European Commission approves creation of British Business Bank

Press release 15 October 2014

The European Commission has issued confirmation that the British Business Bank has received State aid approval.

The approval gives the British Business Bank a ceiling of up to £6 billion of aided activity, plus the freedom to carry out commercial activities and to act as a managing authority on behalf of the UK Government.

Full press releaseEUROPEAN COMMISSION – Brussels, 15 October 2014

The European Commission has concluded that UK plans for setting up the British Business Bank (BBB), an integrated entity for managing SME access to finance programmes in the UK, are in line with EU state aid rules. In particular, the Commission considered that the BBB concept addresses market failures that hamper SME access to finance in an appropriate and proportionate way, without unduly distorting competition in the Single Market.

The BBB will have three subsidiaries, the Mandated Arm, Service Arm and Commercial Arm, that will provide distinct services. It is also planned that certain already existing programmes supporting SMEs will be integrated within the respective arms of the BBB. The BBB will also develop and manage new SME access to finance programmes. The UK considers that this will ensure a more effective deployment of programmes to support SMEs in their growth and thereby contribute to economic development and job creation.

The Commission has approved that the Mandated Arm of BBB may receive up to GBP 6 billion (around €7.6 billion) funding from the UK on a non-commercial (subsidised) basis until the end of 2019. The Mandated Arm can use these funds, within an approved remit, to provide SMEs with access to finance where a market failure is demonstrated, either on commercial terms (through so-called “market conform schemes”) or on subsidised, non-market terms. Market conform schemes are schemes, which grant funding on conditions that a private market operator could have accepted. The Mandated Arm can grant funding through such market conform schemes within the approved remit without having to seek approval by the Commission, because such financing does not involve any state aid within the meaning of EU rules. The introduction of new market conform schemes is subject to a number of safeguards put in place to ensure, for example, that such financing does not crowd out private finance providers, thereby avoiding competition distortions. The Mandated Arm can also operate subsidised schemes involving state aid measures approved by the Commission or deemed compatible under EU state aid rules (e.g. under the Commission’s General Block Exemption Regulation (GBER – see IP/14/587) or the de minimis Regulation) or represent participation in EU financial instruments, such as COSME or Horizon 2020. If the Mandated Arm wishes to implement interventions outside the approved remit, it will have to notify the modification of its remit to the Commission.

The Commission also concluded that neither the activities of the Service Arm (which will only provide advice and services to the UK Government) nor those of the Commercial Arm (which will be funded on a commercial basis and will only carry out market conform interventions) involve any state aid, and are therefore not caught by EU state aid control.

The non-confidential version of the present decision will be made available under case number SA.36061 in the State Aid Register on the competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.