Companies and Covid-19: Direct grants and management of insolvencies
The IEAF/FEF publishes the report "Banking non- performing loans management in the Coronavirus crisis”, elaborated by Antonio Carrascosa, former General Director of the Fund for Orderly Bank Restructuring (FROB), in which he analyzes the challenges arising from a potential increase in business non performing loans as a result of the covid-19 crisis, such as the need for direct aid, the debt recovery model, the determination of business model viability or the different recapitalization instruments.
The report offers the following main conclusions and recommendations:
- The financial sector has been part of the solution “by providing very relevant financing to the economy despite the existing uncertainties”.
- Banking sector alone cannot solve the problem that many companies will face as a result of the economic crisis of Covid-19, specially “if a very large proportion of an economic sector is practically closed and there are no reliable forecasts about its opening”.
- More public aid will be needed, “the phase of public guaranteed loans for companies must be replaced by one with more direct aid for companies in certain sectors. This policy has been followed by main European countries“.
- Recapitalization instruments for SMEs of a certain size and large companies. For the smallest companies direct grants. "It seems clear that debt conversion is an exercise that must be quantitatively limited to make it manageable. Debt-to-equity strategies should be targeted at SMEs of a certain size. For microenterprises in the sectors most affected by the pandemic, only direct grants is appropriate”. The report points out the possibility of using the “European Recovery and Resilience Fund” for the recapitalization of companies, as a possibility already contemplated in its regulation.
- A General framework of best practices to address refinancing and restructuring operations. Given the foreseeable increase in debt together with a drop in income in many companies, it would be desirable for banks to agree on a general framework “in order to avoid the application of disparate criteria in the refinancing and restructuring of SMEs loans, when their situation is similar”.
- To promote sales of non-performing portfolios, the report proposes to develop the Italian and Greek model for securitization of non-performing loans with public guarantee to the senior tranche, which has worked very well in both countries.
Filter results
According to IE University’s Center for the Governance of Change, deeper and more integrated financial markets would strengthen the euro’s global role. This requires, among other elements, resilient and interoperable payment systems and completing the banking union.
Partnerships between banks and private credit: The winners will be those that combine bank underwriting discipline, distribution, and customer access with private capital’s appetite for long-dated, illiquid risk, according to Oliver Wyman.
Lucrezia Reichlin (CEPR): A CBDC is not a prerequisite for monetary sovereignty. Confusing money with payments can risk misdiagnosing the problem and misaligning economic policy efforts.
According to the World Economic Forum´s Global Risk Report 2026, geoeconomic confrontation, mis- and disinformation and societal polarization make up the top three short-term risks, while environmental risks dominate in the long term.
According to the World Economic Forum, over the last few years AI has moved from experimentation to workflow integration, promising systemic gains in productivity while also raising critical questions around economic inclusion, values, trust and resilience.
According to AFME, a clearer, more coherent, and proportionate regulatory environment, without unnecessary layers and focuses on growth and competitiveness, is keyl to increase investor confidence, unlock private capital and deepen European capital markets
According to the Center for the Governance of Change at IE University, Europeans support technological progress if it reinforces security, inclusion, and social welfare; but resist it when change feels imposed, opaque, or misaligned with their values.
According to a recent report released by CEPS, European financial regulators should adopt competitiveness as a formal secondary objective, following the precedent established by the UK's Financial Services and Markets Act 2023.
According to the OECD. SMEs and start-ups that grow rapidly contribute significantly to job creation, economic growth and competitiveness. Indeed, SMEs that grow by one-third over a three-year period, contribute about as much to job creation as large firms.
According to @McKinsey, banks must prepare for a new growth curve. Strategic precision —the ability to combine technology, capital discipline, and deep customer insight— will distinguish the leaders from the laggards.
According to Kristalina Georgeva IMF Managing Director, lifting growth requires three things: one, regulatory housecleaning to unleash private enterprise; two, deeper regional integration; and three, preparedness to harness AI.
According to The European House – Ambrosetti, the European Union has an opportunity to boost competitiveness and growth by simplifying regulatory and supervisory frameworks, particularly in the areas of sustainability and the financial sector.