Kurt Leutgeb (Austria Wirtschaftsservice, aws) - session 16/04/2015 Kurt Leutgeb's presentation at the Operational Training Session held on the 16/17 April 2015 in Maribor. (a new version of this presentation was uploaded on 2/07/2015 to include more data)

1. Policies and Procedures
for Collaterals
Results of the survey among members of AECM
Operational Training Session (OTS)
Maribor/ Slovenia on 16 and 17 April 2015
Kurt Leutgeb - aws

2. Survey
2
Sample: 19 questionnaires
answered by:
 aws/Austria
 NÖBEG/ Austria
 PMV - Waarborgregeling - Flemish guarantee fund/ Belgium
 Sowalfin/ Belgium
 Guarantee Fund of the Republic of Srpska/ Bosnia and Herzegovina
 HAMAG-BICRO/ Croatia
 CMZRB - Czech-Moravian Guarantee and Development Bank/ Czech Republic
 BPI France/ France
 Verband Deutscher Bürgschaftsbanken e.V./ Germany (two)
 AVHGA - Rural Credit Guarantee Foundation/ Hungary
 Garantiqa Hitelgarancia Zrt./ Hungary
 Garfondas - Agricultural Credit Guarantee Fund/ Lithuania
 INVEGA UAB - Investiciju ir verslo Garantijos/ Lithuania
 BGK Bank Gospodarstwa Krajowego/ Poland
 SPGM - Sociedade de investimento/ Portugal
 SEF - Slovene Enterprise Fund/ Slovenia
 CESGAR - Confederation of Spanish Mutual Guarantee Societies/ Spain
 Teskomb/ Turkey
 KREDEX/ Estonia

3. 1. Policy regarding collaterals
0
2
4
6
8
10
12
14
16
Personal
guarantee
Mortage Retention of title,
reservation of
proprietary rights
Pledge of
insurances,
securities, depots
Assignement /
cession of
receivables
never sometimes often in every case
3
1.1. Types of collaterals used by your institution?

4. 1. Policy regarding collaterals
4
1.2. What are the main reasons for you as a guarantee institution to ask for
collaterals?
2
5
6
13
13
18
0 2 4 6 8 10 12 14 16 18 20
to compensate for an intransparent ownership
structure or a strong dependence
legal or regulatory reasons
banks requirements
to share the risk between bank, entrepreneurs
and the guarantee institution
to strengthen the identification of the
entrepreneurs with the company
to reduce risk
Additional remarks:
 To reduce the risk of fraud or illegal act
 Some never ask for collaterals (eg. Waarborgbeheer nv)

5. 1. Policy regarding collaterals
5
1.3. Do you have any minimum collateral requirements (that have to be fulfilled
before granting a guarantee)?
8
12
0 2 4 6 8 10 12 14
yes
no
Additional remarks:
 Examples for minimum collateral requirements:
Personal guarantees (sometimes depending on the equity already invested), third
party personal guarantees, bills of exchange, mortgage
 If bank uses collaterals some members reduce their risk amount
 Some require minimum values (30 %), depending on rating and on loan amount
 SEF: Collateral has to be higher than loan amount, changes in 2015
(1:0.8 + guarantees)
 Depending on type of loan

6. 1. Policy regarding collaterals
6
1.4. Do you offer a collateral waiver, i.e. do you explicitly refuse collaterals?
16
4
0 2 4 6 8 10 12 14 16 18
yes
no
Additional remarks:
 for smaller loan amounts only
 BPI has other aims than a commercial bank (limits collaterals, eg. no seize
through mortgages on the personal home of the entrepreneur even if there
is a personal guarantee)

7. 1. Policy regarding collaterals
7
1.5. Is there a necessity to have collateral besides/ in addition to your
guarantee?
8
11
0 2 4 6 8 10 12
yes
no
Additional remarks:
 Sometimes the bank can ask for collaterals for its own risk share
 Often: Personal guarantee

8. 1. Policy regarding collaterals
8
1.6. Do you take collateral only out of the project you finance (e.g. mortgage on
the land financed) or also in addition (e.g. mortgage on the private real
estate of the entrepreneur)?
7
13
0 2 4 6 8 10 12 14
yes
no

9. 1. Policy regarding collaterals
9
1.7. Is the bank allowed to take extra collateral on its risk share or is there
a pari passu stipulation in every case?
11
9
0 2 4 6 8 10 12
yes
no (always pari passu)

10. 1. Policy regarding collaterals
10
1.8. What is the average ratio between credit and requested SME collateral
(e.g. 100 unit of credit / 200 units of collateral, ratio = 1:2)
Answers:
very different!
 sometimes no collateral,
 sometimes no specific ratios (depends on the bank)
 sometimes ratios like
 2:1 (Hungary)
 1:1 (Portugal, Lithuania, Estonia)
 1:1 in addition to SEFs guarantee (Slovenia)
 1:2 (Turkey)
 1:2,5 (Croatia)
 1:3 (Bosnia)

11. 1. Policy regarding collaterals
11
1.9. Personal Guarantees (if used)
1.9.1. Do you have limits for the nominal amount/percentage of a personal
guarantee?
16
4
0 2 4 6 8 10 12 14 16 18
yes
no
Additional remarks:
 Limit is the amount of the guarantee/ loan
 EUR 250.000
 50 % of the outstanding loan amount

12. 1. Policy regarding collaterals
12
1.9. Personal Guarantees (if used)
1.9.2. Do you have a fixed stipulation when personal guarantees have to
be given?
16
3
0 2 4 6 8 10 12 14 16 18
yes
no
Additional remarks:
 All shareholders holding 20 % or more
 Depending on the project (common for start-ups)
 „better“ projects (eg. more innovative projects) lead to limited stipulations

13. 2. Procedures regarding collaterals
13
2.1. How do you administer collaterals
2
7
14
0 5 10 15
other
on your own
collaterals are always administered by the bank
granting the loan

14. 2. Procedures regarding collaterals
14
2.2. How do you assess collaterals?
2
2
6
7
14
0 5 10 15
no assessment of the value of collaterals is
made
by own experts of the guarantee institutions
by independent experts from outside
by internal standardized assessment rules
by relying on the figures indicated by the
bank granting the loan

15. 2. Procedures regarding collaterals
15
2.3. What is the recovery rate out of collaterals in relation to your guarantee
defaults?
Answers:
 the answer is very often around 5 %
 some indicated 10-20 %
 some indicated 50 %

16. 2. Procedures regarding collaterals
16
2.4. How long does it usually take to recover the amount of defaulted
transaction in months (the length of recovery process)?
Answers:
 varies strongly (depending on the single case): 6
 1 to 2 years: 6
 more than 2 years: 4
 3-5 years: 2

17. 2. Procedures regarding collaterals
17
2.5. Is the recovery process dealt with in-house or is it outsourced?
Answers:
 Bank or outsourced: 10
 Inhouse: 8
 Both: 2

18. 2. Procedures regarding collaterals
18
2.6. At what time of the recovery process do you get reimbursed?
2
6
13
0 5 10 15
Prior to the bank
After the Bank has covered its loss
Pari passu

19. 2. Procedures regarding collaterals
19
2.7. How often do you reject or reduce the guarantee payment because of
administrative mistakes by banks regarding collaterals
Answers:
 Never: 6
 % of all guarantee payments demanded are rejected:
10 %: 2
2 to 6 %: 7
below 2 %: 3
 % of all guarantee payments demanded are reduced:
10 %: 1
2 to 6 %: 4
below 2 %: 2

20. 3. Additional remarks, feedback
or special interest in relation to
guarantees not covered in the questions
20
 annual data on fees and recovery collected from collateral would be
interesting
 statistics on the evolution of the recovery rate on defaults obtained from
collaterals
 are there special programs for zero collateral loans (programme by BPI)

21. 21
Thank you for your kind attention!