28.01.2011

Aid elements in Finnvera’s financing

Public support to enterprises has aroused debate in recent weeks. Finnvera is also a State-owned provider of specialised financing for enterprises but does not award grants or direct support to enterprises.

In certain situations, however, Finnvera’s domestic financing may include interest subsidies and what according to the EU rules is known as imputed State aid. The State also compensates Finnvera for some of its domestic credit and guarantee losses; this means that Finnvera can take higher risks than other financiers. Finnvera’s export credit guarantee activities are regulated by international agreements that require economic self-sustainability over the long term. In keeping with these agreements, Finnvera’s guarantees do not include aid.

A fee is charged for financing provided by Finnvera; in other words, the price paid by clients for loans, domestic guarantees and export credit guarantees is determined according to the risk. Loans granted by Finnvera are repaid as any other loans.

In its operations, Finnvera is expected to attain economic self-sustainability. Accordingly, over the long term, the company must cover the costs incurred in operations with its income from operations.

Domestic financing and venture capital investments

In 2007–2009, Finnvera’s financing to enterprises totalled about one billion euros per year; guarantees for bank loans were over 50 per cent of this, while the rest consisted of loans. Of the enterprises that have received financing, on average about 90 per cent are SMEs.

Finnvera acquires the funds lent to enterprises from the market, by issuing State-guaranteed bonds. This acquisition of funds does not cause expenses to the State Budget.

The State of Finland and the European Regional Development Fund provide interest subsidies for credits granted by Finnvera in areas assisted on regional policy grounds and in the EU Objective regions. The interest subsidies lower the interest paid by clients to Finnvera. The interest subsidies provided in 2009 totalled EUR 17.3 million.

Finnvera’s balance sheet has separate funds for domestic operations and for the financing of exports. Profits from both types of operations are transferred annually to the respective funds, which are also used to cover any losses incurred. The State compensates Finnvera for about half of the credit and guarantee losses arisen in domestic financing. In 2009, the share paid by the State totalled EUR 32.2 million.

The State has granted subordinated loans for the venture capital investments made by Finnvera in starting growth enterprises. The investments are made on normal terms; the goal is, at least, to maintain the real value of the capital invested.

Export credit guarantees

The export credit guarantees granted by Finnvera do not include financial support. To obtain export credit guarantees, clients pay a premium that corresponds to the risk involved. Export credit guarantees can be granted to both large enterprises and SMEs.

Any losses arisen in Finnvera’s export credit guarantee operations are primarily covered by the assets accumulated in the export credit guarantee fund on the company’s balance sheet. If the fund’s assets are not sufficient, the losses are covered by the State Guarantee Fund, which is outside the State Budget. In the end, any export credit guarantee losses are the responsibility of the Finnish government, should the assets in the above funds be insufficient to cover them. Throughout Finnvera’s history, export credit guarantee operations have shown a cumulative surplus.