Seven Banks Sign Agreement on State-guaranteed COVID-19 Loan Scheme

Luxembourg's Minister of Finance Pierre Gramegna and representatives of seven participating banks today signed an agreement on the state-guaranteed loan scheme aimed at supporting the Luxembourg economy in the context of the COVID-19 (coronavirus) pandemic.

The signing ceremony brought together Luxembourg's Finance Minister, Vice President of the Luxembourg Bankers' Association (ABBL), Yves Maas, and representatives of the Banque et Caisse d'Épargne de l'État (BCEE or Spuerkeess), Banque Internationale à Luxembourg (BIL), BGL BNP Paribas, Banque de Luxembourg, Raiffeisen, ING and the Bank of China.

Under this new scheme, which was announced on 25 March 2020 as part of the country's economic stabilisation programme and established by the law of 18 April 2020, the state will guarantee bank loans granted to businesses of up to €2.5 billion. Thus, in order to cover their immediate working capital and investment needs, companies can now apply to their bank to take out a loan which can amount to up to 25% of their turnover and which will benefit from a 85% state guarantee.

As a result, participating banks, which keep a 15% risk share, will be able to grant a larger number of loans and for higher amounts. In total, the banks will be able to grant guaranteed loans to companies affected by the crisis up to a maximum of €2.94 billion euros (85% x 2.94 = €2.5 billion guaranteed by the state). Loans granted by banks to large companies, small and medium-sized enterprises (SMEs) and the self-employed, including young innovative companies, are eligible to apply.

These state-guaranteed loans are part of the package of measures taken by the government to help the economy overcome the current crisis and are intended to be a subsidiary tool, after using, where possible, the tools of the public-law banking institution Société Nationale de Crédit et d'Investissement (SNCI), the Luxembourg Export Credit Agency (Office du Ducroire) or the European Investment Bank (EIB) in particular. Loans are reserved for companies that were viable before 18 March 2020, the date of the proclamation of the state of emergency. The evaluation of the eligibility for loans will be carried out directly by the banks in compliance with the conditions provided for in the agreement signed today.

This guarantee scheme is in addition to the moratoriums on existing loans that the banks, in cooperation with the government, have undertaken to grant to companies in the current context of crisis. To date, more than 8,000 six-month moratoriums, representing a cumulative value of more than €2.6 billion entirely borne by the banks, have already been granted to Luxembourg companies. This corresponds to an acceptance rate of almost 98%.

Pierre Gramegna commented: “I am delighted with the signing of this agreement which underlines the importance of solidarity and cooperation between the government and the private sector in this crisis which is affecting the whole country. The guarantee scheme that the government, the ABBL and the seven participating banks are launching today is indeed a real public-private partnership and thus represents one of the traditional forces of Luxembourg which has always been able to rely on dialogue with economic actors. It is the result of a reflection carried out together with the banks from the start of the pandemic". The Finance Minister continued: "A flagship measure of the €8.8 billion economic stabilisation package, this plan will provide the necessary support to our entrepreneurs and businesses and will help them prepare for the renewal of the economy in the post-crisis period. The presence of an important financial centre and a highly capitalised banking sector thus proves to be a source of support during the crisis. The banks are assuming their responsibilities and playing an essential role for the country in order to resume economic growth and prepare for the future". 

On behalf of BIL, one of the participating banks to date, Marcel Leyers, Chairman of the Executive Committee, stated: "By sharing with the state the risks arising from the current economic uncertainty, this loan package will be enable us to give these companies some breathing space. Once the crisis is over, these firms will then be in a position to resume their operations on a sound economic footing". 

Finance Minister Pierre Gramegna concluded by recalling that "other banks are welcome to join this initiative”.