Commission finds State aid rules on guarantees still relevant but can be updated

The European Commission has found that the State aid rules on guarantees are still relevant as they increase predictability and legal certainty, but that some improvements and simplification are necessary. In a Staff Working Document ('SWD') published today, the Commission finds that there can be improvements regarding estimating aid amounts, complexity for SMEs, and passing-on of risk benefits.

The SWD summarises the findings of its 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 ('Guarantee Notice'), which describes how the Commission assesses State guarantees on loans and other financial instruments. Launched in August 2022, the aim of the evaluation was to assess whether the Guarantee Notice, which has not been revised since 2008, remains 'fit for purpose' and to identify any existing shortcomings as well as any scope for improvement and simplification.

As part of the evaluation, the Commission gathered evidence to understand how the Guarantee Notice has functioned since its adoption. This evidence includes feedback obtained from a public consultation and a targeted consultation, a workshop with bodies that administer and grant guarantees, as well as information provided by Member States. The Commission has also commissioned an external study conducted by a consortium of independent experts. The final report of the external study has also been published today.

Main findings of the evaluation

The evidence gathered in the evaluation has shown the following:

• The Guarantee Notice has a clear added value, as it provides a framework within which the Commission can approve guarantee methodologies developed by Member States. The Guarantee Notice has therefore increased predictability and legal certainty and ensured a level playing field between Member States.
• The Guarantee Notice remains relevant as it describes the conditions for ensuring that a State guarantee is awarded on market terms and hence is free of aid. The continued relevance of the Guarantee Notice is also clear from the increasing number of Member States' (pre-)notifications of guarantee methodologies.

The evaluation also shows that the Guarantee Notice could be improved in the following specific areas:

• Due to developments in the financial markets, the evolution of interest rates, and the changes in capital requirements applicable to lenders since 2008, the implementation of the Guarantee Notice may result in an underestimation of the aid amount (i.e. the premium charged for a State guarantee may be too low). However, for the simplified approach that can be applied for State guarantees to smaller companies (the so-called 'safe harbour option'), there may be an overestimation of the aid amount (i.e. the premium charged may be too high), especially for State guarantees targeting riskier SMEs.
• It may be the case that lenders do not fully pass through to borrowers the risk-reduction benefits they obtain through the State's guarantees, although this effect is insufficient for lenders to achieve any statistically significant aggregate gains.
• Compliance with the provisions of the Guarantee Notice can be complex and costly, especially for smaller measures and smaller Member States. In addition, there is insufficient availability of reliable data on approved guarantee measures, which demonstrates that the reporting framework of the Guarantee Notice is not functioning as intended. This could be due to the costs involved.
• The Guarantee Notice contains elements that are incoherent with the broader State aid framework. Most notably, there are some inconsistencies over the use of market benchmarks and the mechanisms for ruling out aid to lenders, which are both established under the Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU ('Notice on the Notion of Aid').

Next steps

The Commission intends to launch a review of the Guarantee Notice in the first quarter of 2026 with the aim to address the issues identified in the evaluation. Stakeholders will have the possibility to comment on the call for evidence which will be published for feedback. The revision is currently estimated to be finalised by June 2027.

Background

To ensure that a State guarantee involves no aid, the guarantee premium paid to the State should be in line with what a market operator would expect to receive as remuneration for that guarantee under normal market conditions. The Commission's market conformity assessments therefore focus on whether the transaction's compliance with market conditions can be directly established through transaction-specific market data or, in cases where such data is unavailable, whether other methods could be used.

The most direct way to rule out aid is for the State to set the guarantee premiums equivalent to those charged by private operators. If there is no equivalent transaction, market conformity may instead be established using market benchmarks from comparable market transactions on that company or on a sample of comparable companies. In practical terms, most of the Commission's assessments of guarantee measures focus on a situation where the State acts alone, and where no reliable or consistent market benchmarks exist. In those cases, the Member States may develop their own methodologies to calculate market proxies for the guarantee premium. The Guarantee Notice sets out conditions for ruling out aid. The Guarantee Notice also helps Member States set up measures involving an aid element, by providing conditions on how to accurately calculate the aid amount in the State guarantee. Under the Guarantee Notice, Member States can, subject to the Commission's approval, set up methodologies that achieve market conformity by taking into account the specific risk and cost elements that are typically considered by market operators. Simplified options, including a safe-harbour option, are also provided to for small and medium-sized enterprises (SMEs).

For More Information

More information on the Guarantee Notice and its evaluation is available on the Commission's competition website and on the dedicated Guarantee Notice evaluation webpage.