Two risk-sharing deals with the European Investment Bank Group (EIB Group) are expected to enable Spanish bank BBVA to provide about €1.3 billion in business financing, expanding the bank’s capacity to lend.
In its Oct. 21 announcement, the EIB Group put its participation in the transactions at €259 million. The larger €1.3 billion figure is the volume of financing the deals are intended to support, rather than loans already made to businesses.
Small and medium-sized enterprises and entrepreneurs are the main intended recipients, with a separate allocation for midcap companies. More than €200 million of the planned financing is intended for green or sustainability projects.
The transactions are synthetic securitizations tied to two BBVA portfolios: one of loans to smaller businesses and self-employed borrowers, and another of business leases. BBVA said the leasing deal is its first synthetic securitization involving a leasing portfolio. European Investment Bank project records list a June 30 signing for the loan transaction and a Sept. 29 signing for the leasing transaction.
Under the arrangements, the European Investment Fund (EIF) covers losses on mezzanine portions of the portfolios. The European Investment Bank (EIB) counter-guarantees part of that exposure, while BBVA retains the senior and junior portions. The parties therefore hold different positions in the portfolios’ credit risk.
For BBVA, the guarantees can create room for further lending. The EIF explains that covering part of a portfolio’s risk can reduce the regulatory capital a bank must hold against it. The resulting capacity is intended to finance Spanish businesses; the €259 million announced by the EIB Group is not an amount already disbursed to them.
Businesses in Spain’s cohesion regions are expected to benefit in particular. The EIB describes those areas as having income per person below the European Union average. BBVA and the EIB Group have not said when the financing will reach borrowers, what terms they will receive or how the planned green allocation will be assessed.
