EN
16.6.2022
Official Journal of the European Union
L 161/99
45.
Risk finance measures must incentivise market investors to provide funding to potentially viable eligible undertakings above the levels of funding provided in the absence of such incentives or to assume extra risk, or both.
A risk finance measure is considered to have an incentive effect if it mobilises investments from market sources so that the total financing provided to the eligible undertakings exceeds the budget of the measure.
Hence, a key element in selecting the financial intermediaries and fund managers should be their ability to mobilise additional private investment.
46.
If funded debt instruments are used to refinance existing loans, they are not considered to have an incentive effect and any aid element in such instruments cannot be regarded as compatible under these Guidelines.
47.
The assessment of the incentive effect is closely linked to the assessment of the need for State intervention discussed in Section 3.2.2.
Furthermore, the suitability of a measure to leverage private resources ultimately depends on the design of that measure as regards the balance of risks and rewards between public and private finance-providers, which is also closely related to the question as to whether the design of the risk finance State aid measure is appropriate (see Section 3.2.3).
Therefore, once the need for State intervention has been properly identified and the measure has an appropriate design, it can be assumed that an incentive effect is present.
3.2.
Second condition: Avoidance of adverse effects on trading conditions to an extent contrary to the common interest
48.
Article 107(3), point (c), of the Treaty allows the Commission to consider aid to facilitate the development of certain economic activities or of certain economic areas compatible, but only ‘where such aid does not adversely affect trading conditions to an extent contrary to the common interest’.
49.
The assessment of the negative effects on the internal market involves complex economic and social assessments.
The Commission will explain in this Section how it intends to exercise its discretion in that respect.
50.
By its very nature, any State aid measure results in distortions of competition and has an effect on trade between Member States.
However, in order to establish if the distortive effects of the aid are limited to the minimum, the Commission will verify whether the aid is necessary (see Section 3.2.2), appropriate (see Section 3.2.3), and proportionate (see Section 3.2.4).
To enable it to carry out that verification, the Commission requires that Member States submit evidence in the form of an ex ante assessment as described in Section 3.2.1.
51.
The Commission will then assess the negative effects of the risk finance aid in question on competition and trading conditions.
More specifically, aid in the field of risk finance can lead to the crowding out of private investors, have distortive effects at the level of financial intermediaries, cause specific product market distortions and have delocalisation effects.
The Commission will examine such negative effects of the aid on competition and trade and weigh them against the positive effects of the aid (see Section 3.2.5).
If the positive effects outweigh the negative effects, the Commission will consider the aid compatible.
52.
Finally, the Commission will ensure that the aid complies with its transparency requirements (see Section 3.2.6).
3.2.1.
Basic elements of the ex ante assessment to be submitted by the Member State concerned to the Commission
53.
State aid can only be justified if it can bring about a material development that the market cannot deliver itself, for example by remedying a market failure or another relevant obstacle to the provision of risk finance or investment.
54.
State aid may be necessary to increase the provision of risk finance in a situation where the market, on its own, fails to deliver an efficient outcome or does not deliver in a timely manner.
The Commission considers that there is no general market failure as regards access to finance for start-ups, SMEs or mid-caps, but only a failure related to certain groups of start-ups, SMEs and some types of mid-caps, depending, in particular, on the specific economic context of the Member State concerned, as well as their field of activity (e.g. in some sectors risks may be overestimated).