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Garanti q a Hitelgarancia Zrt. dr. Márton Vadász director „Guarantee Systems in European Countries- Searching for the Best Model” Warsaw, February 9, 2011. Garanti q a Hitelgarancia Zrt. (Garantiqa Creditguarantee Co. Ltd.). Founded in December 1992

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slide1

Garantiqa Hitelgarancia Zrt.

dr. Márton Vadász

director

„Guarantee Systems in European Countries- Searching for the Best Model”

Warsaw, February 9, 2011

slide2

Garantiqa Hitelgarancia Zrt.

(Garantiqa Creditguarantee Co. Ltd.)

Founded in December 1992

Subscribed capital: EUR17.2 million (HUF 4,8 billion)

(December 31, 2010)

Equity: EUR 68.3 million (HUF 19 billion)

Mission: to help SMEs’ access to financial resourcesby undertaking surety guarantees and thereby to enhance their development and improve theircompetitiveness.

slide3

The role / cooperation of the

government and the private sector

Ownership structure:

Hungarian Government, represented by

MFB (Hungarian Development Bank):50.025%

+ Indirect state ownership: MFB 13.97%

Hungarian Export-Import Bank (0.25%),

Total: 64.24%

Commercial banks, credit co-operatives,

enterprise associations: 35.76%

Banks are in double role: owners + beneficiaries

of the guarantees

slide4

Legal background

  • Act CXII. of 1996 on the financial institutions
  • Annual act on the central budget
  • National and EU competition / state-aid legislation

Garantiqa is not subject to company tax and does

not pay dividend to its owners.

slide5

Track record

  • Market share: 13% of the approx.
  • HUF 4000 billion SME loan portfolio as of end 2010
  • 2010 results:HUF cca 300 billion (EUR 1.06 billion)
  • new guarantees (y/y decrease 20%)
  • HUF 506 billion (≈EUR 1.82 billion) guarantee portfolio
  • (38956 contracts)
  • Guarantees between 1992-2010:
    • 209.000 financing deals
    • HUF 2400 billion (≈ EUR 8.6 billion) SME-loans and bank
    • guarantees
    • HUF 1900 billion (≈ EUR 6.9 billion) guarantees
slide8

SME guarantee products

  • Gradually extended offer:
  • 1999 – bilateral agreements with banks (‘packages’)
  • 2002 – Széchenyi Card
  • 2005 – other card type loan guarantees
  • 2006 – guarantees to financial asset leasing and factoring
  • 2007 – tender guarantees
  • 2008 – Garantiqa Pont Consulting Ltd.,
  • Jeremie- micro credit guarantees, portfolio guarantee product
  • 2009 – new products to mitigate the effects of the crisis and to enhance banks’ willingness to lend to SMEs
slide9

Garantiqa Hitelgarancia Zrt.

Two ways of undertaking surety guarantees

I. standard process, individual assessment

receipt of application

  • assessment of client and transaction risks
  • decision
    • Deputy CEO / Risk Management (<HUF 100M)
    • Guarantee Committee
  • deadline for the evaluation and

decision making: 15 working days

slide10

Garantiqa Hitelgarancia Zrt.

II. Simplified process (‘packages’)

  • surety guarantees undertaken on basis of

bilateral agreements with banks

  • to a big number of smaller amount,

standardized loans

  • preliminary analysis of risk management and

lending practices ofthe financial institution

  • exact definition of the product terms and

conditions

  • decision making within three days
slide11

Counter-guarantee from the

central budget

  • Annual law on the central budget defines the rate,
  • cap amount and maximum of year-end guarantee commitments (2011: 70%, HUF 20.9 billion,
  • HUF 500 billion). Netting is not possible.
  • Ministry of Finance decree 48/2002. (28 December)
  • on the detailed rules of the state counter-guarantee
  • Agreement of Garantiqa Hitelgarancia Zrt. with the
  • Hungarian State Treasury (documentation, payment
  • deadlines, etc.)
slide12

State aid limits

  • De minimis: gross grant equivalent max.
  • EUR 200 thousand in three years; max. guarantee
  • amount EUR 2.5 million (Commission’s Garantiqa transparency resolution on 12 November 2008)
  • General block exemption: max. HUF 2.5 billion/guarantee to investment finance
  • Guarantees at own risk: max. HUF 2.5 billion / debtor
  • Within the Temporary Framework (till 31 December 2010)
    • supporting enterprises in difficult position
    • gross grant equivalent max. EUR 500 thousand

(vs. de minimis limit)

    • max. 90% guarantee rate
slide13

The effect of the crisis on the

guarantee institution

  • deteriorating average portfolio quality
  • growing number and rate of redemptions
  • higher provisions + smaller yield
  • negative effect on P&L
  • Main objective: stimulation of bank finance
  • Expectation of owners:
  • to increase the portfolio
  • long term sustainability after temporary losses
slide14

How do we support SMEs

during the crisis?

  • Updating of the bilateral agreements
    • guaranteeing overdraft
    • guarantees to restructured financing
    • guarantees to Hungarian Development

Bank-refinanced loans

  • Exploitation of EU possibilities (JEREMIE, CIP,
  • notifications under new legislation, influence on the
  • enterprise policy and on the competition rules, etc.),
  • lobbying through AECM and national authorities
slide15

Further possibilities

  • Capital constraints:
  • Capital adequacy is sound (> 20%) but:
  • smaller yields to be compensated
  • excessive leverage ratio to be avoided
  • drastic fee increase to be avoided (strong market and CRD constraints)
  • Suggested measures:
  • strengthening the counter-guarantee background
  • (JEREMIE funds, EIF / CIP)
  • subordinated debt: IFIs
slide16

Contact:

Address: 1082 Budapest, Kisfaludy u. 32.

Phone: (36-1) - 485-8300

Telefax: (36-1) - 485-8320

E-mail: info@garantiqa.hu

Website: www.garantiqa.hu