Press Release: State aid: Commission authorises UK scheme to support lending to businesses

The European Commission approved, under EC Treaty state aid rules, a UK scheme to encourage banks to provide new lending to businesses in the UK (the Working Capital Guarantee Scheme). In the context of the current global financial crisis banks have become increasingly risk averse and are reducing credit ceilings. Under the scheme, the UK will offer banks up to £10 billion of guarantees in respect of portfolios of working capital loans to sound, credit-worthy companies. By virtue of this government guarantee, banks will obtain capital relief, which the banks have to redeploy to support further lending to businesses. The guarantees will be priced at a level designed to make the scheme self-financing. The Commission found that the measure was an appropriate, necessary and proportionate means of remedying a serious disturbance in the UK economy. In particular it was non-discriminatory, limited in time (two years) and scope and requires a risk-based remuneration. It was, therefore, compatible with the rules on state aid to remedy a serious disturbance in a Member State's economy (Article 87(3)(b) of the EC Treaty), as explained in the Communication on how these rules apply to banks during the current crisis.