dataset by merging 
it  with  Bureau  van  Dijk’s  Orbis  database  for  Italian  firms61  to  respond  to  the  various 
questions over whether guarantees may be allocated to firms facing financial distress or 
whether those guarantees may make defaults more likely.  

The  independent  experts  first  show  that  firms  with  higher  credit  worthiness  levels  and 
those that are not classified as zombie firms are more likely to obtain guaranteed loans. 
In particular, safe firms, which are defined with respect to those with a high Altman Z-
score62, are 50% more likely to receive guaranteed loans compared to firms in distress.  

The  independent  experts  then  find  that  zombie  firms  are  less  likely  to  receive  public 
guarantees  with  less  than  0.1%  zombie  firms  receiving  public  guarantees.  Moreover,  a 
firm is less likely to become a zombie if it receives a public guarantee. More specifically, 
if  a  firm  receives  a  public  guarantee,  it  has  a  68%  higher  probability  of  exiting  the 

61   See Section C.1.2 of Annex C of the External Study for more details on the construction of the merged 

database.  

62   The  Altman  Z-score  is  the  Z''  =  6.56X_1  +  3.26X_2  +  6.72X_3  +  1.05X_4  (Altman,  E.I.  (1983). 
Corporate  Financial  Distress.  A  Complete  Guide  to  Predicting,  Avoiding,  and  Dealing  with 
Bankruptcy. Wiley Interscience. John Wiley and Sons), where X_1 is Working Capital/Total Assets; 
X_2  is  Retained  Earnings/Total  Assets;  X_3  is  EBIT/Total  Assets;  X_4  is  Book  Value  Equity/Total 
liabilities. According to Altman, E. I. & Danovi, A. & Falini, A. (2013). Z-Score Models' Application 
to Italian Companies Subject to Extraordinary Administration, Journal of Applied Finance 23, No. 1, 
who calibrate the Z-scores for Italian firms, safe firms have a Z’’ score higher than 5.83, middle risk 
firms between 5.83 and 4.15, and distressed firms lower than 4.15. 

44 

 
 
zombie  status  the  next  year  compared  to  those  that  have  not  received  such  a  public 
guarantee,  which  could  be  pointing  at  the  effectiveness  of  public  guarantee  measures. 
Due  to  limited  long-term  observations,  it  is  not  clear  if  this  result  holds  over  several 
years,  or  whether  those  firms  eventually  fall  back  into  zombie  status.  However,  it  is 
noteworthy  that  the  opposite  effect  is  less  forceful  as  a  non-zombie  firm  receiving  a 
public  guarantee  only  has  a  0.1%  lower  probability  of  becoming  a  zombie  than  in  the 
case of no public guarantee. 

The experts show that public guarantees tend to have a negative effect on the entry and 
exit dynamics of a specific sector. In particular, increasing the share of firms receiving a 
public  guarantee  by  one  percentage  would  induce  a  slight  reduction  of  entry  and  exit 
rates  by  0.04  and  0.14  percentage  points,  respectively.  This  could  be  highlighting  an 
alternative  explanation  of  the  earlier  results  on  zombie  firms,  in  that  firms  receiving  a 
guarantee may be more likely to remain in the market. 

The main takeaways from the results discussed above can be summarised as follows: 

-  The  empirical  results  suggest  that  public  guarantees  do  reduce  the  interest  rate 
charged  on  the  guaranteed  loan,  although  the  EU-wide  results  are  mixed,  with 
smaller interest rate reductions and weaker statistical significance.  

-  There  is  strong  evidence  from  Italian  data  that  guaranteed  loans  with  a  higher 
guarantee coverage ratio do have lower interest rates and that the relationship is 
statistically significantly. However, the estimated interest rate reduction is smaller 
than the theoretical benchmark of a full pass-through, implying that lenders may 
still be obtaining a benefit from the public guarantee.  

-  The  Italian  data  also  suggest  that  firms  in  distress  or  zombie  firms  are 
significantly  less  likely  to  obtain  guaranteed  loans  than  safer  firms.  However, 
public  guarantees  slightly  lower  the  entry  and  exit  rates  within  a  given  sector, 
highlighting that public guarantees may make a sector less dynamic.  

4.1.1.4 

 Other competition distortions 

Public  guarantees  may  also  result  in  a  number  of  competition  distortions  that  have  not 
been  addressed  above.  Eligible  firms  may  obtain  a  competitive  advantage  over  non-
eligible  firms  that  compete  in  the  same  relevant  market,  resulting  in  a  higher 
concentration. This issue was already mentioned in section 4.1.1.3, in that sectors with a 
higher  prevalence  of  public  guarantees  tend  to  exhibit  lower  entry  and  exit  rates.  This 
section  will  address  whether  public  guarantees  could  result  in  other  competition 
distortions,  such  as  a  higher  market  concentration  in  sectors  with  higher  use  of  public 
guarantees or benefits to lenders with a higher share of guaranteed loans.  

Do public guarantees result in a higher market concentration for firms or lenders? 

The  independent  experts  first  turn  to  the  question  of  whether  recipients  of  public 
guarantees tend to create a competition distortion by increasing market concentration, at 
the  expense  of  competitors  with  no  guarantees.  Alternatively,  it  could  be  that  public 
guarantees  enhance  competition  by  reducing  market  concentration  by  ensuring  that  a 
sufficient number of entrants and incumbents survive within the market and be driven out 
by adverse credit conditions.  

45 

 
The evidence based on the Italian FCG data merged with the Orbis database shows that 
that the firms that have obtained guaranteed loans are more likely to be smaller ones in 
each  sector.  More  specifically,  large  firms  are  90%  less  likely  to  receive  public 
guarantees than smaller firms, including SMEs and micro-firms, which is not surprising 
since FCG principally focuses on smaller firms.  

The empirical specifications, based on the merged FCG-Orbis database for Italy, suggest 
that sectors with a higher prevalence of publicly guaranteed loans tend to be associated 
with  substantially  lower  market  concentration,  as  measured  by  the  Herfindahl-
Hirschmann  Index  (HHI)63.  The  estimated  correlation  coefficients  suggest  that  a  one 
percentage  point  increase  in  the  percentage  of  firms  receiving  a  public  guarantee  in  a 
sector  leads  to  a  decrease  in  the  HHI  for  that  sector  by  19.8  HHI  points  out  of  a 
maximum of 100 points (i.e. single firm).  

The  independent  experts  also  conduct  a  similar  empirical  analysis  of  concentration 
among  lenders  by  using  data  from  the  World  Bank  GFDD  (Global  Financial 
Development  Database)  on  the  concentration  in  the  banking  sectors  of  26  EU  Member 
States, measured by the asset share of the top three or five largest banks in each county, 
and  public  guarantee  intensities  for  those  Member  States,  measured  by  the  fraction  of 
firms reporting the use of public guarantees in the SAFE database. The results show that 
there  is  no  statistically  significant  correlation  between  public  guarantee  intensity  and 
banking market concentrations.  

Do public guarantees provide competitive advantages to lenders? 

Lenders may benefit from a public guarantee measure as they may not pass through the 
reduced cost of risk they obtain from the guarantee to the borrower, thereby obtaining a 
premium  over  their  normal  net  interest  incomes.  This  issue  was  discussed  in  section 
4.1.1.3 with mixed findings. This section turns to the question on whether these findings 
result in any perceivable benefits to lenders using lender-specific data.   

The independent experts use the bank-specific data for 54 large EU lenders for end-2020 
and end-2022 on guarantees from EBA’s 2021 and 2023 Stress Test reports, comprising 
the  public  guarantees  put  in  place  under  the  Temporary  Framework64,  to  determine 
whether public guarantees provide any benefits. These measures are not directly covered 
by the Guarantee Notice and therefore the results are only partly informative. However, 
all of the measures do include a requirement65 that the lender “operates a mechanism that 
ensures that the advantages [from the public guarantee] are passed on to the largest extent 
possible to the final beneficiaries.”  

63   Herfindahl-Hirschman  Index  (HHI)  is  a  commonly  used  measure  of  market  concentration  that  is 
calculated by squaring the market share of each firm competing in a specific sector and then summing 
the resulting numbers for each firm present in that sector. For the purposes of the External Study, the 
independent experts rely on a market share figure based on the annual turnover of each firm.  

64   Communication from the Commission  - Temporary framework for State aid measures to support the 
economy in the current COVID-19 outbreak (OJ C 91I, 20.3.2020, p. 1), as amended by Commission 
Communications C(2020) 2215 (OJ C 112I, 4.4.2020, p. 1), C(2020) 3156 (OJ C 164, 13.5.2020, p. 3), 
C(2020) 4509 (OJ C 218, 2.7.2020, p. 3), C(2020) 7127 (OJ C 340I, 13.10.2020, p. 1), C(2021) 564 
(OJ C 34, 1.2.2021, p. 6), C(2021) 8442 (OJ C 473, 24.11.2021, p. 1), and C(2022)  7902 (OJ C 423, 
7.11.2022, p. 9). 

65   For  more  details,  see  point  of  section  3.4  of  Communication  from  the  Commission  -  Temporary 
framework for State aid measures to support the economy in the current COVID-19 outbreak (OJ C 
91I, 20.3.2020, p. 1).  

46 

 
 
The experts first show that publicly guaranteed loans represent on 1.3% of the total assets 
of the lenders in the database. This is a surprising result that shows that public guarantees 
represent  only  a  very  modest  fraction  of  the  lenders’  balance  sheets,  despite  the 
significant number of measures put in place in response to the COVID-19 crisis.  

The  independent  experts  then  analyse  whether  lenders  that  have  a  higher  proportion  of 
guaranteed loans in their balance sheets have higher net interest margins, after controlling 
for country fixed effects. The results of the empirical assessments show that there is  no 
statistically  significant  relationship  between  the  exposures  of  the  lenders  to  public 
guarantees  and  profitability.  The  experts  also  conduct  an  additional  analysis  using  pre-
COVID-19 data for the years 2015-2019, which also point at no statistically significant 
correlation between public guarantee exposures and profitability.  

While  data  availability  has  not  allowed  the  independent  experts  to  conduct  additional 
empirical  analyses,  empirical  literature  provides  a  second  way  in  which  banks  may 
benefit from public guarantees by shifting a significant portion of their credit risks to the 
State, thereby freeing up costly capital and improving profits. Marsh and Sharma (2024)66 
use US data from COVID-19 public guarantee measures under the Paycheck Protection 
Program (PPP) to show that the lenders’ decisions to participate in the public guarantee 
measures could be motivated by risk-aversion (i.e. shifting risks to the State) rather than 
improving their net interest income. Using the French data on a guarantee measure that 
was  also  put  in  place  during  the  COVID-19  pandemic,  Nicolas  et  al.  (2023)67  confirm 
that  the  measure  encouraged  lenders  that  were  undercapitalised  and  more  exposed  to 
non-performing loans to expand activity and clean their balance sheets by shifting risks 
to the State, thereby obtaining some indirect advantages to lenders in the form of lower 
regulatory capital requirements.  

Several  studies  have  also  shown  that  banks  may  get  substantial  benefits  from  public 
guarantees by engaging in the substitution of pre-existing non-guaranteed loans that are 
riskier with guaranteed loans. Altavilla et al. (2021)68 find that guaranteed loans resulted 
in  a  moderate  degree  of  substitution,  with  each  additional  EUR  of  guaranteed  loan 
resulting  in  a  drop  in  non-guaranteed  lending  by  EUR  0.10-0.14.  This  effect  is 
significantly stronger for borrowers with a larger share of late payments, or arrears, with 
the drop in lending increasing by another EUR 0.16-0.19. Jiménez et al. (2022)69 find that 
firms  that  have  obtained  a  publicly  guaranteed  loan  reduce  their  non-guaranteed  loan 
stock  by  around  15%  and  that  this  effect  is  stronger  for  riskier  firms.  These  results 
highlight  that,  more  than  simply  crowding  out  non-guaranteed  loans,  public  guarantees 
may also result in benefits to lenders by significantly reducing their risk exposures.  

The main takeaways from the results discussed above can be summarised as follows: 

-  There  is  no  evidence  that  public  guarantee  measures  have  impacted  in  a 
statistically significant manner the degree of competition among firms. Evidence 

66   Marsh,  W.  B.  and  Sharma,  P.  (2024).  Loan  guarantees  in  a  crisis:  An  antidote  to  a  credit  crunch?, 

Journal of Financial Stability, vol. 72, issue C 

67   Nicolas, T., Ungaro, S., and Vansteenberghe, E. (2023) Public-Guaranteed Loans, Bank Risk-Taking 

and Regulatory Capital Windfall, Débats Economiques et financiers, vol 41, Banque de France. 

68   Altavilla, C. & Ellul, A. & Pagano, M. & Polo, A. & Vlassopoulos, T. (2021). Loan Guarantees, Bank 

Lending and Credit Risk Reallocation, CSEF Working Paper No. 629 

69   Jiménez,  G.  &  Laeven,  L.  &  Miera,  D.  M.  &  Peydró,  J.  (2022).  Public  Guarantees,  Relationship 
Lending and Bank Credit: Evidence from the COVID-19 Crisis, CEPR Discussion Paper No. DP17110 

47 

 
 
from  Italy  suggests  that  sectors  with  a  higher  degree  of  guarantee  intensity 
actually have a lower degree of concentration, which is most likely linked to the 
fact  that  public  guarantees  are  often  targeted  towards  those  sectors  –  even  if 
indirectly due to the higher prevalence of smaller businesses.  

-  Similarly,  based  on  bank-specific  data  obtained  on  public  guarantees  granted 
under COVID-19 measures, the market concentration and net interest earnings of 
lenders  also  are  not  statistically  linked  to  public  guarantees.  However,  these 
results may be undermined by the relatively modest share that public guarantees 
represent in the overall balance sheets of EU banks during COVID-19. Whether 
the  same  conclusion  would  hold  for  measures  that  are  based  on  the  Guarantee 
Notice is an open question.  

-  The empirical studies using COVID-19 data also suggest an additional manner in 
which  lenders  may  benefit  from  public  guarantees  in  that  lenders  might  have 
substituted  a  greater  share  of  their  pre-COVID-19  (non-guaranteed)  loans  with 
publicly guaranteed loans, especially  for riskier borrowers, resulting in a greater 
crowding  out  for  that  segment,  which  could  be  pointing  to  another  profitability 
motive for lenders.  

4.1.1.5 

 Summary of the findings concerning effectiveness 

Effectiveness  refers  to  whether  the  Guarantee  Notice  has  helped  Member  States  set  up 
methodologies that identify accurately market-consistent guarantee premiums. But a key 
evaluation criterion is whether the Guarantee Notice has also helped to prevent potential 
unwanted  effects,  such  as  crowding  out,  resulting  in  unintended  selective  advantages, 
especially to lenders, or affecting competition among firms and lenders.   

The results discussed in section 4.1.1.1 clearly highlight that the existing methodologies 
may not be sufficiently accurate in producing market conform fees across different risk 
categories and over time, especially for existing risk-based methodologies.  

With regard to unwanted effects, the first concern is that the Guarantee Notice does not 
sufficiently rule out the possibility of the use of measures that may reduce the incentives 
of private guarantors or lenders to provide funding to eligible undertakings at their own 
risk,  i.e.  without  any  form  of  support,  thereby  deterring  the  development  of  private 
markets.  

The  empirical  results  summarised  in  section  4.1.1.2  suggest  that  public  guarantee 
measures  do  not  fully  crowd  out  private  guarantees.  Thus,  at  least  some  of  those 
measures benefit undertakings that would otherwise not receive any funding from private 
markets.  However,  the  findings  also  suggest  that some  degree  of  crowding  out  may  be 
present, implying that the Guarantee Notice may not be fully successful in ruling out the 
use of measures where private funding would in any manner be available.  

A second concern is the possibility that the Guarantee Notice does not fully address the 
unintended  selective  advantages  to  lenders.  There  are  two  main  forms  of  benefits  that 
lenders may enjoy from public guarantee measures. First, lenders may not pass-through 
all the benefits they obtain from the transfer of risk to public guarantors. Second, lenders 
may  substitute  their  riskier  loans  with  guaranteed  loans.  These  actions  could  distort 
competition  in  the  funding  markets,  where  lenders  compete  with  other  financial 

48 

 
institutions,  or  even  within  credit  markets  if  certain  lenders  are  more  likely  to  benefit 
from such measures.  

With regards to  aid to lenders, the empirical results surveyed in section  4.1.1.3 suggest 
that  public  guarantee  measures  do  decrease  the  interest  rates  charged  on  the  guarantee 
below the counterfactual interest rates without any form of support. However, the amount 
of interest reduction appears to fall well short of the theoretical estimation, pointing at the 
possibility  that  some  of  the  benefits  may  not  be  passed-through.  The  empirical  results 
provided  in  section  4.1.1.4  demonstrate  that  the  amount  of  guarantee  lending  business 
does  not  contribute  significantly  to  the  lenders’  market  concentration  or  their  earnings, 
although this result could be explained by the modest share of public guarantees in those 
lenders’  loan  books.  In  contrast,  there  is  some  evidence  that  lenders  might  have 
substituted a greater share of their (non-guaranteed) loans with publicly guaranteed loans, 
especially for riskier borrowers.  

Lastly, a third concern is that the Guarantee Notice does not provide adequate safeguards 
to prevent aid to borrowers that should otherwise exit the market, such as zombie firms. 
Moreover, it could be that the aid provided to specific sectors or firms could deter entry 
into  those  sectors  or  enhance  the  market  power  of  the  recipients,  which  could  harm 
competition and undermine the healthy development of those sectors.   

The results provided in sections 4.1.1.3 and 4.1.1.4 provide a response to these concerns. 
Zombie firms are less likely to receive aid, as intended by the criteria under point (a) of 
sections 3.2 and 3.4 of the Guarantee Notice. There is some limited evidence that public 
guarantees may lower the entry and exit rates within a given sector. However, there is no 
evidence  that  public  guarantee  measures  have  impacted  in  a  statistically  significant 
manner the degree of competition among firms.  

4.1.2  Efficiency 

Efficiency refers to the determination of how successful the Notice has been in producing 
methodologies  that  are  cost-effective.  The  relevant  costs  include  the  operational  and 
administrative costs borne by all parties involved, most notably the national authorities70, 
financial  intermediaries  and  guarantee  applicants,  including  those  arising  from  delays, 
complexities  and  any  amount  of  aid  that  may  benefit  parties  other  than  the  final 
beneficiary. Costs borne by smaller beneficiaries, such as micro-enterprises, SMEs, and 
start-ups,  are  also  considered  as  those  firms  may  by  overburdened  by  complex 
application and monitoring procedures as well as the credit ratings procedures, which are 
key in the determination of market conform guarantee premiums. 

Addressing the above research question is made difficult due to general unavailability of 
data on efficiency indicators, such as time and other resources spent on exchanges with 
the Commission until the adoption of a measure as well as for the implementation of the 
adoption.  The  highly  incomplete  nature  of  the  available  data  through  mandatory 
reporting  under  Section  6  of  the  Guarantee  Notice  has  been  a  key  constraint  on  the 
experts’  ability  to  address  the  relevant  questions.  Nevertheless,  the  experts  did  use  the 
limited  data  to  the  fullest  extent  to  draw  some  results  on  the  administrative  costs 

70   See  Annex  IV  for  the  Commission’s  estimates  on  the  direct  cost  of  associated  with  developing 

methodologies.  

49 

 
 
associated with putting in place and implementing a guarantee methodology that is in line 
with the Guarantee Notice.  

4.1.2.1 

 Qualitative analysis 

The  qualitative  analysis  is  based  on  structured  interviews  of  a  sample  of  relevant 
stakeholders  involved  in  the  design,  set-up  and  implementation  of  guarantees.  The 
qualitative  analysis  also  took  into  account  the  feedback  from  the  public  and  expert 
consultations  conducted  by  the  Contracting  Authority  between  August  and  December 
2022.  Other  voluntary  contributions  received  from  different  entities,  such  as  the 
European Association of Public Banks (EAPB), were also incorporated into the analysis. 

After consultation with the Commission services, the independent experts have selected a 
sample  of  16  guarantee  measures  based  on  the  insights  obtained  on  those  measures  in 
Area 1 and with the aim to ensure sufficient variability in geographical coverage, pricing 
methodology,  and  eligibility  criteria.71  Between  April  and  June  2024,  The  independent 
experts  have  conducted  interviews  with  nine  guarantee  granting  and  administering 
authorities  on  a  total  of  ten  different  measures.72  Insights  on  two  additional  measures 
were collected through written communications. 

The  results  of  these  interviews  demonstrate  significant  variability  with  regards  to  the 
efficiency of the Guarantee Notice.  

Design and setup of guarantee measure or methodology 

With regard to costs borne by the authorities in the design and the setup of a guarantee 
measure  or  methodology,  a  commonly  quoted  bottleneck  is  that  the  current  State  Aid 
framework was too convoluted, generating difficulties in the design and the setting up of 
a  measure  or  a  calculation  methodology.  As  an  example,  one  authority  argued  that  the 
interpretation  of  the  Guarantee  Notice  was  not  straightforward,  and  it  considered  it 
necessary to consult legal experts for this purpose.  

Another  widespread  critique  relates  to  the  official  communication  lines  between  the 
guarantee granting and administering authorities and the Commission. Two respondents 
noted that although informal support and partial answers are provided relatively quickly 
by the Commission services, official replies and adoption of Commission decisions tend 
to take much longer, creating critical delays in putting the measures in place. Due to the 
lengthy pre-notification, notification and adoption stages, several respondents argued that 
they  often  wait  for  approval  without  a  clear  schedule.  One  authority  highlighted  that 
these uncertainties have disrupted workflow and caused further delays as it necessitated 
re-setting of teams and other resources. In addition to Commission’s internal delays, one 
respondent  also  identified  the  routing  of  questions  and  responses  through  permanent 
representations or ministries as an additional contributing factor.  

Four respondents also note they face significant resistance from lenders to share any data 
on  risk  assessments.  Bank  often  cite  legal  provisions  on  banking  secrecy  and  rules  on 

71   See Annexes C.14 and C.18 of the External Study for more details on the interviews.  
72   For  more,  see  https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13466-State-
and 
(expert 

aid-rules-for-assessing-State-guarantees-on-loans-evaluation_en 
https://competition-policy.ec.europa.eu/public-consultations/2022-guarantee-notice_en 
consultation).   

consultation) 

(public 

50 

 
 
information  privacy  to  argue  against  any  data  sharing.  Enhancing  cooperation  with 
financial  intermediaries  is  seen  as  being  instrumental  to  avoid  duplication  of  risk 
assessments.  This  issue  is  particularly  important  in  the  design  of  measures  targeting 
SMEs, where lack of any reliable alternatives often make it compelling for authorities to 
rely on lenders.  

Two  respondents  emphasized  that  there  was  no  high-level  exchange  of  information 
platform  in  place  with  the  involved  stakeholders,  especially  those  from  other  Member 
States,  regarding  best  practices.  The  respondents  note  that  such  a  platform  could  help 
reduce  costs,  especially  by  acting  as  a  forum  where  the  authorities  could  discuss  both 
among  themselves  and  with  the  Commission  specific  issues  relating  to  their  guarantee 
measures and methodologies.  

Application procedures, screening and monitoring 

With regards to the application and screening process, streamlined application procedures 
relying on online tools generally result in significant cost savings and quicker approvals. 
As an example, in one Member State, beneficiaries that are approved after an online or 
physical  (face-to-face)  interaction  (directly  with  the  granting  authority)  receive  a 
certificate  confirming  their  eligibility  for  a  guarantee,  which  can  then  be  used  at  any 
lender for a loan application. This procedure not only reduces costs to the authorities but 
also ensures competition among lenders, as the borrower can literally shop around for the 
best priced loan.  

Several  respondents  highlight  that  online  application  procedures  may  not  be  applicable 
for larger firms, which  are typically more complex and  require a more time-consuming 
tailored  assessment.  The  approval  of  such  complex  applications  usually  implies  the 
involvement of different grades of the authority’s staff and may take significantly longer.  

More  generally,  the  lenders  are  also  instrumental  in  the  application  stages.  This  is 
especially  the  case  for  measures  targeted  towards  SMEs  and  agricultural  companies, 
where the lender gathers all the relevant information from the applicant and applies for 
the guarantee on behalf  of that borrower. While  the arrangement clearly  shifts some of 
the administrative costs towards the lender, it is not clear how the lender is remunerated.  

The interviews also demonstrate that the guarantee administering and granting authorities 
rarely  perform  any  monitoring  activity,  which  are  typically  delegated  to  the  lender.  In 
most cases, the authorities only receive a quarterly or yearly monitoring report. In some 
measures, the authorities only receive an update for borrowers that have defaulted.  

The main takeaways from the results discussed above can be summarised as follows: 

-  The  qualitative  results  backed  by  interview  data  suggest  that  the  State  aid 
framework is considered as being too complex, calling for a significant amount of 
resource allocations from Member States, especially in the design and setting up 
stages.  Several  respondents  highlighted  that  collaboration  among  stakeholders, 
including  the  public  authorities  responsible  for  administering  and  granting 
guarantee measures, to learn from best-practices could help in this manner.   

- 

Interview  data  also  highlights  that  the  lengthy  pre-notification,  notification  and 
adoption  stages  relating  to  individual  decisions  result  in  uncertainty  and  costly 
staff re-allocations over time.  

51 

 
-  The interviews also show that there is significant resistance from lenders to share 
any  data  on  risk  assessments  with  the  authorities  in  some  cases,  which  is 
particularly  problematic  in  guarantees  covering  smaller  firms  and  start-ups  for 
which data availability is limited. This issue increases administrative costs both in 
the design, setup and implementation stages.  

4.1.2.2 

 Quantitative analysis 

Due  to  the  general  unavailability  of  dataset  that  would  allow  the  comparison  of 
administrative costs of different public guarantee measures, including those that are not 
within the scope of the Guarantee Notice, the quantitative analysis will focus solely  on 
design elements that may help reduce costs to Member States. The analysis is based on 
reports  submitted  by  Member  States  in  line  with  Section  6  of  the  Guarantee  Notice 
(“Section 6 data”).  

The  final  dataset  contains  data  on  a  yearly  basis  for  43  measures  covering  12  Member 
States (Belgium, Bulgaria, Croatia, Czechia, Denmark, Estonia, Greece, Hungary, Latvia, 
Netherlands,  Poland,  Romania).  The  reports  contain  general  information  on  each 
measure, including the name of the measure, the start and end dates, the number and the 
amount of guarantees issued, as well as the administrative costs and costs associated with 
triggering of guarantees, income from premiums charged and the number of defaults.  

The independent experts have faced a number of data issues during the analysis, which 
undermines  some  of  the  results.  In  particular,  there  are  some  missing  elements  in  the 
dataset (e.g. no default data although default costs are reported). In addition, there were 
significant outliers, which were removed using conventional methods73.  

The  indicators  below,  unless  mentioned  otherwise,  are  aggregated  by  summing  values 
across years. Thus, they should not be seen as estimates of what is borne by a guarantor 
as annual administrative costs, but a cumulation of those costs across the years for which 
data was reported.  

The  results  of  quantitative  analysis  based  on  the  Section  6  data  show  that  the  median 
cumulative  administrative  costs  represent  1.4%  of  the  total  value  of  guarantees  issued 
while the average figure is around 2.8%, which is significantly higher given the presence 
of  extremely  high  values.  This  is  also  clear  from  Figure  14,  which  clearly  depicts  the 
significant  variability  in  administrative  costs  not  only  across  but  also  within  some 
Member States.  

73   See Annex C.19 of the External Study for more details.  

52 

 
 
Figure 14: Administrative costs as a share of total value of guarantees issued 

Note: The dotted line depicts the median (1.4%) value for the 43 measures across 12 Member States.  

Another  question  is  the  extent  to  which  the  cumulative  revenues  from  guarantee 
premiums compare to the total costs, i.e. the administrative costs and the guarantee claim 
disbursements following the default of borrowers. This issue clearly goes to the heart of 
the question of whether the measures are self-financing. While one would expect non-aid 
schemes to be self-financing, as required under point (d) of Section 3.4 of the Guarantee 
Notice,  guarantee  premium  collections  may  well  fall  short  of  total  costs  for  other 
measures.  

The  data  confirms  these  expectations,  although  only  to  some  extent.  The  median 
guarantee premium collections, depicted by a dotted line in Figure 15, represent 69% of 
the  total  costs,  mainly  due  to  the  predominance  of  aid  measures  in  the  sample.  In 
particular, all but 4 of the 21 observations below the median line correspond to measures 
involving  aid.  More  specifically,  for  the  29  measures  for  which  guarantee  premium 
collections  are  below  total  costs,  or  below  100%  in  the  nearly  two  thirds  are  aided 
measures. These results  imply that in some cases the measures are not necessarily self-
financing, at least based on the information provided.  

53 

 
 
Figure 15: Guarantee premium collections as a share of total costs, including 
administrative costs and guarantee claim disbursements 

Note: The dotted line depicts the median (69%) value for the 43 measures across 12 Member States.  

The independent experts’ statistical analysis incorporates annual reports sent by Member 
States  for  each  of  the  43  measures,  resulting  in  a  total  of  293  observations.  The 
regression results based on this data show that the size of the measure, as proxied by the 
total  value  of  the  guarantees  issued,  has  a  statistically  significant  negative  impact  on 
administrative costs (as a share of total value of guarantees issued). This result is a clear 
indication  that  there  are  economies  of  scale,  implying  that  larger  measures  tend  to  be 
associated with lower unit administrative costs. More specifically, increasing the size of 
the  measure  by  EUR  10  million  of  guarantees  issued  results  in  a  reduction  of  the 
administrative costs by up to 0.016 percentage points.  

Furthermore, no-aid measures tend to have statistically significantly larger administrative 
costs, by up to 1 percentage points. This result may be explained by the fact that a no-aid 
measure  may  involve  closer  monitoring  to  ensure  that  the  measure  remains  both  self-
financing and market conform to ensure a healthy take up of the measure by borrowers.  

Beyond  these  results,  none  of  the  other  explanatory  variables  exhibit  a  statistically 
significant relationship with the administrative costs. The main findings are as follows: 

-  Administrative  costs  are  only  weakly  linked  to  default  costs  following  the 
triggering of a guarantee. In particular, a 1 % increase in the default ratio appears 
to increase administrative costs by 0.01 to 0.02 percentage points.  

-  Measures  based  on  safe  harbour  premiums  under  Sections  3.3  or  3.5  of  the 
Guarantee Notice do have lower administrative costs, up to 0.5 percentage points 
when  compared  to  other  measures.  However,  the  statistical  significance  of  the 
result is very weak, which may be driven by the general unavailability of data on 
safe harbour measures, i.e. only 3 of the 43 measures in the sample are identified 
as  safe  harbour  measures.  Nonetheless,  it  is  likely  that  the  result  reflects  some 
realism.  It 
involve  higher 
administrative costs as they require complex procedures to demonstrate the self-
financing  nature  of  the  scheme  as  well  as  a  proper  risk  orientation  of  the 
guarantee premiums.  

that  risk-based  methodologies 

is  conceivable 

54 

 
 
-  Single  premium  measures  for  SMEs  covered  by  Section  3.5  of  the  Guarantee 
Notice  have  lower  administrative  costs  than  other  measures  by  around  0.09 
percentage  points.  However,  the  relationship  is  weak,  both  in  terms  of  its 
magnitude and its statistical significance.  

In addition to the above empirical assessments, the independent experts also provide an 
overview  of  the  average  administrative  costs  associated  with  different  tasks  as  a 
percentage of the outstanding guaranteed amounts on an annual basis. Since the data on 
task-related  costs  is  mostly  incomplete,  the  dataset  is  reduced  once  again  to  24 
observations  covering  11  Member  States.  The  analysis  reveals  that  the  risk  monitoring 
and  management  tasks  cost  between  0.10%  to  0.15%  with  an  average  of  0.13%  of  the 
guaranteed  amounts  on  an  annual  basis.  However,  the  more  involved  task  of  risk 
assessments cost between 0.15% to 1.15%, with an average of 0.61% of the guaranteed 
amounts, also on an annual basis. Putting these together, the annual administrative costs 
range from a low of 0.25% to a high of 1.3% of the guaranteed amounts, with an average 
of 0.74%.  

The main takeaways from the results discussed above can be summarised as follows: 

-  The quantitative analysis highlights that guarantee premium collections may well 
fall  short  of  total  costs,  including  in  some  cases,  no-aid  schemes.  This  result  is 
somewhat disturbing given that point (d) of Section 3.4 of the Guarantee Notice 
requires such measures to be self-financing.  However, data limitations may also 
be an additional explanatory factor behind this finding.  

-  There  is  clear  evidence  that  larger  measures  are  associated  with  lower  (unit 
administrative costs), i.e. economies of scale. Moreover, no-aid measures tend to 
have  higher  administrative  costs,  which  could  be  explained  by  the  fact  that  in 
addition to remaining self-financing, Member States may have to devote further 
resources  to  ensure  that  the  measure  does  not  become  too  costly  for  borrowers, 
resulting in a healthy take up.  

-  The  annual  costs  related  to  risk  assessment  are  substantially  greater  than  other 
administrative costs, with  an average of 0.61% of the total  guaranteed  amounts. 
The  total  annual  administrative  costs,  including  all  relevant  risk  assessment, 
monitoring  and  management  tasks,  is  around  0.74%  of  the  total  guaranteed 
amounts. 

4.1.2.3 

 Summary 

Efficiency refers to whether the Guarantee Notice has helped Member States in setting up 
methodologies  in  a  cost-effective  manner,  without  introducing  undue  complexities, 
bureaucratic  obstacles  and  red  tape  while  recognising  any  cost  synergies  or  other 
elements  that  could  reduce  costs.  Due  to  data  limitations,  the  section  has  been  divided 
into a discussion of the qualitative and quantitative results.  

The qualitative results reviewed in section 4.1.2.1 highlight that the Member States view 
the State aid framework as being complex, especially in the design and setting up stages, 
including  the  pre-notification,  notification  and  adoption  stages.  The  respondents  to  the 
interviews,  which  mostly  include  public  guarantee  administering  and  granting  bodies, 
generally lack the information and data sources that are crucial for their risk assessments, 
worsened  in  some  cases  by  the  reluctance  of  lenders  to  share  their  own  data  or 
assessments.  There  is  no  formal  forum  where  the  relevant  stakeholders  may  discuss 

55 

 
issues  on  a  timely  manner.  All  of  these  elements  drive  up  the  administrative  costs,  not 
only  for the  administrators but  also  for the final  beneficiaries, thereby undermining the 
efficiency of the measures.  

Owing  to  the  limited  nature  of  the  available  data,  the  quantitative  results  surveyed  in 
section 4.1.2.2 focus more on whether the administrative costs of the public measures are 
covered  by  the  premium  collections  as  well  as  elements  that  could  be  identified  as  the 
source of high costs. First, and foremost, empirical results show that guarantee premium 
collections  may  well  fall  short  of  total  costs,  including  in  some  cases,  no-aid  schemes. 
Second,  there  is  clear  evidence  that  larger  measures  are  associated  with  lower  (unit 
administrative costs), i.e. economies of scale, which implies that smaller Member States 
may  be  particularly  prone  to  higher  costs.  Once  again,  no-aid  measures  tend  to  have 
higher costs, which could  be explained by additional resources that the authorities may 
need  to  devote  to  remain  competitive.  Lastly,  the  results  highlight  that  administrative 
costs associated with risk assessments are several multiples of any other costs, including 
monitoring and management costs.  

4.2  Coherence 

The evaluation of the coherence74 of the Guarantee Notice assesses whether the Notice is 
legally  and  economically  sound  and  consistent,  both  on  a  stand-alone  basis  (internal 
coherence)  and  in  relation  to  other  State  aid  legislation  and  guidance  (external 
coherence). Whether or not the Guarantee Notice is coherent with the broader financial 
services  legislation  does  not  fall  within  the  scope  of  the  evaluation,  as  explained  in 
section 1.3.  

Issue #1. Preference over direct pricing information vs. benchmarks vs. proxies 

The  independent  experts  identified  the  relative  ranking  of  market  information  on  a 
specific  transaction,  market  benchmarks  and  market  proxies  as  a  potential  incoherence 
between the Guarantee Notice and the Notice on the Notion of Aid.   

In  particular,  the  Notice  on  the  Notion  of  Aid  envisages75  that  comparable  market 
transactions,  i.e.  benchmarks,  should  only  be  used  in  the  absence  of  direct  pricing 
information on a given loan transaction. Applying this point by analogy to guarantees on 
loans  would  imply  that  pricing  information  relating  to  a  specific  transaction  should  be 
prioritised over market benchmarks, such as pricing information relating to comparable 
transactions, i.e. market benchmarks. For example, if a public guarantee is accompanied 
by  a  private  guarantee  on  the  same  loan,  then  this  information  should  take  precedence 
over market benchmarks (i.e. prices of guarantees for similarly rated firms).  

In  addition,  the  Notice  on  the  Notion  of  Aid  also  envisages  a  preference  for  market 
benchmarks  over  market  proxies,  (i.e.  market  prices  generated  by  a  pricing 
methodology).76 Once again, although the relevant text in the Notice on the Notion of Aid 

74   Results  of  the  public  and  expert  consultations  were  inconclusive  with  regard  to  coherence,  so  the 

evaluation mainly relied on the expert study. 

75   See  point  111  of  the  Notion of  Aid:  “In  the absence  of  specific  market  information  on a  given debt 
transaction, the debt instrument's compliance with market conditions may be established on the basis 
of a comparison with comparable market transactions (that is to say through benchmarking).” 

76   This  is  clear  from  point  113 of  the  Notion  of  Aid:  “If  comparable  transactions  have  typically  taken 
place  at  a  lower  price  than  that  indicated  as  a  proxy  by  the  reference  rate,  the  Member  State  can 
consider this lower price to be the market price. If, on the other hand, the same company has carried 

56 

 
 
 
refers only to loan subsidies, applying them by analogy to guarantees would imply that 
the market proxies generated by, say a guarantee methodology, should be overridden by 
market benchmarks (e.g. from comparable guarantee transactions) if the two deviate from 
one another.  

This  implicit  preference  structure  is  only  indirectly  (and  incompletely)  mentioned  for 
individual guarantee measures under point (d) of section 3.2 of the Guarantee Notice, i.e. 
“[i]f  no  corresponding  guarantee  premium  benchmark  can  be  found  on  the  financial 
markets…”.  

In  this  context,  the  safe  harbour  premiums  for  SMEs  as  set  out  in  section  3.3.  of  the 
Guarantee  Notice  are  referred  to  as  “proxies  (and  irrebuttable  presumptions  […]  for 
SMEs)” under the Notice on the Notion of Aid.77 Accordingly, the hierarchy as set out in 
the  Notion  of  Aid  would  normally  have  to  be  applied  with  regard  to  these  proxies,  as 
well. However, the Guarantee Notice explicitly notes that the application of safe harbour 
rates is optional and within the discretion of the Commission.78 This derogation from the 
aforementioned hierarchy could be explained by the fact that the Guarantee Notice aims 
at simplifications and improved access to finance for SMEs.79 As a result, the hierarchy is 
not applied with regard to safe harbour premiums for SMEs. This is also reflected in the 
Commission’s case practice.80 

Issue #2. Use of pricing of non-guaranteed loan in the Notice on the Notion of Aid 

The Notice on the Notion of Aid envisages81 that the interest rate of the non-guaranteed 
loan must be used to determine the total cost of the guaranteed loan, i.e. the interest rate 
of the guaranteed loan plus the guarantee premium. This possibility is only mentioned for 
individual  guarantee  measures  under  point  (d)  of  section  3.2  of  the  Guarantee  Notice, 
“[i]f  no  corresponding  guarantee  premium  benchmark  can  be  found  on  the  financial 
markets, the total financial cost of the guaranteed loan, including the interest rate of the 
loan  and  the  guarantee  premium,  has  to  be  compared  to  the  market  price  of  a  similar 
non-guaranteed loan.” More generally, the wording in the Notice on the Notion of Aid 
and  point  (d)  of  section  3.2  of  the  Guarantee  Notice  raises  the  question  whether  the 
interest  rate  on  a  non-guaranteed  loan  should,  in  effect,  be  preferable  to  the  market 
proxies generated by a given pricing methodology. This incoherence may undermine the 
consistency  and  comparability  of  public  measures  that  are  based  on  similar  financial 
instruments,  such  as  interest  rate  subsidies  and  credit  guarantees.  Perhaps  more 
importantly, it could also result in legal uncertainty with respect to aid-free measures that 

out recent similar transactions at a higher price than the reference rate, and its financial situation and 
the market environment have remained substantially unchanged, the reference rate may not constitute 
a valid proxy of market rates for that specific case.” 

77   Point 114 of the Notion of Aid. 
78   As an example, see Section 3.3. of the Guarantee Notice: “the Commission can by way of derogation 

from point 3.2(d) accept a simpler evaluation of whether or not a loan guarantee involves aid.” 

79   See Section 2.4 of this document on the background of the introduction of safe harbour premiums and 
Section  3.5.  of  the  Guarantee  Notice:  “In  view  of  the  specific  situation  of  SMEs  and  in  order  to 
facilitate their access to finance“. 

80   See e.g. SA.109147 (2023/N) – Slovakia Calculation of aid elements in the provision of guarantees to 

SME. 

81   See point 111 of the Notion of Aid: “In the case of guarantees, if no corresponding price benchmark 
can be found on the financial markets, the total financing cost of the guaranteed loan, including the 
interest  rate  of  the  loan  and  the  guarantee  premium,  should  be  compared  to  the  market  price  of  a 
similar non-guaranteed loan”. 

57 

 
 
respect  the  relevant  provisions  of  the  Notice  on  the  Notion  of  Aid  and  whether  those 
same measures may be considered to be in line with the Guarantee Notice.   

Issue  #3.  Incompatibility  of  guarantee  premiums  under  Guarantee  Notice  with  risk 
margins under the Reference Rate Communication 

As is clear from point 112 of the Notice on the Notion of Aid, the Guarantee Notice and 
the Reference Rate Communication share a common aim of producing market proxies to 
determine the aid character of loans and guarantees. To that extent, one would expect a 
degree  of  comparability  between  the  two  frameworks.  This  expectation  would,  in 
particular, apply to any common factor that enter into the pricing of a loan or a guarantee, 
such as the so-called credit risk margin or the loan margin.82  

The  independent  experts  highlight  that  the  two  frameworks  are  quite  distinct  when  it 
comes to what a market conform credit risk margin should be. For example, a firm with a 
low  credit  risk,  corresponding  to  a  AAA  to  A  rating,  is  associated  with  loan  margins 
between 60 to 100 basis points under the Reference Rate Communication, depending on 
the degree to collateralisation. In turn, the safe harbour premiums described under section 
3.3 of the Guarantee Notice require that the annual premiums should at least be between 
40  to  55  basis  points  for  similarly  rated  SMEs.  It  is  easy  to  see  that  the  credit  risk 
margins implied by this treatment under the Guarantee Notice would be much lower than 
those spelt out in the Reference Rate Communication, once the necessary adjustments to 
the former are made, i.e. netting out administrative and capital remuneration costs.83 The 
guarantee  premiums  do  not  take  into  account  any  level  of  collateralization,  and  the 
guarantee premiums’ dependence on the credit quality step of the borrower is much more 
granular  when  comparing  to  the  corresponding  features  in  the  Reference  Rate 
Communication. Similarly, the Guarantee Notice and the Reference Rate Communication 
have different levels of granularity for the credit risk steps.  

The examples  above highlight three areas in which the Reference Rate Communication 
and  the  Guarantee  Notice  differ  in  the  way  they  treat  credit  risk  margins.84  First,  the 
margins  themselves  are  not  comparable.  Second,  the  Guarantee  Notice  does  not 
incorporate any consideration for collateral levels. Third, while the safe harbour rates are 
only applicable for SMEs, the reference rates are applicable more broadly.  

Beyond  the  safe  harbour  premiums,  the  Reference  Rate  Communication  also  does  not 
contain any guidelines or sufficient conditions to allow Member States to calculate their 

82   For the purposes of this sub-section, credit risk margin or loan margin refers to the guarantee premium 
(for guarantees) and what a borrower pays over the so-called base rate, or the funding cost (for loans). 
Unlike  the  discussions  in  earlier  Sections,  the  term  incorporates  all  of  the  administrative,  capital 
remuneration and other relevant costs associated with guarantees and loans, which are assumed to be 
also the same for simplicity.  

83   As an interesting side note, the credit risk margins and loan margins applicable to unrated firms appear 
more comparable. More specifically, an unrated firm or a startup is associated with a loan margin of at 
least  400  basis  points  in  the  Reference  Rate  Communication,  while  the  Guarantee  Notice  only 
associates a safe-harbour premium of 380 basis points. 

84   In comparison, OECD’s Export Credit Arrangement does incorporate a single credit risk element for 
the  calculation  of  export  credit  subsidies  and  guarantees.  More  specifically,  Article  21  of  the 
Arrangement  foresees  the  identification  of  a  common  element,  or  the  so-called  “Minimum  Premium 
Rate”,  which  is  to  be  applicable  for  both  market  conform  interest  rate  and  guarantee  premium 
calculations.   

58 

 
 
own reference rates, which would be comparable to sections 3.2 and 3.4 of the Guarantee 
Notice.  

Issue #4. Aid to the lender 

The independent experts identify the different ways in which the Guarantee Notice and 
the rest of the relevant State aid framework exclude aid to the lender as another potential 
incoherence. In particular, there is no requirement or guideline on how aid to the lender 
should be assessed and, to the extent possible, ruled out. More specifically, section 2.3 of 
the  Guarantee  Notice  only  describes  cases  in  which  guarantees  may  provide  aid  to  the 
lender  and  draws  attention  to  the  “fact  that  such  aid  might,  in  principle,  constitute 
operating aid”. Beyond these high-level descriptions, it does not provide any guidelines 
on  how  such  aid  may  be  ruled  out  or  minimised  and  any  applicable  conditions.  This 
approach  contrasts  quite  remarkably  with  GBER,  where,  under  Article  21  paragraph 
13(b)  as  applicable  to  risk  finance  aid,  the  financial  intermediaries  should  be  “selected 
through an open, transparent, and non-discriminatory call”.  

Against  this  background,  the  following  provides  a  summary  of  the  assessment  of  the 
coherence of Guarantee Notice:  

-  The Notice on the Notion of Aid envisages that pricing information obtained from 
comparable market transactions, i.e. market benchmarks, should only be used in 
the absence of direct pricing information on that very transaction85. Furthermore, 
the Notion of Aid also envisages a preference for market benchmarks over market 
proxies, such as those generated by a pricing methodology86. Lastly, the Notice on 
the Notion of Aid also requires the use of the interest rate of the non-guaranteed 
loan to be comparable to the total cost of the guaranteed loan. These  preference 
structures are not fully taken into account in the Guarantee Notice.  

-  The approaches of the Guarantee Notice and the Reference Rate Communication 
are not consistent with one another in terms of the fixed credit margin tables. In 
particular,  the  indirect  credit  margins  that  are  implied  by  the  safe  harbour 
the  Reference  Rate 
premiums  are  not  comparable 
Communication.  Moreover,  the  Guarantee  Notice  remains  applicable  only  for 
SMEs and does not incorporate any consideration for collateral levels.  

those  fixed  by 

to 

-  The  Guarantee  Notice  does  not  provide  guidance  on  how  to  rule  out  indirect 
advantages to lenders. Thus, it is not fully aligned with the ex ante examination 
that  is  called  for  by  the  Notice  on  the  Notion  of  Aid87.  This  omission  also 
contrasts with the GBER as applicable to risk finance aid, where it is required that 
financial  intermediaries  are  “selected  through  an  open,  transparent,  and  non-
discriminatory call”88.  

85   See point 111 of the Notice on the Notion of Aid. 
86   See point 113 of the Notice on the Notion of Aid. 
87   See point 116 of the Notice on the Notion of Aid. 
88   See GBER Article 21 paragraph 13(b). 

59 

 
 
4.3  EU  added  value  -  How  did  the  Guarantee  Notice  make  a  difference  and  to 

whom?  

The  evidence  gathered  in  the  evaluation,  particularly  the  expert  consultation  and  the 
external study, suggests that the Guarantee Notice has a clear EU added value compared 
to  a  situation  without  any  guidance.  In  particular,  the  Guarantee  Notice  has  provided  a 
framework  within  which  the  Commission  can  approve  guarantee  methodologies 
developed  by  Member  States  and  which  provides  directly  applicable  safe  harbour 
premiums. It has thereby increased predictability and legal certainty in the context of the 
approval  of  guarantee  methodologies  and  the  corresponding  measures.  Lastly,  the 
application  of  the  Guarantee  Notice  has  also  ensured  a  level  playing  field  between 
Member States. 

4.4  Relevance of the Guarantee Notice 

As explained in section 3.3.2, Member States continue to notify guarantee methodologies 
based  on  the  Guarantee  Notice.  The  stock  of  the  approved  methodologies  therefore 
continues  to  increase.  These  continued  notifications  by  Member  States  to  obtained 
approved guarantee methodologies shows that the Guarantee Notice remains relevant. In 
addition, respondents to the expert consultation have emphasized the Guarantee Notice’s 
role in guiding stakeholders and noted the enduring relevance of its concepts, addressing 
the  needs  of  Member  States  and  other  stakeholders  over  time  with  regard  to  financing 
companies. The fact that guarantees do not imply immediate fiscal costs are also driving 
Member States’ use of the Guarantee Notice for public guarantees, which is in evidence 
from  the  significant  number  of  on-going  discussions  with  Member  States  for  new 
methodologies that are yet to be adopted.89 More broadly, the Guarantee Notice remains 
relevant as the calculation of a market conform premium and the measurement of the aid 
element  are  quite  distinct  for  guarantees  than  for  other  support  measures,  such  as  loan 
subsidies and grants. Nevertheless, due to the changing market conditions and regulatory 
environment since 2008, the evaluation has shown that the Guarantee Notice has several 
shortcomings,  notably  the  fixed  nature  of  the  safe  harbour  premiums  and  a  capital 
remuneration for self-financing methodologies that is not in line with current regulatory 
levels.  

5  WHAT ARE THE CONCLUSIONS AND THE LESSONS LEARNT? 

5.1  Conclusions 

The  present  evaluation  aims  to  assess  whether  the  Guarantee  Notice  remains  ‘fit  for 
purpose’,  to  identify  its  shortcomings  and  to  verify  whether  there  is  any  scope  for 
improvements or simplifications.  

The  findings  provided  in  section  3.3  demonstrate  that  Member  States  have  made 
extensive  use  of  the  methods  offered  by  the  Guarantee  Notice  to  provide  public 
guarantees. The widespread and increasing use of both the risk-based methodologies and 
safe  harbour  premiums  suggests  that  Member  States  value  the  guidance  offered  by  the 
Guarantee  Notice.  These  also  confirm  that  the  Guarantee  Notice  continues  to  fulfil  an 
important role as secondary legislation under which Member States can provide aid in the 

89   As  of  1  September  2025,  there  are  on-going  pre-notification  and  notification  discussions  with  7 

Member States for new methodologies.  

60 

 
 
form  of  guarantees.  In  addition,  this  framework,  within  which  the  Commission  can 
approve guarantee methodologies developed by Member States in line with the guidance 
provided by the Guarantee Notice, results in a level playing-field.  

However,  the  evaluation  has  also  shown  some  shortcomings  with  regards  to  the 
effectiveness, efficiency, and the coherence of the Guarantee Notice with other State aid 
legislation.  

With  regards  to  effectiveness,  the  results  summarised  in  section  4.1.1.1  clearly 
demonstrate  that  the  existing  methodologies  do  not  yield  an  accurate  estimation  of 
market  conform  guarantee  premiums  in  many  cases.  This  is  especially  the  case  for 
existing risk-based methodologies, which produce premiums that are consistently lower 
than  the  relevant  benchmarks  across  different  risk  categories,  maturities,  and  time 
horizons.  The  existing  safe  harbour  premiums,  however,  produce  guarantee  premiums 
that are higher than the relevant benchmarks only for lower risk BBB-rated borrowers.  

Also linked to effectiveness is the question of whether the guidance provided under the 
Guarantee  Notice  helps  prevent  potential  unwanted  effects  and  competition  distortions. 
The  empirical  results  presented  in  section  4.1.1.2  suggest  that  public  guarantees  do 
provide  some  form  of  additionality,  ruling  out  the  possibility  that  they  lead  to  full 
crowding  out  of  private  risk  taking.  However,  there  is  some  evidence  from  reviewed 
empirical studies using COVID-19 guarantee measure data in section 4.1.1.4 that lenders 
might have substituted higher risk non-guaranteed loans with publicly guaranteed loans, 
suggesting  that  there  may  be  some  crowding  out  for  that  category  of  borrowers.  More 
generally,  although  the  empirical  evidence  in  section  4.1.1.3  suggests  that  public 
guarantees do result in lower interest rates than what would otherwise be possible, these 
lower interest rates are not sufficient to fully rule out aid to lenders. Nevertheless, these 
potential benefits are also not large enough to generate statistically significant financial 
gains  or  competitive  advantages  for  lenders.  This  also  mitigates  the  risk  of  the 
qualification  of  the  (indirect)  aid  to  lenders,  as  extraordinary  public  financial  support, 
under the BRRD/SRMR. 

Regarding  efficiency,  the  voluntary  stakeholder  interviews  demonstrate  that  the 
implementation  of  the  Guarantee  Notice  is  considered  to  be  complex,  calling  for  a 
significant amount of resource allocations from Member States, especially in the design 
and  setting  up  stages  of  guarantee  methodologies.  In  addition,  lengthy  pre-notification, 
notification  and  adoption  stages  result  in  uncertainty  and  costly  allocations  or  re-
allocations  of  resources.  The  quantitative  analysis  suggests  that  larger  measures  are 
associated  with  lower  administrative  costs  as  a  share  of  guaranteed  amounts,  implying 
significant  economies  of  scale  and  potentially  higher  unit  costs  for  smaller  measures 
and/or  Member  States.  In  addition,  although  safe  harbour  measures  and,  to  a  lesser 
extent, single premium schemes, do have lower (unit) administrative costs, the results are 
not statistically significant.  

Regarding external coherence, a key message is that the ranking established in the Notice 
on the Notion of Aid on the types of market information to be used in the estimation of 
the  market  conform  premiums  is  not  fully  incorporated  in  the  Guarantee  Notice.  In 
addition, the independent experts identify several inconsistencies between the Guarantee 
Notice  and  the  Reference  Rate  Communication,  most  notably  on  the  credit  margins, 
eligibility conditions and consideration for collateral levels. Lastly, the Guarantee Notice 
does  not  provide  guidance  on  how  to  rule  out  indirect  advantages  to  lenders,  unlike 

61 

 
specific conditions and criteria provided in the Notice on the Notion of Aid as well as in 
GBER.    

5.2  Lessons learnt 

The  following  issues  describe  the  key  lessons  learnt  that  emerged  from  the  evaluation. 
Note  that  some  of  these  issues  are  not  directly  addressed  by  the  Study  but  rather  are 
based on discussions with Member States in the context of specific cases (see discussion 
section 3.4).  

Lesson #1. Existing safe harbour premiums may be too high for higher risk borrowers 

Safe  harbour  methodologies  could  be  less  preferable  for  Member  States,  as  noted  in 
section  3.4,  since  the  targeted  beneficiaries,  i.e.  SMEs  and  start-ups,  typically  have 
higher  default  risks.  Since  the  fixed  safe  harbour  premiums  for  those  beneficiaries  are 
higher than the benchmark premiums, it should not come as a surprise that many Member 
States  opt  for  developing  risk-based  methodologies  for  those  beneficiaries,  even  if  this 
results in extra costs and complexity.  

Lesson  #2.  Accuracy  of  risk-based  methodologies  may  be  undermined  due  to 
inappropriate parameters or incorrect specifications 

The  evaluation  demonstrates  that  the  accuracy  of  risk-based  methodologies  may  be 
undermined if the parameters used are not aligned with market reality. The following are 
three key areas where misalignments may be originating from:  

a)  The  accuracy  of  the  premiums  calculated  under  any  risk-based  methodology 
could be undermined due to the substantial variability in administrative costs. As 
described in section 4.1.2.2, the reported annual administrative costs as a share of 
the guaranteed amounts range from a low of 0.10% (for measures involving only 
risk monitoring and management tasks) to a high of 1.3% (for measures that also 
involve  the  more  costly  risk  assessment  tasks),  with  an  average  of  0.74%.  It  is 
possible  that  some  of  this  variability  is  due  to  differences  in  not  only  the  tasks 
performed  but  also  the  specific  characteristics  of  the  underlying  loans  and  the 
targeted beneficiaries 

b)  As noted in section3.4, a more granular approach for determining the amount of 
capital  that  needs  to  be  set  aside  and  the  expected  earnings  on  that  capital  may 
help  align  the  Guarantee  Notice  with  the  new  regulatory  environment.  In 
particular, Article 122 of the CRR sets the standardised-approach risk weights for 
corporate exposures, ranging from 20% (for AAA-rated borrowers) to 150% (for 
borrowers with  a rating  of B+ and  below).  These imply  that a minimum capital 
requirement  of  10.5%  as  a  percentage  of  risk-weighted  assets  translates  into 
capital charges of 2.1% and 15.8% as a percentage of the notional loan amounts 
for  borrowers  with  a  rating  of  AAA  and  B,  respectively.90  These  considerations 

90   A similar case can also be made for expected earnings on capital. While footnote 17 of the Guarantee 
Notice  suggests  the  use  of  400  basis  points  as  the  “normal  risk  premium  for  equity”,  the  return  on 
equity  for  significant  institutions  averaged  at  a  much  higher  9.5%  for  end-2024  and  an  average  of 

62 

 
 
 
 
 
demonstrate  that  the  single  example  provided  in  Footnote  17  of  the  Guarantee 
Notice is not only outdated, but could also result in an accurate representation of 
the amount of capital  market  participants have to put  aside, resulting  in a lower 
premiums, especially for higher risk categories.   

c)  Also  as  noted  in  section  3.4,  there  is  very  little economic  justification  for  a  4% 
risk  premium,  at  least  in  the  current  market  conditions,  which  is  cited  as  an 
example in  the Notice. Fitch Ratings reports that the 20 largest  European banks 
are  expected to  maintain a return on  equity of  around 12% in  2025,  while S&P 
Global Ratings provides a slightly more conservative estimate of 9%. On average, 
the  return  on  equity  for  European  banks  has  been  around  6%  over  the  past  10 
years  and  has  rarely  dropped  to  4%  or  lower.  Another  source  of  misalignment 
could  be  the  fact  that  the  current  Guarantee  Notice  does  not  require  that  higher 
risk is compensated by higher return. 

The inaccuracies may also be explained by the fact that certain parameters are not taken 
into  account  at  all  in  the  calculation  of  the  premiums.  The  following  are  key  areas  for 
such incomplete specifications: 

a)  As  noted  in  section  4.1.1.1,  the  existing  methodologies  typically  do  not 
distinguish  risk  levels  based  on  the  maturity  of  the  underlying  loan  or  the 
guarantee  itself.  This  contrasts  with  the  observation  that  investors  typically  ask 
for additional margins on certain types of financial instruments, including loans, 
to  account  for  inflation,  interest  rate  and  liquidity  risks  associated  with  longer 
term assets.  

b)  Some of the existing methodologies do not incorporate any elements  to  account 
for changing market conditions. While private guarantees and similar instruments 
in  the  market  do  have  fixed  prices,  which  are  paid  on  regular  intervals  (e.g. 
annually or monthly) for the entire duration of the loan, those prices usually take 
into  account  information  on  expected  or  potential  market  developments  at  the 
date on which the price is agreed. In contrast, the results summarised in  section 
4.1.1.1  highlight  that  existing  methodologies  typically  exhibit  a  much  lower 
sensitivity  to  market  dynamics  than  the  relevant  benchmarks  and  that,  in  some 
cases, the premiums are set at a fixed level for the entire duration of the measure.  

c)  The Guarantee Notice does not take into account counterparty credit risk, which 
is linked to the possibility that the public guarantor may not be able to honour its 
guarantee  obligations.  The  independence  experts  note  that  the  consideration  for 
counterparty  credit  risk  is  a  key  component  of  the  pricing  of  guarantees  and 
similar  financial  products,  such  as  CDS  and  similar  credit  derivatives.  In 
particular, the pricing of those financial transactions is typically inversely linked 
to the default risks associated with the insurance provider.  

Lesson #3. There may be potential aid to lenders 

The  empirical  evidence  in  section  4.1.1.3  suggests  that  public  guarantees  do  result  in 
lower interest rates than what would otherwise be possible, these lower interest rates are 

6.4%  between  2016  and  202490.  For  less  significant  institutions,  the  return  on  equity  was  lower,  at 
6.9% at end-2024 and an average of 5.2% between 2020 and 2024 (the longest set of period for which 
data was available). 

63 

 
 
not  sufficient  to  fully  rule  out  aid  to  lenders.  As  discussed  in  section  3.4,  the 
Commission’s services were able to address some of the identified shortcomings in some 
of the recent approved methodologies, by incorporating the effective interest rate (EIR) 
safeguard.91  However,  the  Commission’s  experience  in  these  decisions  highlight  a 
number of issues, ranging from the significant variability in administrative costs (section 
4.1.2.2) and the sensitivity of the calculated floor to estimations errors (section 3.4).  

Lesson #4. The current framework is undermined by limited information sharing, lack of 
standardisation and poor quality reporting 

Interviews  conducted  by  the  independent  experts,  which  are  summarised  in  section 
4.1.2.1,  highlight  that  Member  States  lack  a  robust  framework  for  knowledge  and 
information sharing. While the existing safe harbour methodologies could be seen as an 
example,  the  evaluation  reveals  a  number  of  areas  that  may  undermine  a  full 
standardisation  and  the  relevant  efficiency  gains,  including  the  extent  to  which  lenders 
may be willing to share their assessments with the public guarantor, and variability in the 
correspondence of internal ratings systems of lenders (or guarantors) with those used by 
international  credit  rating  agencies.  Moreover,  Member  States  face  significant 
administrative costs in the initial phases of the approval process, including the design and 
setup  of  the  guarantee  measure  or  methodology,  as  described  in  section  4.1.2.1.  The 
discussion  at  the  beginning  of  section  4.1.2  also  makes  it  clear  that  there  is  only  very 
limited  information  available  from  the  reports  presented  to  the  Commission  services 
under section 6 of the Guarantee Notice. Lastly, as the evidence in section 4.1.2.2 shows, 
there are significant economies of scale, which result in disproportionate costs borne by 
smaller  Member  States.  All  of  these  elements  point  at  a  lack  of  adequate  information 
sharing,  not  only  between  the  Commission  and  the  Member  States  but  also  between 
Member  States.  It  is  also  clear  that  the  current  reporting  framework  is  at  best  only 
partially  achieving  its  intended  aim  of  monitoring  the  developments  in  the  financial 
markets and the evolution of State guarantees over time.  

Lesson #5. Implementation and interpretation issues still persist  

The  discussions  with  Member  States  mentioned  in  section  3.4  highlight  the  following 
implementation and interpretation issues:  

a)  As described in detail in section 2.4, and under points (d) and (e) of section 3.4 of 
the  Guarantee  Notice,  a  market  conform  scheme  should  be  and  remain  “self-
financing”.  However,  as  described  in  section  3.4,  this  condition  is  often 
interpreted  as  being  the  only  requirement  for  achieving  market  conformity. 
However, point (f) of section 3.4 of the Guarantee Notice makes it clear that the 
guarantee  premiums  must  cover  not  only  the  expected  losses  that  the  guarantor 
would bear through the triggering of the guarantees, but also the expected returns 

91   Such  an  approach  has  already  been  deployed  in  some  recent  decisions,  comprising  of  the  2021 
Portuguese guarantee methodology (SA.61340), the 2022 Greek guarantee methodology (SA.102741), 
the  2022  Croatian  guarantee  methodology  (SA.64359),  and  the  2022  Italian  guarantee  methodology 
(SA.100837). 

64 

 
 
 
 
on  regulatory  capital  as  well  as  the  relevant  administrative  costs  borne  by  the 
guarantor.  

b)  As  noted  in  section  3.4,  several  Member  States  have  implemented  guarantee 
measures at a portfolio level or have introduced a cap on the guarantees granted at 
portfolio level. However, the Guarantee Notice offers little guidance on how such 
measures should be assessed.  

c)  As is  clear from section  4.1.1.1, the independent experts have observed that  the 
public guarantees often have maturities that go beyond the maturity of an existing 
bond  market  for  certain  credit  risks.  In  financial  markets  sub-investment  grade 
bonds with a maturity above 15 years are highly exceptional. Yet, some Member 
States guarantee investment loans beyond that duration.  

d)  As noted in section 3.4, although the Guarantee Notice claims it is applicable to 
guarantees linked to any specific financial transaction, i.e. going beyond a typical 
loan or debt transaction, there are no applicable conditions or criteria for certain 
types  of  transactions.  For  example,  performance  guarantees  or  guarantees  on 
securitised  loans  incorporate  specific  elements  that  are  not  clearly  addressed  by 
the Guarantee Notice, such as if and how the rating of the beneficiary matter.  

65 

 
 
 
ANNEX I. PROCEDURAL INFORMATION 

−  Lead DG: 

Commission Directorate-General for Competition (DG Competition) 

Decide Reference: PLAN/2022/918 

−  Organisation and timing: 

An  inter-service  steering  group  (ISSG)  was  set  up  which  gathered  representatives 
from the Commission’s Secretariat-General, the Legal Service and the  Directorates-
General FISMA, GROW, RTD, DEFIS and ESTAT. The first meeting was held on 
24  May  2022  and  focused  on  the  purpose,  scope  and  tentative  timeline  of  the 
evaluation, as well as the call for evidence, public consultation strategy, questionnaire 
for  the  public  consultation,  and  request  for  information  to  Member  States  and 
targeted questionnaire.  

The evaluation was then initiated with a call for evidence on 29 August 2022. Further 
details on the steps of the evaluation and their timing can be found in the table below. 

Overall timeline:  

o  Start date: Q3-2022 

o  Planned completion date: Q4 2025 

Detailed timeline:  

Date 

24 May 2022 
29 August 2022 
29 August – 19 
December 2022 
29 August – 19 
December 2022  

28 February 2023 

20 October 2023 

22 November 2024 
24 June 2025 

Description 

1st ISSG meeting 
Call for evidence 
Public consultation 

Targeted consultation (additional request for 
information as part of the targeted consultation 
submitted to Member States on 5 September 2022) 
Factual summary report of replies and contributions to 
the public consultation published 
Award of the contract on the Study on the Review of the 
Guarantee Notice 
Submission of the final Study 
ISSG meeting on the draft Staff Working Document 

−  Evidence used together with sources and any issues regarding its quality: 

The evaluation is based on the feedback received to the call for evidence which was 
followed  by  a  public  consultation  aimed  at  gathering  high-level  feedback  from  the 

66 

 
 
 
 
general  public.  Further  evidence  used  stems  from  a  targeted  consultation  which 
comprised (i) a request for information where Member States were asked to provide 
consolidated  data  on  State  guarantees  and  (ii)  a  targeted  questionnaire  directed  at 
stakeholders with direct involvement or expertise in State guarantees and credit risk. 
For more details and the limitations of certain sources, please see Annex II.  

−  Use of external expertise: 

An external study has been conducted by the contractor between November 2023 and 
December  2024.  It  focused  on  the  Guarantee  Notice's  effectiveness,  efficiency,  and 
coherence  and  the  identification  of  characteristics  and  methodologies  of  existing 
guarantee  measures.  Further,  benchmark  methodologies  on  guarantee  pricing  were 
developed. For more details, please see Annex II. 

67 

 
 
 
ANNEX II. METHODOLOGY AND ANALYTICAL MODELS USED 

The current Evaluation was based on a wide range of data sources and inputs. 

The Evaluation involved both internal analyses by the Commission services and an expert 
study prepared by experts conducting the external study. 

Moreover, the Commission  services also  used the results  of the public consultation  and 
the  targeted  stakeholder  consultation,  as  well  as  already  existing,  publicly  available 
studies  (some  of  them  can  be  found  in  section  3.1.2.1  of  the  External  Study)  and  other 
information  collected  by the Commission  services. The Evaluation  also  benefitted from 
the  relevant  insights  and  observations  resulting  from  the  Commission  services’ 
application experience and the Commission services’ own case practice.  

1  CONSULTATION ACTIVITIES 

1.1  Public consultation 

The  open  public  consultation  on  the  evaluation  of  the  Guarantee  Notice  took  place 
between 29 August 2022 to 19 December 2022 on the Commission’s Better Regulation 
Portal. The objective of the public consultation was to obtain the views of citizens, public 
authorities  and  other  relevant  stakeholders  on  the  effectiveness,  efficiency,  coherence, 
relevance and EU added value of the currently applicable Guarantee Notice. The public 
consultation took the form of an online survey, with a mix of closed and open questions. 
Participants  were  able  to  reply  in  any  of  the  EU’s  official  languages.  The  public 
consultation  was  also  promoted  through  Twitter  (now  X),  DG  Competition’s  State  aid 
Newsletter and DG Competition’s website. The statistics computed in this summary are 
based  only  on  contributions  to  the  public  consultation  submitted  through  the  online 
questionnaire. 

The  synopsis  of  the  answers  of  respondents  to  the  public  consultation  is  available  in 
Annex V. 

1.1.1  Targeted consultation 

The  targeted  consultation  was  aimed  at  stakeholders  directly  involved  in  or  affected  by 
the provision of State guarantees or with relevant expertise in the field of credit risk. Like 
the public consultation, the targeted consultation took place from 29 August 2022 to 19 
December  2022  on  DG  Competition’s  website.  Contributions  were  particularly  sought 
from  Member  State  authorities,  supranational  authorities  and  institutions  (including 
national governments, managing and implementing authorities of various State guarantee 
schemes  and  also  of  individual  guarantees),  guarantee  institutions  and  financial 
intermediaries, financial industry associations, market participants in the credit and credit 
derivative markets, non-financial companies (including SMEs), business associations and 
the  research  community.  The  objective  of  the  targeted  consultation  was  to  gather 
evidence  for  the  evaluation  of  the  Guarantee  Notice  and,  in  particular,  whether  the 
proxies  it  describes  were  aligned  with  market  benchmarks.  More  broadly,  the  targeted 
consultation  aimed  to  gather  evidence  and  views  on  the  effectiveness,  efficiency, 
relevance, coherence and EU added value of the Guarantee Notice.  
At the same time of the public consultation, the Commission launched a targeted request 
for information on 5 September 2022 (the ‘REQ’), addressed to Member States directly 
impacted  by  the  Guarantee  Notice.  A  conference  to  clarify  the  request  for  information 

68 

 
 
with representants from all Member States took place on 20 October 2022. Given that it 
is  the  Member  States  that  grant  the  guarantees  and  apply  the  Guarantee  Notice,  their 
responses are of particular relevance to the Evaluation. 

The synopsis of the answers is available in Annex V. 

1.2  Expert study92 

The  Commission  services  commissioned  an  external  study  with  the  specific  aims  to 
assess  the  effectiveness,  efficiency,  and  coherence  of  the  Guarantee  Notice  over  the 
evaluation period.  

The  Study  was  conducted  by  independent  experts  of  Prometeia  and  Learlab  and  its 
academic  partners  and  is  published  together  with  this  SWD.  It  was  carried  out  in  the 
course of 2024. The Study is ‘backward-looking’, focusing on the period 2010 to 2023. 
To the extent that it uses its insights in the report, the Commission takes ownership of the 
Study, agreeing with the corresponding methodology and analysis. 

The  Study  evaluates  the  impact  of  the  2008  Guarantee  Notice  through  a  detailed 
examination  of  its  characteristics,  existing  pricing  methodologies,  and  the  development 
of new benchmarking approaches. The study is organized in three key areas: (i) Analysis 
of  Guarantee  Methodologies,  (ii)  Benchmarking  Methodologies,  and  (iii)  Impact 
Assessment.   

For the study, the independent experts have created four databases, which were provided 
to the Commission services as separate deliverables.  

-  Sample  A  is  a  sizeable  database  that  includes  information  on  283  public 
guarantee  measures  that  are  based  on  the  Guarantee  Notice,  and  that  were 
implemented  between  2010  and  2022.  To  compile  the  Sample  A  dataset,  the 
independent  experts  combined several  data sources, including  the REQ, the  DG 
Competition’s  State  Aid  Register,  national 
laws  implementing  guarantee 
measures,  information  contained  in  the  Commission’s  Decisions,  websites  of 
Guaranteeing  Institutions  and  completed  it  with  contacts  with  the  Granting  and 
Administering  Authorities.  According 
the 
construction  of  Sample  A  was  time-consuming  due  to  problems  of  poor  data 
quality in the replies sent by Member States to the REQ and the continuous need 
to update it with information arriving at later stages of the Study.  

independent  experts, 

the 

to 

-  Sample B1 is based on a subset of measures from Sample A, selected through a 
sampling  approach  to  ensure  the  representativeness  of  all  Member  States  and 
sectors. However, its aim is to provide the necessary details for the calculation of 
guarantee  premiums  under  each  sampled  guarantee  measure.  It  is  based  on  the 
same information sources as Sample A and was faced with similar challenges. 

-  Sample  B2  provides  the  necessary  details  for  the  calculation  of  guarantee 
premiums for each market benchmark developed by the independent experts. To 
that end, sample B2 is constructed in a similar manner as sample B1 but covers 
only  hypothetical  calculation  methodologies  that  are  identified  as  market 

92   This  description  reuses  parts  of  the  Study  performed  by  Prometeia  and  its  partners.  The  Study  is 

available online on https://competition-policy.ec.europa.eu/state-aid/publications_en. 

69 

 
 
benchmarks. The sample is not based on any of the sources identified above, but 
is  rather  based  on  market  indicators,  such  as  credit  default  swap  (CDS)  spreads 
and  credit  spreads  for  comparable  financial  instruments,  and  other  publicly 
available  data  sources  that  are  used  for  the  calculation  of  each  of  the  market 
conform benchmarks.  

-  Sample C includes data used in the empirical estimations referred to in section4, 
covering  the  period  from  2010  to  2022.  The  data  sources  include  SAFE,  data 
obtained from FCG and Orbis, firm-level data obtained from guarantee granting 
authorities  in  Croatia,  Lithuania,  and  Latvia,  Bureau  van  Dijk’s  Orbis  database, 
OECD’s  Structural  Analysis  (STAN)  database,  EU-KLEMS  database,  EBA’s 
stress  test  and  transparency  exercises,  ECB’s  Bank  Lending  Survey  (BLS)  and 
World Bank’s Global Financial Development Database (GFDD).  

1.3  Other data sources 

To  complete  the  information  on  the  results  obtained  in  the  REQ,  the  Commission 
requested Member States to provide the obligatory reporting detailed in Section 6 of the 
Guarantee  Notice.  Other  sources  used  by  the  experts  conducting  the  external  study 
include  S&P  Capital  IQ,  the  European  Commission  State  aid  case  register  website, 
websites  of  the  relevant  authorities  and  the  European  Association  of  Guarantee 
Institutions. 

2  KNOWN LIMITATIONS AND MITIGATING MEASURES OF THE EVALUATION 

During  the  initial  stages  of  the  study,  several  limitations  were  identified  that  could 
potentially impact the validity and reliability of the results. However, through a thorough 
analysis  and  implementation  of  mitigating  measures,  these  limitations  were  effectively 
addressed to ensure the overall quality and accuracy of the evaluation. 

2.1  Limitations in data quality 

Although  the  sample  of  guarantees  provided  by  public  institutions  is  considered 
representative, given that it is based on the REQ survey, the samples used do not provide 
a complete picture of public guarantees in the EU. The REQ responses contained many 
out-of-scope  measures,  such  as  export  guarantee  schemes  or  Temporary  Framework 
measures, which were excluded from the analysis. 

Furthermore,  in  some  cases,  the  dataset  lacked  comprehensive  information  on  key 
elements, such as pricing methodologies and costs. To overcome this circumstance, the 
missing data was completed using alternative sources, including national laws and direct 
contact with the Member State authorities. 

2.2  Limitations in the study: Benchmark methodologies 

A  known  limitation  of  the  benchmark  methodologies  development  is  the  simplification 
used  when  determining  the  recovery  value.  Specifically,  the  current  approach  only 
considers  defaults  at  maturity,  rather  than  at  any  stage  before  maturity.  This 
simplification  has  significant  implications  for  the  pricing  of  guarantees,  resulting  in 
lower credit spreads and therefore lower guarantee premiums. However, to address this 
limitation,  an  extension  to  the  methodology  has  been  proposed  in  the  annexes  of  the 

70 

 
study. This revised approach considers defaults at any stage before maturity, providing a 
more realistic view of guarantee valuation. 

In the benchmark definitions, a simplification has been applied to determine the market 
price  of  guarantees.  Specifically,  it  has  been  assumed  that  public  institutions  granting 
guarantees  have  zero  default  risk93.  This  approach  is  consistent  with  other  financial 
institutions'  regulations,  which  often  simplify  default  risk  for  public  institutions  when 
calculating capital consumption. If the credit risk of public institutions as guarantors were 
considered, it would likely lead to a reduction in the price of guarantees. 

Another simplification applied in the study is the absence of default correlation between 
borrowers.  Considering  default  correlation  between  borrowers  would 
introduce 
significant  complexity  into  the  methodologies  and  result  in  less  stable  benchmarks. 
However,  it  is  reasonable  to  expect  some  positive  correlation  between  defaults  among 
borrowers in the same country or sector, and in particular during economic crisis periods, 
which could lead to higher potential losses and result on increased guarantee prices. 

In addition to these limitations, the calibration of certain parameters may be complicated 
or  unavailable  at  the  minimum  required  granularity  level.  In  some  cases,  these 
parameters  may  need  to  be  approximated,  such  as  the  real-world  probability  of  default 
term  structures,  appropriate  capital  remuneration,  and  information  on  lenders'  credit 
pricing. 

2.3  Limitations in the study: assessment of effectiveness, efficiency and coherence 

One  critical  source  of  information  for  conducting  the  efficiency  analysis  was  the 
mandatory reporting outlined in Section 6 of the Guarantee Notice submitted by Member 
States.  However,  the  information  provided  in  these  reports  exhibited  a  low  level  of 
standardization, resulting in inconsistencies and gaps in the data. This lack of uniformity 
made it challenging to compare the data submitted by different Member States, hindering 
a  comprehensive  analysis.  To  overcome  these  limitations,  the  Contractor  conducted 
interviews with the authorities of the Member States to supplement the available data and 
gather  additional  information.  This  approach  was  necessary  to  ensure  a  more  accurate 
and comparable analysis. 

In evaluating the effectiveness of the Guarantee Notice, the Contractor based its analysis 
in data derived from the ORBIS database, which provided detailed information for Italy. 
Additionally,  some  Member  States,  including  Croatia,  Latvia,  and  Lithuania,  were  able 
and  willing  to  offer  more  detailed  data.  While  the  samples  were  sufficiently  large, 
extrapolating the results to all EU Member States may not be completely accurate due to 
the unique characteristics and specificities of each country. As a result, it is necessary to 
be  cautious  when  generalizing  the  findings  to  the  broader  EU  context,  considering  the 
potential for country-specific nuances to be overlooked.  

To address potential methodological limitations on the evaluation of the effectiveness of 
the  Guarantee  Notice,  the  Contractor  employed  an  approach  to  control  for  potential 
endogeneity issues stemming from omitted variables in the estimation: the initial analysis 
was  re-run  with  the  inclusion  of  firm  and  time  fixed  effects.  This  served  to  control  for 
any unobserved factors that may be specific to individual firms or time periods, thereby 

93   The  default  risk  of  the  public  institutions  has  been  taken  into  consideration  in  the  study  only  in  the 

effective interest rate risk methodology.  

71 

 
 
strengthening the validity of the results. Additionally, to mitigate concerns about reverse 
causality,  the  Contractor  employed  a  dynamic  approach  controlling  for  the  previous 
situation  of  the  companies.  This  allowed  for  a  more  nuanced  understanding  of  the 
relationship between the Guarantee Notice and the outcome variables, helping to isolate 
the causal effect of the programmes. By accounting for the pre-existing conditions of the 
companies,  the  Contractor  was  able  to  more  accurately  attribute  the  impact  of  the 
Guarantee Notice to the program itself, rather than to other factors. 

3  METHOD OF THE EVALUATION 

An evaluation needs an appropriate point of comparison to be able to assess the change 
that  the  EU  action  has  brought  over  time.  In  general,  the  main  baseline  (or 
counterfactual) is a situation in the absence of EU intervention. 

In the current situation, the EU intervention is the 2008 Guarantee Notice setting out the 
Commission's approach to State aid granted in the form of guarantees. 

The evaluation questions and criteria are presented in Annex III below. 

72 

 
 
 
ANNEX III. EVALUATION MATRIX 

Effectiveness 

•  To  what  extent  has  the  Guarantee  Notice  contributed  to  determining  market-

compliant guarantee premiums?  

o  Whether public guarantees have succeeded in creating additional access 

to finance for final beneficiaries?  

o  To  what  extent  are  guarantees  passed  through  to  beneficiaries  via  the 

conditions of the loan? 

• 

Is there a relationship between public guarantee measures using the Guarantee 
Notice and banking market concentration? 

•  Which types of firms are more likely to receive guarantees and what effects the 

guarantees produce? 

•  Have the Guarantee Notice's provisions facilitated access to finance for smaller 
beneficiaries,  and  has  this  had  a  positive  impact  on  their  competitiveness 
compared to their sector peers? 

•  How  effective  were  the  guarantee  measures  using  the  Guarantee  Notice  in 
limiting  distortions  of  competition  between  financial  intermediaries  and 
distortions of prices in credit markets? 

o  Do  banks  benefit  from  public  guarantees  and  to  what  extent  it  may 

have distorted competition in lending markets? 

• 

Is there a link between pricing methodologies and effectiveness of the Notice? 

Efficiency 

•  Has  the  Guarantee  Notice  contributed  to  determining  market-compliant 
guarantee  premiums,  to  what  extent  have  the  requirements  of  the  Guarantee 
Notice been proportionate to the cost of implementing guarantee schemes? 
•  To  what  extent  have  the  requirements  of  the  Guarantee  Notice  been 

proportionate to the cost of implementing guarantee schemes?  

•  Did the simplified solutions for measures targeted at small and medium-sized 

enterprises achieve the right balance between simplicity and accuracy? 

•  How  did  the  applied  pricing  systems  work,  compared  to  optimal  pricing 

systems for state guarantees? 

•  Did  Member  States  implement  guarantee  schemes  in  line  with  the  Guarantee 

Notice? 

•  Did  the  Member  States  face  difficulties  when  interpreting  the  Guarantee 

Notice? Have the rules been clear? 

Relevance 

•  How  has  the  Guarantee  Notice's  relevance  evolved  over  time,  particularly  in 
light  of  changes  in  macroeconomic  conditions,  financial  stability,  and 
regulatory developments since 2008? What implications do these changes have 
for its continued effectiveness? 

Coherence 

•  To  what  extent  does  the  Guarantee  Notice  provide  a  coherent  framework  for 
determining  market-compliant  guarantee  premiums,  and  how  consistent  is  it 
with other EU legislation, such as the Reference Rate Communication, in terms 
of ensuring a level playing field and preventing indirect advantages to lenders? 

73 

 
 
 
 
 
EU added value 

•  Has  the  Guarantee  Notice  provided  added  value  in  terms  of  facilitating  the 
approval  of  guarantee  methodologies,  ensuring  a  level  playing  field  between 
Member States, and promoting the use of public guarantees?  
Is the intervention still relevant? 

• 

74 

 
 
 
 
 
 
 
Table 1. Overview of costs and benefits identified in the evaluation 

ANNEX IV. OVERVIEW OF BENEFITS AND COSTS 

Citizens/Consumers 
National administrations  

Businesses  

EU Administrations 

Broader Economy 

Quantitative  

Comment 

Quantitative  

Comment 

Quantitative 

Comment  

Quantitative 

Comment 

It is not possible to quantify the costs and benefits listed in this table other than those that are quantified 

Direct 
Costs 

(all one-
off for any 
given aid 
measure) 

Direct cost of 
developing 
methodologies 
(estimated at 
EUR 1.93 
million94 for all 
EU Member 
States during the 
evaluation 
period). 

The National 
Authorities cost 
of developing 
methodologies 
since 2008.  

As one of the 
requirements in 
the Guarantee 
Notice is that the 
schemes remain 
self-financed, 
the cost of using 
the guarantee in 
case it is 
triggered by 
defaults is not 

Administrative costs 
included in GN (in 
sample B1 of the study 
it, as detailed in section 
4.1.2.2, ranges between 
0.1% and 1.1% of the 
guaranteed amount) in 
line with market 
practice. 

Premiums (including 
costs paid) on the 
guarantees (depending 
on the methodology 
used), in line with 
market practice95 

The aided 
beneficiaries 
(Businesses) 
have to cover 
the 
administrative 
costs and the 
guarantee 
premiums based 
on their credit 
profile and the 
methodology 
used, in line 
with market 
practise.  

Costs of assessing 
and approving 
methodologies 

(estimated at EUR 1 
million96 for the 
Commission during 
the evaluation 
period) 

National 
authorities may 
need to notify the 
individual 
guarantees or 
guarantee 
schemes to ensure 
their compliance. 

The 
Commission’s 
services carry out 
the assessment of 
the measures 
based on the 
Guarantee Notice.   

94   The cost estimation considers a similar amount of time dedicated by public administration of Member States to the amount of time dedicated by the Commission (but taking into 

consideration also the cases that don’t contain aid) and similar cost per hour. 

95   It has to be noted that both of these cost types are not exclusive to public guarantees based on the Guarantee Notice. Also guarantees provided by the private market bear costs. 
96   The cost is estimated based on the 152 State aid cases considered in the study, an average case dedication of 24 hours and a cost per hour of 35.6 euro. 

75 

 
 
 
                        
 
 
 
 
 
considered as 
direct costs since 
this should be 
covered by the 
premiums on the 
guarantees paid 
by the 
companies. 

National 
Authorities may 
need help from 
special advisors 
on the 
application of 
the Guarantee 
Notice. 

More details can 
be obtained in 
the external 
study 

Costs for 
external 
consultants  

(not 
quantifiable97) 

Indirect 
Costs  

(one-off 
with 
recurrent 
effects) 

Potential crowding-out 
of banks from certain 
sectors. 

Potential indirect aid to 
financial institutions. 

(not quantifiable) 

State guarantees 
if not well 
designed may 
result in 
crowding-out 
financial 
institutions 
from 
participating in 
certain 
activities. It 
may also result 
in a no pass-on 
of the benefits 
to final 
consumers 
resulting in aid 
to financial. 
institutions This 
is limited by 
State aid 
control.   

Competition 
distortions 

(not 
quantifiable;) 

By supporting 
certain 
beneficiaries but 
not others, State 
aid has the power 
to produce 
competition 
distortions, which 
are, however, 
minimised by the 
State aid control.   

See sections 
4.1.1.3 and 
4.1.1.4 for more 
details 

97   As  indicated  in  section  4.1.2  Efficiency,  it  is  not  possible  to  make  adequate  quantifications  due  to  the  lack  of  access  to  or  availability  of  relevant  and  representative  financial 

information on the costs. 

76 

 
 
 
 
 
 
 
 
Reduction in financing 
costs and ensuring 
access to financing. 

(not quantifiable) 

See section 
4.1.1.2 for more 
details 

Companies get 
cheaper loans 
and improved 
access to loans 
through the 
public 
guarantees. 

More 
information on 
section 4.1.1.2 

Direct 
benefits 

(one-off 
with 
recurrent 
effects) 

Indirect 
benefits  

(one-off 
with 
recurrent 
effects) 

Legal certainty 

Less bureaucracy 

(not 
quantifiable98) 

Simplified 
methodologies 
provide legal 
certainty, reduce 
bureaucracy and 
reduce the time 
needed to be 
prepared. (In the 
absence of the 
Guarantee 
Notice, a case-
by-case decision 
would be 
required to 
ensure legal 

Reduction of 
administrative costs 
of reviewing 
methodologies. 

(not quantifiable) 

Financial 
system 
stability 

Standardisation 
of 
methodologies 
across Member 
states 

(not 
quantifiable)  

Safe harbour is a 
very effective tool 
to reduce 
bureaucracy and 
to facilitate the 
implementation 
of measures 
ensuring legal 
certainty. Single 
premiums 
exclude the need 
for company 
ratings. 

See more details 

State guarantees 
provide comfort 
to financial 
institutions 
providing loans 
and enhance their 
credit profile due 
to credit exposure 
reduction. 

The Guarantee 
Notice ensures a 
level playing field 
for all EU 
members as 
regards the 

98   As detailed in section 2.1, Member States reported the improvements of the Guarantee Notice in legal certainty and reduction of bureaucracy terms but there is no quantification 

provided.  

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
certainty) 

See section 2.1 
of the study for 
more details 

in section 4.1.2.1 

calculation of 
guarantees. 

See more details 
in section 4.3 

78 

 
 
 
 
 
TABLE 2:  Simplification and burden reduction (savings already achieved)  

Citizens/Consumers/Workers 

Businesses 

Administrations 

National administrations 

Quantitative  

Comment 

Quantitative  

Comment 

Quantitative 

Comment  

Direct compliance cost savings (for example adjustment cost savings, administrative cost savings, savings from regulatory charges)  

Administrative costs (not 
quantifiable) 

Having a more 
standardised approach 
from the government also 
has reduced the 
administrative costs to get 
the guarantees for the 
enterprises 

More details can be 
obtained in the external 
study  

Administrative costs (not 
quantifiable) 

Administrative costs have 
been reduced thanks to the 
introduction of a 
dedicated set of rules for 
guarantees. 

More details can be 
obtained in the external 
study 

Administrative costs (not 
quantifiable)99 

Type: one-off 
with recurrent 
effects 

Administrative costs for 
the Governments have 
been reduced thanks to the 
introduction of a 
dedicated set of rules to 
simplify the provision of 
individual public 
guarantees (e.g. safe 
harbours) and guarantee 
schemes. 

Safe harbour premium for 
SMEs have offered a 
simpler evaluation 
approach to determine the 
level of the guarantee 
premiums. 

Methodologies approved 
have ensured that 

99   See footnote 95. 

79 

 
 
 
               
 
 
 
guarantee premiums 
charged on non-aided 
State guarantees are 
market conform. 

See more details in 
sections 4.1.2.1 and 4.3 

PART II: II Potential simplification and burden reduction (savings) 

Further potential simplification and savings that could be achieved with a view to make the initiative more effective and efficient without prejudice to its policy objectives100. 

Citizens/Consumers/Workers 

Businesses 

Administrations 

National administrations 

Quantitative  

Comment 

Quantitative  

Comment 

Quantitative 

Comment  

Direct and indirect compliance cost savings (for example adjustment cost savings, administrative cost savings, savings from regulatory charges) 

Type: recurrent  Administrative 

costs  

Administrative 
costs could be 
further reduced 
by simplifying 
reporting 
obligations by 
Member States, 
which would 

Administrative 
costs   

Administrative burden for small mid-caps 
could be reduced by further unifying and 
standardizing the requirements for this kind 
of companies opting for guarantees.  

Administrative 
costs   

Administrative costs could be further 
reduced by simplifying reporting 
obligations by Member States, i.e. the 
submission of periodic reports on key 
metrics of guarantees (e.g. amounts, 
remuneration), in terms of scope and 
frequency (“Section VI reports”) 

100 This assessment is without prejudice to a possible future Impact Assessment. 

80 

 
 
 
 
 
indirectly also 
reduce reporting 
efforts and costs 
of financial 
intermediaries 
providing 
Member States 
with the relevant 
data for their 
annual reports to 
be submitted to 
the Commission 

81 

 
 
ANNEX V. SYNOPSIS REPORT 

The  Commission  gathered  stakeholder  opinions  on  the  effectiveness,  efficiency, 
relevance,  coherence,  and  EU  added  value  of  the  Guarantee  Notice  through  a  call  for 
evidence, as well as a public and a targeted consultation. 

1  CALL FOR EVIDENCE 

1.1  Overview of respondents of the call for evidence 

The  call  for  evidence  consultation  ran  from  29  August  to  19  December  2022.  In  total 
there were 11 respondents. Feedback could be provided in all 24 official EU languages. 
There were no specific questions but instead, general feedback could be provided on the 
call for evidence. 

Responses were received from different stakeholders including public authorities (4), EU 
citizens  (4),  companies/businesses  (2)  and  other  (1).  All  respondents  were  stakeholders 
from  the EU, except  for one stakeholder  from  Norway. EU respondents  came  from  six 
different  Member  States:  Germany  (3  respondents),  Slovakia  and  Spain  (each  2 
respondents),  as  well  as  France,  the  Netherlands,  and  Portugal  (1  respondent  each). 
Given the very low rate of participation, the fact that several answers were unrelated to 
the  consultation,  and  the  general  lack  of  convincing  arguments  or  explanations,  the 
feedback received via the call for evidence was not perceived as sufficiently reliable or 
representative and thus, could not be considered in the SWD. 

1.2  Summary of key messages 

Two respondents mentioned the importance of the Guarantee Notice as  a guidance tool 
whilst  pointing  out  that  an  update  was  welcome.  One  respondent  supported  a 
continuation of a simple and constant safe harbour premium matrix. 

Several  respondents  mentioned  potential  areas  for  improvements.  These  included  an 
extension of the safe harbour premiums to a broader range of companies, the increase of 
the 80% threshold implying (in connection with other conditions) that there is no aid, and 
the need for clear rules on guarantees in the context of municipal services. Further, it was 
proposed that the Guarantee Notice should allow the use of OECD Arrangement terms.  

Amongst points of criticism of the current Guarantee Notice, one respondent found that 
the assessment of whether a company was in financial difficulty was too rigid and binary. 
Another  respondent  generally  found  that  the  Notice  would  lead  to  a  discriminatory 
treatment  of  smaller  companies  compared  to  larger  ones.  Another  respondent  generally 
criticized the provision of guarantees to the aviation sector in the past. 

82 

 
 
2  PUBLIC CONSULTATION  

2.1  Overview of respondents of the public consultation 

The  public  consultation  ran  from  29  August  to  19  December  2022.  Replies  could  be 
provided in all 24 official EU languages. The public consultation contained 15 high-level 
questions,  grouped  by  the  five  evaluation  criteria  under  consideration,  namely  the 
effectiveness,  efficiency,  relevance,  coherence  and  EU  added  value  of  the  Guarantee 
Notice.  

Responses  received  were  from  a  variety  of  stakeholders  representing  public  authorities 
(2),  business  associations  (2),  EU  citizens  (1)  and  others  (1).  All  respondents  were 
stakeholders  from  the  EU,  covering  four  EU  Member  States:  Belgium  (3  respondents), 
Finland, Greece and Italy. 

Overall,  the  feedback  from  the  public  consultation  in  most  areas  did  not  lead  to  clear, 
convincing  results  and  was  considered  not  sufficiently  representative  given  the  low 
participation rate. Therefore, the evaluation findings only rely on feedback that was also 
supported by other sources used in the evaluation. 

2.2  Summary of key messages 

Effectiveness 

Four  respondents  found  the  Guarantee  Notice  helpful  in  facilitating  State  guarantees, 
with one highlighting safe harbour premiums for SMEs and another noting its usefulness 
without  approved  EU  methodologies.  Two  respondents  said  the  Notice  supported 
market-conform guarantees, while one criticized the high premiums for SMEs. Only one 
respondent  felt  that  the  Notice  enabled  pricing  guarantees  below  market  terms,  while 
three disagreed, citing high premiums as a barrier. 

Respondents  identified  the  Notice's  most  successful  long-term  impacts  as  ensuring  that 
benefits  reach  ultimate  beneficiaries,  limiting  competition  distortions  among  financial 
intermediaries, and stabilizing credit market pricing. One respondent, however, felt it was 
“rather not successful” in helping creditworthy SMEs secure necessary loans or credit. 

Efficiency  

Two  respondents  found  the  Guarantee  Notice  easy  to  understand,  and  three  stated  the 
Notice  supports  a  common  standard  for  granting  public  guarantees.  One  respondent 
disagreed  with  both  points.  Two  respondents  felt  there  was  insufficient  public 
information  concerning  the  Commission’s  policy,  while  others  were  neutral  or  had  no 
opinion.  Respondents  highlighted  that  the  Guarantee  Notice  is  highly  technical  and 
challenging  for  financial  intermediaries  and  beneficiaries,  recommending  informal 
guidance for its practical application. 

Respondents  noted  the  Guarantee  Notice  helped  reduce  administrative  and  operating 
costs for public authorities, lenders, and beneficiaries. However, one respondent found it 
“rather  not  helpful”  for  lenders  and  beneficiaries.  Respondents  agreed  that  public 
authorities  have  used  the  Notice’s  methods  effectively,  that  it  ensured  predictable 

83 

 
provision  of  guarantees  and  supported  efficient  State  expenditure.  One  respondent 
disagreed, attributing efficiency to internal rules rather than the Notice. 

Three  respondents  suggested  clarifying  aspects  of  State  guarantees,  particularly  the 
comparison  with  market-priced  non-guaranteed  loans,  which  often  lack  a  benchmark. 
One respondent claimed the Commission recently applied the Market Economy Operator 
Principle  more  strictly  than  outlined  in  section  3.2.  Another  respondent  reported  that 
State  guarantees  under  the  Notice  imposed  a  disproportionate  administrative  burden, 
requiring special expertise in certain cases. 

Relevance 

Three  respondents  considered  that  the  Guarantee  Notice  remains  relevant  in  helping 
Member States provide financing to undertakings in the form of guarantees. Respondents 
consider  that  the  financial  crisis  episodes,  periods  of  low  interest  rate  environment  and 
changes  in  the  regulatory  framework  for  financial  intermediaries  are  important  for  the 
relevance of the Guarantee Notice. More concretely, the level of safe harbour premiums 
for  SMEs  is  considered  too  high  in  periods  of  low  interest  rates.  The  criticism  on  the 
accuracy of safe harbour premiums was also raised by other sources in the evaluation and 
addressed in sections 4 and 5 of the SWD. 

Coherence 

Three  respondents  considered  that  the  Guarantee  Notice  is  internally  coherent,  i.e. 
different sections of the Notice are consistent with one another. The others were neutral 
or had no opinion. As regards the coherence with other EU policies and legislation, the 
respondents  broadly  reported  coherence  with  the  Reference  Rate  Communication,  the 
General  Block  Exemption  Regulation  and  the  De  Minimis  Regulation.  One  respondent 
mentioned incoherence with the Commission Notice on the Notion of State aid, without 
specifying  the  main  reasons.  Overall,  the  feedback  on  coherence  was  considered  not 
representative  and  inconclusive,  so  the  evaluation  relied  on  the  expert  consultation  and 
the more elaborated analysis in the external study. 

EU Added Value 

Four  respondents  agreed  that  the  Guarantee  Notice  has  provided  an  added  value  in 
comparison to a situation without such guidance. One of those respondents referred to the 
clear  guidance  on  calculating  the  aid  element  in  State  guarantees.  This  feedback  aligns 
with  that  from  the  expert  consultation  and  the  findings  of  the  external  study  and  was 
taken into account in the evaluation findings under section 4.3 above. 

Other aspects 

Three respondents  provided additional feedback.  One respondent  mentioned difficulties 
regarding the application of Section 3.3 of the Guarantee Notice to SMEs without credit 
history  or  having  their  rating  based  on  a  balance  sheet,  but  for  which  financial 
intermediaries apply other rating systems.  

One  respondent  claimed  incoherence  with  Article  213  of  the  EU  Regulation  No 
575/2013,  specifying  that  credit  protection  contracts  must  not  contain  any  clauses  that 

84 

 
would increase the effective cost of protection as a result of a deterioration in the credit 
quality  of  the  protected  exposure.  According  to  the  respondent,  the  Guarantee  Notice 
does not comply with this requirement, without however providing further details.  

One  respondent  claimed  that  municipalities  have  been  applying  wrongly  the  Guarantee 
Notice to undertakings of a non-economic nature or to activities which are not subject to 
competition on the market, and that led sometimes to cancellations of transactions or to 
providing financing at higher costs. 

3  EXPERT CONSULTATION 

The  expert  consultation  ran  from  29  August  to  19  December  2022.  Replies  could  be 
provided in all 24 official EU languages. The expert consultation contained 31 high-level 
and more detailed questions, grouped by the five evaluation criteria under consideration, 
namely  the  effectiveness,  efficiency,  relevance,  coherence,  and  EU  added  value  of  the 
Guarantee Notice.  

The expert consultation was targeted at selected stakeholders with specific expertise and 
experience in the provision of State guarantees, but open to the general public. Responses 
were  received  from  ten  public  authorities  from  the  following  nine  EU  Member  States: 
Bulgaria,  Germany,  the  Netherlands,  Finland  (2),  Sweden,  Estonia,  Greece,  Lithuania, 
and Italy. 

In  parallel  to  the  expert  consultation,  a  separate  information  request  was  sent  to  the 
managing  and  implementing  authorities  of  State  guarantees  of  Member  States  which 
aimed  at  gathering  consolidated  data  on  State  guarantees.  The  information  received 
constituted an important input for the external study conducted as part of the evaluation. 
An overview of how the qualitative and quantitative data received has been analysed and 
used for the study can be found in Tables A2 and A3 of the study. Apart from that, the 
feedback  received  was  only  conclusive  in  a  few  aspects,  such  as  confirming  that  the 
Guarantee Notice has broadly achieved its objectives, remained relevant for the financing 
of undertakings, and  has provided EU added value compared to  a situation without the 
Notice. 

3.1  Synopsis of the key messages 

Effectiveness 

Nine respondents stated that the Guarantee Notice was working well and facilitated the 
granting  of  guarantees,  whilst  one  respondent  had  no  opinion.  Seven  respondents  also 
agreed  in  that  the  Notice  facilitated  the  granting  of  market  conform  guarantees,  whilst 
two respondents had no opinion. Six respondents viewed the Notice as facilitating aided 
guarantees  whilst  three  respondents  had  opposing  views,  though  without  substantiating 
their answer. 

Respondents found the Guarantee Notice helpful (4) or rather helpful  (5) to ensure that 
beneficiaries  would  not  receive  an  advantage  in  the  context  of  a  guaranteed  loan.  One 
respondent  added  that  particularly  the  safe  harbour  premiums  for  SMEs  were  useful  in 
this  respect.  When  it  comes  to  avoiding  aid  to  the  intermediary,  most  respondents  (9) 
found the Notice to be helpful or rather helpful. One respondent found that it was rather 

85 

 
unhelpful though, due to the lack of practical guidance on how an advantage to the lender 
should be avoided and thus, urged to include specific conditions in the Guarantee Notice. 

Most  respondents  answered  that  the  Notice  has  achieved  its  objectives  regarding  e.g. 
legal certainty, market-conform guarantee premiums, easy-to-apply safe harbour rates for 
SMEs or the calculation of the aid element. Two respondents however found that it has 
been  rather  unsuccessful  in  achieving  its  objectives  to  increasing  legal  certainty  and 
transparency of market-conform guarantee premiums and increasing the predictability of 
the Commission’s assessment and ensuring equal treatment of market participants. 

Concerning  the  successful  provision  of  guidance  by  the  Guarantee  Notice  on  market-
conformity,  most  respondents  found  that  it  has  been  rather  successful  or  successful  in 
laying out  horizontal guidance on  ruling  out  the  presence of  aid  (6)  and  providing  safe 
harbour rates for SMEs (8). One respondent added that the Notice was easy to understand 
in  this  respect.  Two  respondents  mentioned  that  it  has  been  rather  unsuccessful 
concerning  guidance  to  determine  market-conform  premiums  for  individual  guarantees 
and regarding the determination of premiums that make schemes self-financing and that 
are aid-free without providing any further explanations. 

Most  respondents  found  that  the  transparency  and  predictability  of  the  Commission’s 
assessment  as  regards  State  guarantees  has  been  successful  or  rather  successful.  Two 
respondents added that the criteria for the Commission’s assessment were clear. One of 
them proposed that examples could be given in footnotes in case of a revision.  

There  was  positive  feedback  received  regarding  the  Notice’s  role  in  providing  easy  to 
apply  rules  for  guarantees  to  SMEs  with  only  one  respondent  finding  it  rather  not 
successful  concerning  conditions  for  single  premiums,  guarantee  methodologies,  and 
providing guidance on market conform prices, without providing further explanations.  

There  was  also  overall  positive  feedback  on  the  long-term  impacts  of  the  Guarantee 
Notice  such  as  ensuring  that  creditworthy  SMEs  were  able  to  get  bank  loans  or  other 
forms of credit. 

When  asked  about  other  benchmarks  used  to  determine  market  conform  guarantee 
premiums that are not included in the Guarantee Notice, two respondents mentioned CDS 
rates.  One  respondent  also  mentioned  the  OECD  Arrangement  for  Export  Credits  as 
benchmark and pricing method. 

Efficiency 

When asked whether the Guarantee Notice was easy to use, three respondents disagreed, 
whereas  five  agreed  out  of  which  two  added  that  the  Notice  was  easy  to  understand. 
Respondents also had split views on whether the Guarantee Notice was formulated in a 
way which is likely to lead to a common standard for granting public guarantees across 
the  EU  and  on  whether  there  was  sufficient  publicly  available  information  to  ensure  a 
good  understanding  of  the  Commission’s  policy  in  this  field  (with  four  respondents 
agreeing  with  these  statements  and  three  respondents  disagreeing).  Other  respondents 
were neutral or had no opinion in this regard. 

Most respondents were of the opinion that the Guarantee Notice helped or rather helped 
public  authorities  (6),  lenders  (5),  and  beneficiary  companies  (3)  to  keep  down  the 

86 

 
 
 
 
 
 
 
 
 
administrative and operating costs related to the granting of State guarantees down. Only 
one  respondent  respectively  disagreed  concerning  costs  for  public  authorities  and 
beneficiaries, however without providing a justification. On the question of whether the 
Notice  had  been  effective  in  limiting  the  amount  of  administrative  costs  for  access  to 
finance  for  SMEs,  most  respondents  had  no  opinion  (5)  or  stayed  neutral  (3),  whilst  2 
respondents  found  the  Notice  effective  with  regard  to  certain  aspects  such  as  the 
provision of safe harbour-rates. 

As  additional  remark,  one  respondent  added  that  the  Guarantee  Notice  facilitates  the 
launch of guarantee schemes without aid elements thanks to the conditions in the Notice. 
Another respondent found safe harbour premiums helpful in this respect. One respondent 
stated with regard to costs for public authorities, that the simplicity to provide guarantees 
on  market-conditions  or  determine  whether  the  guarantee  includes  State  aid  or  not, 
helped to lower the administrative and operating costs.  

Eight respondents positively replied to the question whether certain aspects or concepts 
related to the provision of State guarantees made the application of the Guarantee Notice 
difficult  or sub-optimal  and could therefore have been further  clarified or been defined 
more  precisely.  Amongst  the  examples  given  were  the  suggestion  to  establish  more 
exemptions  from  the  80%  threshold  as  one  of  the  conditions  for  implying  no  aid  of  a 
measure.  Further,  one  respondent  found  that  the  Commission  applied  the  Market 
Economy  Operator  Principle  test  more  strictly  than  set  out  in  the  Notice.  Another  one 
expressed  the  view  that  further  guidance  on  State  aid  rules  on  specific  guarantees  for 
development cooperation would be warranted, as well as clearer guidance on section 3.2. 

Most  respondents  (5)  answered  that  the  provision  of  State  guarantees  under  the 
Guarantee  Notice  has  not  created  any  disproportionate  administrative  burden,  whereas 
three  respondents  came  to  the  opposite  conclusion.  One  of  the  latter  respondents 
mentioned that in some special circumstances special expertise was needed to assess how 
to apply the Guarantee Notice. Another respondent explained that public authorities were 
forced to  acquire specific competences  to ensure that lenders do not  benefit from  State 
guarantees. 

Relevance 

All respondents (9) except for one supported the view that the Guarantee Notice has been 
and  remains  relevant  in  addressing  the  needs  of  Member  States  and  other  stakeholders 
over time with regard to financing undertakings. One of them pointed out that the Notice 
was important, because it provided guidance to Member States and other stakeholders. A 
second one highlighted that the concepts introduced by the Notice remained relevant to a 
very  large  degree,  whilst  adding  that  safe  harbour  premiums  may  have  changed  due  to 
the long  period of time  since they were  estimated and introduced  and that  guidance on 
the  conditions  necessary  for  the  passing  of  the  advantage  from  the  lender  to  the 
borrowers could be an improvement. 

In terms of developments and events for the relevance of the Guarantee Notice over time, 
many  respondents  found  that  the  financial  crisis  has  been  important  (3)  or  rather 
important (4). Respondents also found the description of the types of guarantees and the 
types  of  financial  obligations  covered  by  the  Guarantee  Notice  and  the  horizontal 
conditions for guarantees to rule out the presence of State aid (point 3.2 (a)-(c)) relevant 
or rather relevant (6). 

87 

 
 
 
 
 
 
 
Some respondents had proposals for the Guarantee Notice to stay relevant regardless of 
future macro-economic developments. One of them suggested regular adjustments of the 
safe  harbour  premiums  to  make  them  more  market-oriented.  Another  respondent 
suggested a more regular review of the points affected by other regulatory frameworks. 

Coherence 

Four  respondents  found  the  Guarantee  Notice  internally  coherent,  whilst  three  found  it 
rather coherent and three others remained neutral. With regard to external coherence, one 
respondent  found  the  Guarantee  Notice  not  coherent  with  the  Reference  Rate 
Communication  and  rather  not  coherent  with  the  Notice  on  the  Notion  of  State  aid. 
Another one found the Notice to be rather incoherent with the General Block Exemption 
Regulation.  Most  other  respondents  however  found  the  Notice  coherent  or  rather 
coherent  with  the  Reference  Rate  Communication  (3),  the  General  Block  Exemption 
Regulation (5), the De minimis Regulation (5), and the Notice on the Notion of State aid 
(5). 

EU Added value 

All ten respondents stated that the Notice has provided an added value in comparison to a 
situation  without  such  guidance.  One  respondent  added  that  without  the  Guarantee 
Notice market-conform guarantee premiums would likely be determined very differently 
across  the  EU.  Another  respondent  expressed  a  similar  view  by  commenting  that  the 
design of State guarantees would show greater differences.  

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ANNEX VI. CASE PRACTICE PRIOR TO 2000 AND COMPARISON OF GUARANTEE NOTICE 
OF 2000 AND 2008 

In 1989, the Commission addressed two letters on State guarantees to the Member States. 
In the first letter101 it pointed out that the Commission regarded all guarantees given by a 
State  as  falling  within  the  scope  of  Article  87(1)  of  the  EC  Treaty102  at  the  time. 
According to the first letter, the Commission had to be, therefore, notified of any plans to 
give or alter such guarantees in sufficient time to enable it to submit its comments. In the 
second  letter103  the  Commission  made  it  clear  that  it  intended  to  examine  the 
establishment of State guarantee schemes, and that individual guarantees given under an 
approved scheme would not need to be notified.  

In  1993,  the  Commission  adopted  a  communication104  which,  besides  other  topics, 
addressed the subject of guarantees as well.  

By 2000, the Commission gained sufficient experience suggesting that the Commission’s 
policy  in  the  area  of  guarantees  had  to  be  reviewed  and  dealt  with  in  a  separate 
communication. Therefore, in 2000 the Guarantee Notice of 2000105 was adopted which 
replaced  the  two  Commission  letters  of  1989  and  paragraph  38  of  the  Commission 
communication of 1993.  

Guarantee Notice of 2000 and 2008 compared 

The Guarantee  Notice of 2000 required Member States to notify guarantee measures to 
the Commission in advance pursuant to Council Regulation (EC) No 659/1999. 

In  the  case  of  an  individual  State  guarantee,  the  aid  element  should  be  assessed  by 
reference  to  the  details  of  the  guarantee  and  loan  (or  other  financial  obligation).  The 
relevant factors include the (i) duration and (ii) amount of the guarantee and loan, (iii) the 
risk of default by the borrower, (iv) the price paid by the borrower for the guarantee, (v) 
the nature of any security given, (vi) how and when the State could be called upon to pay 
a  debt  and  (vii)  the  means  (e.g.  declaration  of  bankruptcy)  to  be  used  by  the  State  to 
recover amounts owed by the borrower once the guarantee has been invoked. 

The  Guarantee  Notice  of  2000  also  set  conditions  for  exemption  from  the  notification 
requirement.  The  Commission  considered  that  any  State  aid  fulfilling  the  following 
conditions was compatible with the competition rules and thus exempt: 

101   Commission letter to the Member States, SG(89) D/4328 of 5 April 1989. 
102   Treaty  establishing  the  European  Community  Official  Journal  C  340  ,  10/11/1997  P.  0173  - 

Consolidated version  

103   Commission letter to the Member States, SG(89) D/12772 of 12 October 1989. 
104   Commission  Communication  to  the  Member  States  on  the  application  of  Articles  92  and  93  of  the 
EEC  Treaty  and  of  Article  5  of  Commission  Directive  80/723/EEC  to  public  undertakings  in  the 
manufacturing sector (OJ C 307, 13.11.1993, p. 3). 

105   Commission notice on the application of Articles 87 and 88 of the EC Treaty to state aid in the form of 

guarantees, OJ C 71 of 11.03.2000. 

89 

 
 
 
Individual guarantee 

Guarantee scheme 

The borrower is not in financial difficulty. 

The borrower is not in financial difficulty. 

The borrower would, in principle, be able to obtain 
a loan on market conditions from the financial 
markets without any intervention by the State. 

The borrower would, in principle, be able to obtain a loan 
on market conditions from the financial markets without 
any intervention by the State. 

The guarantee is linked to a specific financial 
transaction. 

The guarantee gives rise to payment of a premium 
on the market price. 

- 

- 

The guarantee is linked to a specific financial transaction. 

A realistic assessment of the risk has been carried out. 

The guarantee is subject to a review of overall financing 
at least once a year. 

The premiums cover both the normal risks associated 
with granting guarantees and the administrative costs of 
the scheme and allow a normal return on the initial 
capital. 

The  Guarantee  Notice  of  2000  also  stated  that  failure  to  comply  with  the  above 
conditions  does  not  mean  that  such  a  guarantee  or  guarantee  scheme  is  automatically 
regarded as State aid. 

Member States were also required to present an annual report to the Commission giving 
the total amount of state guarantees outstanding,  the total amount paid in the preceding 
year  by  the  State  to  borrowers  and  the  premiums  paid  for  state  guarantees  in  the  same 
year. Thereby, the Commission aimed to monitor the State guarantee granted by Member 
States.  

Based  on  case  practice,  the  Guarantee  Notice  of  2008  updated  the  Commission’s 
approach on State guarantees and gave more detailed guidance about the principles used 
for  the  assessment  while  retaining  the  content  of  the  Guarantee  Notice  of  2000.  In 
particular, it defined more concretely the types of guarantees to which it applied, the need 
for  individual  assessment  of  the  risks  related  to  each  guarantee  in  the  case  of  schemes 
and introduced the safe harbour premium for SMEs.  

90