IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: 31 Oct 2012 | Removal date: 29 Dec 2016
Still in force

Loan guarantee

On 12 October 2012, Cyprus notified the EC about its intention to implement a guarantee scheme for Cypriot banks. The Central bank of Cyprus described the objective of the scheme as: 'to enable credit institutions to raise medium-term funding, thereby enhancing the liquidity of the Cyprus economy and reducing interest rates towards levels comparable to those in other euro area economies". (para 5., letter from the EC to Cyprus, Brussels 6.11.2012)
 
Under the current economic conditions, Cypriot banks have very restricted access to medium and long-term funding on the open market. The Cypriotic state therefore plans to provide state guarantees of EUR 6 billion. (para. 9)
 
The guarantees are only to be used as 'collateral for securing new loans or the issue of bonds for the purpose of funding'. (para. 11)
 
In its reply, the EC finds that: 'The provision of guarantees by the State involves State resources '...' In light of the fact that Cypriot banks are active in other Member States and that subsidiaries of banks headquartered in other Member States are active on the Cypriot banking market, the Scheme is capable of affecting trade between Member States.'
 
On 6 December 2012, Cyprus notified a first prolongation of the scheme until 30 June 2013.
 
The EC confirms that the prolongation is 'in line with the Commission's decisional practice. Cyprus may prolong the guarantee scheme for banks until 30 June 2013. Any further prolongation or extension will require the Commission's approval and will have to be based on a review of the developments in financial markets and the scheme's effectiveness'. (para. 36, letter from the EC to Cyprus, Brussels 22.01.2013)
 
Approved prolongations:

  • On 22 January 2013 the EC approved the first prolongation of the scheme until 30 June 2013.
  • On 25 July 2013 the EC approved the second prolongation of the scheme until 31 December 2013.
  • On 18 December 2013 the EC approved the third prolongation of the scheme until 30 June 2014.
  • On 25 June 2014, the EC approved the fourth prolongation of the scheme until 31 December 2014.
  • On 14 January 2015, the EC approved the fifth prolongation of the scheme until 30 June 2015.
  • On 13 July 2015, the EC approved the sixth prolongation of the scheme until 31 December 2015.
  • On 11 January 2016, the EC approved the seventh prolongation of the scheme until 30 June 2016.
  • On 28 June 2016, the EC approved the eigth prolongation of the scheme until 31 December 2016.

 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.

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