Loan guarantee schemes

Business scope

Loan guarantee schemes ('confidi' in Italian), in the form of consortia and cooperatives, issue collective guarantees for exposures to small and medium-sized enterprises (SMEs) or to partner freelance professionals, in order to help them access finance from banks and other financial intermediaries (Article 13(1) of Decree Law 269/2003).

Loan guarantee schemes with a business volume of less than €150 million ('small-loan guarantee schemes') may only provide collective credit guarantees and any related or ancillary services pursuant to Ministerial Decree 53/2015, subject to statutory licensing requirements. They must register with Organismo dei Confidi Minori, the organization that manages the list of small-loan guarantee schemes.

Loan guarantee schemes with a business volume of over €150 million must be registered pursuant to Article 106 of the Italian Consolidated Law on Banking (TUB). Their core business is providing collective credit guarantees and any related or ancillary services, subject to statutory licensing requirements. In addition, they may:

• grant other forms of funding pursuant to Article 106(1) of the TUB, as a secondary business and up to 20 per cent of their total assets, or back bonds issued by member SMEs, within the same limit;
• provide services under Article 112(5) of the TUB, mainly to partner or member companies, including: a) issuing guarantees to Italian tax authorities, for the purposes of tax refunds to partner or member companies; b) managing public incentive schemes; c) entering into agreements with banks receiving public guarantee funds to govern their relationships with credit guarantee scheme partners or members and improve access to credit.

Requirements

Credit guarantee schemes must meet the following requirements for the purpose of registering pursuant to Article 106 of the TUB:

1. legal form of a joint-stock company (società per azioni), limited joint-stock partnership (società in accomandita per azioni), limited-liability company (società a responsabilità limitata), cooperative company, or limited-liability consortium (società consortile a responsabilità limitata);
2. registered office and headquarters in Italy;
3. share capital of at least €2 million;
4. members must be: i) small and medium-sized enterprises (SMEs) in the industrial, commercial, tourism and service sectors, farms and craft businesses, as defined in EU State aid rules for SMEs; ii) registered or chartered professionals in business, not exceeding SME size limits; iii) larger enterprises within the limits set by the EU for access to European Investment Bank (EIB) funds for SMEs, provided they do not account for more than one sixth of member or partner companies overall; iv) large non-financial corporations and public or private entities, provided member SMEs have at least fifty per cent plus one of the votes to be cast in general meetings of shareholders and the members of management and supervisory boards are appointed in general meetings (see Article 13 of Decree Law 269/2003);
5. each member can hold up to 20 per cent of the consortium fund or share capital and no less than €250;
6. regulatory requirements for the qualified shareholders;
7. statutory fit and proper requirements for members of the management body;
8. no close links between a financial intermediary, or any entities within its group, and other entities that could stand in the way of effective supervision;
9. corporate purpose limited to licensed operations only.

Applications shall also contain the following statements:

• the business volume resulting from the latest approved financial statements is €150 million or higher, and it has been maintained for the following six months;
• the amount of equity is sufficient to comply with prudential requirements.

In addition, applicants are required to submit specific documents in compliance with Bank of Italy Circular 288/2015, including, among others, their memorandum and articles of association, a business plan with an analysis of the financial viability of operations, and a report on their organizational structure.

A loan guarantee scheme is required to submit an application within 60 days of breaching the operational threshold laid down by law (see Article 4 of Ministerial Decree 53/2015).

The Bank of Italy shall deny the licence where, based on the requirements assessment, the applicant cannot ensure sound and prudent management.

Post-licensing requirements

Newly-licensed intermediaries are required to send the Bank of Italy a certificate showing the date the amendments to their articles of association were entered into the Italian Business Register. As of that date, licensed intermediaries will be registered pursuant to Article 106 of the TUB and notified of their identification number.

Once registered, financial intermediaries are required to:

• join an Alternative Dispute Resolution (ADR) system, pursuant to Article 128-bis of the TUB;
• notify the Bank of Italy of any changes to the information contained in the register, within 10 days of filing for registration of those changes in the business register.

Intermediaries are supervised by the Bank of Italy in accordance with the organizational criteria published on our website and are subject to the supervisory powers set forth in statutory provisions.