EIB Support to the Cypriot Private Sector

TABLE OF CONTENTS

1. A few words about EIB

2. EIB activity in Cyprus

3. EIB support for the Private Sector in Cyprus

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TABLE OF CONTENTS

1. A few words about EIB

2. EIB activity in Cyprus

3. EIB support for the Private Sector in Cyprus

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The EIB: capital breakdown

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EIB Group financing in 2018 – EUR 64.2 bn

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EuropeanUnion

€ 56.1bn (87%)

Outside EU€ 8.1 bn

(13%)

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The EIB: the EU bank

Largest multilateral lender and

borrower in the world

Shareholders: 28 EU Member States

HQ in Luxembourg with 40 local offices

Around 3000 staff (finance

professionals, but also engineers,

sector economists and socio-

environmental experts)

Around 450 projects each year in over

160 countries

AAA-rated by the three major rating

agencies

4 policy areas

13.5bn 15.2bn 12.3bn 23.3bn€ € € €

Innovation Environment Infrastructure SMEs

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Benefits of an EIB loan

‣ Benefits of low cost of funding passed on to clients:‣ Liquidity

‣ Long maturities

‣ Attractive interest rates

‣ Catalyst for participation of other banking or financial partners

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Supporting environment

Water pipeline: From Vasilikosdesalination to the Nicosia region

Anti floodingpumping stations in

Larnaca

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Supporting environment

Wind farm in Pafos

Photovoltaic

park in Nicosia

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Supporting infrastructure

EAC’s power

plants at Vasilikos

Highway outside

Limassol

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Supporting innovation

Cyprus Institute of Neurology and Genetics

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University of Cyprus development phase

Learning Centre

Engineering School

Biology School

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Supporting innovation

Supporting SMEs (examples: 3 SMEs in Agros)

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Meat factory

Traditional sweets

Winery

TABLE OF CONTENTS

1. A few words about EIB

2. EIB activity in Cyprus

3. EIB support for the Private Sector in Cyprus

15 15

Yr Signatures(EUR m)

Disbursements(EUR m)

2014 265 113

2015 215 128

2016 240 105

2017 333 263

2018 210 212

2019 (targets) 210 200

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EIB maintains high activity levels in Cyprus

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EIB’s lending activity in Cyprus: Compared to the GDP size or Cyprus’ shareholding of EIB it is the most benefited

country. Since its first operation in Cyprus in 1981, EIB signed loans for a total of EUR 4

bn, of which EUR 1.5 bn or 37%, has been signed in the last 6 years, after the financial crisis.

TABLE OF CONTENTS

1. A few words about EIB

2. EIB activity in Cyprus

3. EIB support for the Private Sector in Cyprus

Standard Intermediated Lending

Cyprus Enterpreurship Fund

EIF’s InnovFin SME Guarantee

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1. Intermediated Lending for supporting local SMEs and MidCaps

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EIB Instruments for supporting Private Sector investments in Cyprus

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• No of participating Financial Intermediaries: 10 counterparts (in 2013 there were zero active counterparts);

1. Alpha Bank (Cyprus)

2. Astrobank

3. Bank of Cyprus

4. Cyprus Development Bank

5. Eurobank (Cyprus)

6. Hellenic Bank

7. NBG (Cyprus)

8. RCB bank

9. Société Générale Bank of Cyprus

• Signatures so far: EUR 780m;

• Allocations: investments for more than EUR 620m benefiting some 500 new investments;

Intermediated Lending – Status

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The local banks bears the full portfolio credit risk ;

Transfer of benefits (ToFA): Local banks benefit from EIB rates but are oblidged to transfer to final beneficiary these benefits (interest rate reduction, longer loan tenor)

Standard FVA: 0.75%;

Additional FVA for Jobs for Youth: 0.75% + 0.50%;

Complementarity: participating banks must add 1/3 of the allocated amount

Transparency: Financial Intermediaries must inform each final beneficiary of EIB support

Intermediated Lending - Characteristics

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Scope of eligibility:

Sector Eligibility: Many sectors and activities are eligible;

Final Beneficiary eligibility: SMEs: i.e. self-employed to 249 staff

MidCaps: i.e. 250 to 3,000 staff;

Loan size eligibility: Maximum investment amount: Up to EUR 25m;

Loan maturity: 2-12 years

Intermediated Lending – Who is eligible?

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All activities are eligible with few exceptions:

Refinancing of old loans (MUST be a new investment)

Real estate developments

Production of weapons and ammunition, arms, military or police equipment

Gambling, betting and related equipment;

Tobacco manufacturing, processing, or distribution;

Working capital / overdraft is eligible

Intermediated Lending – Who is eligible?

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Check EIB website: http://www.eib.org/attachments/lending/inter_cy.pdf

Check your bank’s website:

Ask your bank:

Where / how can I get more information?

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2. «Ταμείο Επιχειρηματικότητας» or Cyprus Entrepreneurship Fund (CYPEF)

Instrument for supporting Private Sector investments

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• No of participating banks: 2 counterpart;

1. Bank of Cyprus (signed: EUR 60m)

2. Ancoria (signed: EUR 10m)

• For a total portfolio of new lending

1. Bank of Cyprus: EUR 120m

2. Ancoria: EUR 20m

• Current status (as at 30/04/2019)

Allocations: approx. 500 allocations for a EUR 130m loan portfolio

Cyprus Entrepreneurship Fund (CYPEF)

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Cyprus Entrepreneurship Fund (CYPEF) - Characteristics

CYPEF is a Risk Sharing instrument: Local bank shares the lending with CYPEF as well as the risk;

CYPEF’s funding is priced below usual local bank’s pricing , reducing the interest rate for SMEs;

Aim: To facilitate access to finance for smaller size / higher risk SMEs at improved terms

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Risk retained

by the

Financial

Intermediary

Risk retained

by

CYPEF

New Portfolio of

Underlying TransactionsRisk-

Sharing

Rate

Scope of eligibility:

Beneficiary eligibility: local SMEs - self-employed up to 249 staff;

Eligible purposes: Consistent with Intermediated Lending;

Maximum loan amount: Up to EUR 1.5 m;

Loan maturity: 2-12 years;

Cyprus Entrepreneurship Fund (CYPEF) - characteristics

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3. EIF InnovFin SME Guarantee (EFSI)

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EIB Instruments for supporting Private Sector investments in Cyprus

EIF’s InnovFin SME Guarantee (EFSI)

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InnovFin SME Guarantee Facility is an unfunded instrument. EIF shares / guarantees 50% of all losses

No of participating banks:1. Bank of Cyprus: EUR 10m2. RCB Bank: EUR 10m

Current status10 new investments for a total of EUR 18m benefited from a EUR 9m of InnovFin Guarantee

SMEs (up to 249 staff) and Small MidCaps (250 – 499 staff)

Innovation Eligibility Criteria:

investing in the production or development of innovative products, processes and/or services that present a risk of technological or industrial failure; or

that are “fast growing enterprises” i.e. their workforce or turnover has increased by at least 20% p.a. over the last 3 years;

Amount: at least EUR 25K and up to a max of EUR 7.5m

Maturity: at least 1 year and up to a max of 10 years

EIF’s InnovFin SME Guarantee (EFSI) - Characteristics

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Indicative example - Transfer of Financial Benefit

Without InnovFin With InnovFin

Financing at 4% Financing at 3.5%

Cost: 4.0% 3.0%

EIF’s InnovFin SME Guarantee (EFSI) - Characteristics

Cost of Risk: 1.5%

Others / Profit: 1.5%

Admin cost: 0.5%

Funding cost: 0.5%

Reduction of risk with InnovFin

Cost of Gtee: 0.5%

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0.5%

0.5%

1.5%

1.5%

0.5%

0.5%

1.5%

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Instrument Signatures Utilisation

EUR m EUR m No

EIB Scheme 780 620 494

CYPEF 70 63 491

EIF InnovFin 20 9 10

SUMMARY - Utilisation of EIB’s instruments for the Private Sector

EIB disbursements for supporting private sector: 2012-2018

33

0 0

33

45

105

167173

0

20

40

60

80

100

120

140

160

180

200

2012 2013 2014 2015 2016 2017 2018

EUR

m

Year

Total disbursements for supporting the private sector 2012-2018: EUR 523m

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Overall, the EIB support has been successful and is considered an

important growth driver for the Cypriot economy in recent years. The

main conclusions of an independent study commissioned by EIB were

the following:

Transfer of Financial Advantage: on average, interest rates were

more than 1.50% lower than the standard rates.

Viability of enterprises: more than 75% of the companies

responded that the EIB Scheme was critical or very important to

implement their investments and ensure their viability.

Employment: 72% of the enterprises have increased or will increase

their employment. At least 1,000 new positions have already been

created. In particular, the Scheme supported youth employment.

SUMMARY - Utilisation of EIB’s instruments for the Private Sector

Thank you!

More information at: www.eib.org

info@eib.org

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