COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE 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

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   EUROPEAN COMMISSION  Brussels, 13.10.2025  SWD(2025) 331 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE 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) 330 final}  
 
 
1.  INTRODUCTION 

 The  Guarantee  Notice  was  first  adopted  in  2000  and  last  revised  in  2008.  It  sets  out  the 
Commission’s approach to State aid granted in the form of guarantees and provides Member 
States with guidance on when guarantees do not constitute State aid.  

In August 2022, the Commission launched the process of evaluating the 2008 Guarantee Notice. 
The purpose of this evaluation was to check whether the Guarantee Notice remained ‘fit for 
purpose’,  to  identify  any  shortcomings  and  to  verify  whether  there  was  any  scope  for 
improvement.  Sources of evidence for the evaluation included public consultations, an external 
expert study and the Commission’s own case practice. The evaluation covers the guarantees 
with an aid element and guarantees without aid element that were notified to the Commission 
and that were introduced within the period between 2010 and 2022. The results of the evaluation 
are summarised in a Staff Working Document (SWD). 

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 that the Commission may take.  

2.  EXPECTED OUTCOME OF THE INITIAL INTERVENTION 

The objective of the 2008 Guarantee Notice is to provide detailed guidance on assessing notified 
guarantee measures, to clarify when a guarantee constitutes State aid, and, if that is the case, to 
provide  guidelines  on  how  Member  States  should  calculate  the  aid  element  (“gross  grant 
equivalent”).  

The  2008  Guarantee  Notice  applies  to  all  guarantees  issued  by  public  authorities  or  entities 
under  their  control  related  to  financial  instruments  such  as  loans,  and  counter-guarantees 
whereby a public guarantor undertakes to  compensate an undertaking (such as a lender or a 
private guarantor) for payments made to the beneficiary (hereafter “public guarantees”). Thus, 
in  the context of the Guarantee Notice, public guarantees involve public authorities, lenders 
(i.e. banks and other financial institutions) and borrowers.  

Public guarantees cover both individual guarantees and guarantee schemes for undertakings in 
all  economic  sectors,  except  for  export  credit  guarantees.  Key  provisions  of  the  Guarantee 
Notice include criteria that, if met cumulatively, exclude aid (capping of guarantee coverage at 
80%, exclusion of firms in difficulty, the need for the measure to remain “self-financing” and 
be  market-oriented,  etc.).  In  addition,  the  Guarantee  Notice  includes  simpler  approaches  to 
assess possible State aid elements in public guarantees to small and medium-sized enterprises 
(“safe harbour premiums” or “single premiums”), helping to improve their access to finance. 

Against this background, the 2008 Guarantee Notice aims (i) to reduce the number of notified 
public guarantee measures by guiding Member States in designing State aid-free schemes; (ii) 
to increase legal certainty; (iii) to ensure that the guarantee premiums reflect market-conform 
pricing thereby avoiding notification to the Commission; (iv) to serve as an appropriate tool for 
calculating the aid element; and, (v) to support financing of SMEs through simpler methods 
such as safe harbour premiums. 

3.  EVOLUTION OF THE SITUATION OVER THE EVALUATION PERIOD 

Since  the  2008  revision,  there  have  been  notable  developments  with  relevance  for  the 
functioning of the Guarantee Notice. In terms of macroeconomic developments, the 2008 global 

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financial  crisis  triggered  higher  default  rates  and  a  prolonged  phase  of  low  interest  rates. 
Subsequent shocks like the COVID-19 pandemic and the Russian military aggression against 
Ukraine  further  stressed  the  markets,  causing  inflation  and  a  tightening  of  monetary  policy 
starting in  2022.  Credit risks  fluctuated sharply in  response to  these crises and resulted in  a 
tightening of funding conditions for SMEs. 

Private lenders were also affected by several key regulatory developments, such as increased 
capital  requirements  through  the  adoption  of  the  Capital  Requirements  Directive  and 
Regulation  in  2013  and  the  introduction  of  a  new  forward-looking  approach  for  measuring 
credit  risks  under  the  IFRS  9  accounting  rules,  which  has  been  effective  from  2018  and 
onwards.  As  a  result,  lenders  now  follow  stricter  and  more  harmonised  credit  assessment 
practices, which may also affect the use of guarantees. 

The external study estimates that in the observation period of 2010 to 2022, public authorities 
granted guarantees for an amount of EUR 22.1 billion under the Guarantee Notice, which is 
equal to 0.13% of EU GDP (2023). While  Italy and Germany recorded the highest absolute 
amounts of public  guarantees, smaller  Member  States  like Latvia and Romania  issued more 
guarantees relative to  their respective GDP levels than these larger Member States. Overall, 
34%  of  the  total  public  guarantee  volume  reported  to  the  Commission  consisted  of  market-
conform  (i.e.  without  State  aid)  public  guarantees,  though  this  number  is  likely  to  be 
underreported since market-conform measures are not subject to explicit reporting obligations.  

The  most  common  methodologies  used  to  calculate  the  guarantee  premiums  during  the 
observation period were risk-based approaches (with a value of around EUR 12 billion), used 
mostly in Member States like Germany, Sweden, and Italy. Risk-based approaches are bespoke, 
taking into account the specific circumstances of each case. Such case-specific methodologies 
should be distinguished from safe harbour methodologies, which were popular in other Member 
States  (e.g.,  Romania,  Ireland).  A  third  set  of  methodologies  calculate  the  market  conform 
guarantee  premiums  and  are  based  on  available  market  benchmarks,  such  as  the  pricing  of 
comparable financial products (e.g., credit default swaps) or the interest rate charged on the 
very loan that is subject to a public guarantee. 

In its case practice, the Commission services have faced several issues during the evaluation 
period. For example, the safe harbour premiums have been used less regularly, most likely due 
to post-crisis market conditions and lower interest rates, prompting a shift toward the bespoke 
risk-based methodologies. Furthermore, there has been limited use of market benchmarks, due 
to  the  absence  of  comparable  transactions,  especially  in  smaller  or  less  developed  financial 
markets. 

4.  EVALUATION FINDINGS 

The evaluation assessed, how well the Guarantee Notice has met its objectives, based on five 
evaluation criteria: effectiveness, efficiency, coherence, EU added value, and relevance. The 
findings are backed by empirical data, benchmark comparisons, case practice, and stakeholder 
feedback. 

Effectiveness 

Accuracy of risk-based and safe harbour pricing methodologies 

First, the evaluation’s findings suggest that existing risk-based methodologies produced lower 
premiums than market benchmark methodologies developed for the external study, especially 
for higher-risk borrowers and long maturities. Second, the safe harbour methodology produces 
premiums that are lower than the market benchmarks for lower risk (e.g. BBB-rated) borrowers 

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while the opposite is true for higher risk borrowers. More generally, the existing risk-based and 
safe  harbour  methodologies  exhibit  lower  sensitivity  to  market  dynamics  and  changing  risk 
conditions than the market  benchmarks.  These results imply that the popular methodologies 
that are used most frequently by Member States may not be adequately accurate in producing 
market conform fees across different risk categories and over time.  

Crowding out of private investors 

Crowding  out  occurs  if  publicly  guaranteed  loans  replace  private  loans  or  prevent  the 
development  of  private  guarantee  markets  for  similar  loans.  SMEs  typically  have  more 
difficulties in accessing finance compared to larger firms. The external study therefore analyzed 
whether public guarantees can reduce this effect. The results suggest that public guarantees may 
not  be  sufficient  in  bridging  the  entire  gap  between  SMEs  and  large  firms  in  terms  of 
participation  in  credit  markets  and  credit  rationing  vis-à-vis  borrowers.  While  the  results 
effectively rule out full crowding out, it is also likely that some amount of crowding out takes 
place, especially since the impact of public guarantees on credit rationing is relatively small. 
The extent of crowding out remains an open question.  

Unintended Selective Advantages 

Public guarantees may provide unintended selective advantages to lenders if those lenders do 
not properly pass-through the risk-reduction benefits to the intended beneficiary, the borrower. 
Similarly, public guarantees may provide support for non-viable borrowers, delaying their exit 
from the market and undermining competition. The evaluation indicates that there may be an 
incomplete pass-through of the benefits of public guarantees to final borrowers, which implies 
that selective advantages to lenders could be present. In addition, public guarantees may reduce 
entry and exit rates in sectors benefiting from guaranteed loans, potentially lowering market 
dynamism, productivity and ultimately growth. 

Coherence 

The findings of the external study suggest that the Guarantee Notice is not fully coherent with 
other State aid legislation, such as particularly the Notice on the Notion of Aid or the Reference 
Rate Communication. For instance, the Notice on the Notion of Aid prioritizes the use of market 
benchmarks  over  market  proxies,  such  as  the  premiums  produced  by  the  risk-based  or  safe 
harbour methodologies, which is not fully reflected in the Guarantee Notice. Additionally, the 
Guarantee Notice and Reference Rate Communication prescribe different fixed risk premiums 
– a key component of a guarantee premium – for the same firm. Finally, the Guarantee Notice 
does not  provide any specific guidance on the ex-ante examination that the Commission should 
conduct for determining whether undue advantages to lenders exist, as required by the Notice 
on the Notion of Aid. Similarly, the Guarantee Notice does not suggest any specific safeguards 
to  rule  out  indirect  aid  to  lenders,  as  is  done  by  the  General  Block  Exemption  Regulation 
conditions for risk finance aid.  

Efficiency 

Efficiency  refers  to  the  determination  of  how  successful  the  Guarantee  Notice  has  been  in 
producing methodologies that are cost-effective. The general unavailability of reliable data on 
administrative  costs  (which  form  part  of  the  price  of  public  guarantee  together  with  the 
premium,  i.e.  the  renumeration)  has  been  a  key  impediment  for  the  independent  experts  to 
address empirically the questions relating to efficiency. Nevertheless, the experts did use the 
limited available data to the fullest extent and supplemented this with voluntary interviews to 
draw some qualitative results. 

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Overall, the interviewed stakeholders flag that the Guarantee Notice is too complex, requiring 
a significant amount of resources from Member States, especially in the design and setting up 
stages. The qualitative  data also  highlights that the lengthy pre-notification, notification and 
adoption  stages  relating  to  individual  State  aid  decisions  on  public  guarantees  result  in 
uncertainty and costly staff re-allocations over time. In turn, the quantitative analysis revealed 
that the guarantee premium  collections by the State may not  cover total  costs.  Furthermore, 
larger schemes benefit from economies of scale, resulting in lower unit administrative costs. In 
turn, no-aid measures typically incur higher administrative expenses, 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. 

EU Added Value 

The  evidence  gathered  in  the  evaluation  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 different methodologies 
for determining the value of public guarantees developed by Member States. The Notice also 
sets out directly applicable safe harbour premiums. But, on the other hand, the Guarantee Notice 
does not reflect the rules applicable when State guarantees are complemented with a support 
stemming from Union Programmes. Overall, the Notice has increased predictability and legal 
certainty, ensuring a level playing field between Member States. 

Relevance 

The  increasing  number  of  pre-notifications  and  notifications  for  the  approval  of  guarantee 
methodologies  and  a  continued  use  of  the  safe  harbour  premiums  shows  that  the  Guarantee 
Notice remains highly relevant. From a purely practical point of view, this relevance is likely 
explained by the fact that 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 Guarantee  Notice would  benefit from  a revision  to  increase its 
relevance. 

5.  CONCLUSIONS AND LESSONS LEARNED 

Overall, the Guarantee Notice has been widely used by Member States, especially due to its 
flexibility in allowing the use of both risk-based methodologies and safe harbour premiums for 
providing public guarantees. This has contributed to maintaining a level playing field within 
the  EU  and  enabling  the  Commission  to  approve  guarantee  methodologies  developed  by 
Member States.  

The  evaluation  highlights  several  areas  for  improvement  of  the  Guarantee  Notice.  First,  the 
risk-based  and  safe  harbour  methodologies  in  most  cases  tend  to  underestimate  guarantee 
premiums compared to market benchmarks.  

Furthermore, while there is evidence that public guarantees do result in lower interest rates than 
what would otherwise be possible without the guarantees in place, this finding is not sufficient 
to  rule out  the possibility that some of  the benefit of the  aid  is  retained by the lenders. The 
Guarantee  Notice  also  seems  overly  complex,  potentially  resulting  in  high  administrative 
burdens for the Member States. Finally,  there  appears to  be a certain  degree of incoherence 
between  the  Guarantee  Notice  and  other  State  aid  rules,  such  as  the  Reference  Rate 
Communication and the Notice on the Notion of Aid. 

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The evaluation has also highlighted a number of lessons learnt.  

First, since existing safe harbour premiums are much higher than comparable benchmarks for 
higher risk SMEs, many Member States may be opting for developing bespoke risk-based (and 
more complex) methodologies for those beneficiaries.  

Second,  the  evaluation  demonstrates  that  the  accuracy  of  risk-based  methodologies  may  be 
undermined if the parameters used are not aligned with market reality. 

Third, there may be potential unintended aid to lenders which only has been partially addressed 
by recently approved methodologies to tackle this issue.  

Fourth,  there  is  a  lack  of  a  framework  for  voluntary  information  sharing  between  Member 
States. Such framework for Member States wishing to cooperate both among themselves and 
with lenders could be instrumental to improve access to data and state-of-the-art risk assessment 
approaches.  In  addition,  the  current  reporting  requirements  only  lead  to  limited  information 
being available to properly monitor the implementation of the Guarantee Notice.  

Fifth, there are some common interpretation and implementation issues that emerged from the 
evaluation.  This  for  instance  concerns  the  assessment  of  portfolio  guarantees  (i.e.  the  State 
guarantee covers losses up to a portfolio-level rather than a loan-level cap), the meaning of the 
so-called “self-financing” condition (i.e. the requirement that the collected premiums should be 
sufficient to cover all relevant costs), and criteria and conditions for other types of guarantees 
than loan guarantees (e.g., performance guarantees).  

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