Madrid, 27 May 2010

1. Helmut Kraemer-Eis Madrid, 27 May 2010 WPFS – Workshop on Securitisation Head of Research & Market Analysis Securitisation as tool to support SME financing

2. Content • Introduction/SME financing/the EIF • Overview • EIF’s role • Origination Focus • Underwriting Criteria • Pool Criteria • Portfolio Summary • Concluding Remarks • Contacts

3. Introduction: The challengeFinancing Innovation amongst SMEs in Europe • SMEs account for a large proportion ofEurope’s economic activity • Micro-businesses dominateemployment in countries such as Italy (48%) and Greece (57%) • Successive EU summits put issues ofgrowth, employment, innovation and competitivenesshigh on agenda • EIF is theSME armof the EIB Group Source:Eurostat, Commission Communication on Modern SME policy for Growth and Employment Importance of SMEs as the Foundation Stone for Tomorrow’s Prosperity

4. Introduction: EIF at a glance EU specialised institution for SMEs, risk financing Venture Capitaland Mezzanine (fund of funds) Structuring and Guaranteeing portfolios of SME and microfinance loans/leases Geographic Focus / Intermediaries EU 27, EFTA, Candidate Countries Distributing through Banks and Funds Authorised Capital € 3bn AAA rated Staffing, Culture and Values Leading-edge modern institution Adapting to changing market conditions Attracting talented staff High standards of compliance and integrity Dual Objective of Meeting EU Policy Goals & Generating a Satisfactory Return on Equity

5. EIB: Main Shareholder (61%) • European Investment Bank’s shareholders: 27 EU Member States • European Community represented by the European Commission (29%) • 30 public and private financial institutions from 17 countries (9%) Introduction: EIF’s Shareholders

6. Introduction: Operating Model of EIFTransformational Role of EIF Intermediaries Transformational Key Success Factors Suppliers / Mandators SMEs • Own resources • Mandates by EIB, EC, MAs, … • Productdevelopment • Mandate management • Transaction execution • Risk management • Follow-up and relationship focus • Commercial banks • Development & Promotional banks • Guarantee Institutions • Fund Managers VALUE ADDED

7. Formal VC Funds & Mezzanine Funds Introduction: EIF Tool Kit for SMEs SME Cash Flows Public Stock Markets Portfolio Guarantees & Credit Enhancement VC Seed & Early Stage Microcredit Business Angels, TT Development Emerging Growth Seed Phase Start-up Phase SME Development Stages HIGHER RISK LOWER RISK

8. Overview – SecuritisationStatus • European Investment Fund (EIF) is part of the EIB Group and serves as: “Europe's leading developer of risk financing for entrepreneurship and innovation“ • Multilateral Development Bank (MDB) status • Basel II 0% risk weighting • Aaa/AAA/AAA ratings (Moody’s/S&P/Fitch)

9. Overview – Why SME Loan Securitisation? • Transforming illiquid SME loans into liquid asset class. • Alternative source of funding for the originating banks. • Economic and regulatory capital relief. • Smaller banks are able to tap the capital markets. • Portfolio management, risk diversification. • Overall: increase of lending capacity. • Advantages for investors. • Securitisation of an individual loan does not improve the access to finance for the individual SME, but on a portfolio level banks are able to expand their SME lending. • Positive impact on the overall availability and conditions of loans to SMEs.

10. Overview – Market Environment • European SME securitisation market has dropped since 2007 with reduced investor demand. • Still negative perception of securitisation in Europe; contagion effects. • Restart depends on macroeconomic developments, investors’ demand, and regulatory environment. • Public sector support to complement private sector activities. • Replicable tool for SME support that provides efficient multiplication of public money. • EIF expects to play a key role in rebuilding the market.

11. EIF’s Role • EIF as “deal facilitator” (for any SME-backed transaction) • Credit enhancer of typically mezzanine tranches, either with ABS wrap or as bilateral protection seller. • Unconditional, irrevocable guarantee of timely payment of interest and ultimate payment of principal. • Transaction Manager for the EIB Group, with potential involvement of EIB as cash investor at senior (AAA) level. • “Deal maker” with active structuring role • Small, bilateral and work-intensive deals unattractive for investment banks, but which contribute to the development of the SME securitisation market.

12. EIF’s Role(example) Typical EIF intervention in a securitisation transaction Originator AAA AA A BBB BB unrated SPV Investors Reference SME Portfolio Sale of Portfolio or Aaa/AAA Investors Credit Default Swap External guarantor

13. Origination Focus • WHO • SME Finance Providers (mainstream + 2nd tier originators) • WHAT • HOW • Through Investment Banks for public deals / private placements • Direct origination with established FIs • Direct origination for bilateral transactions

14. Underwriting Criteria • Minimum tranche rating • Typically: BB (exceptionally: BB- / B+) • External rating is not required but preferred EIF always assigns its internal rating to the tranches guaranteed and performs own due diligence. • Max. amounts • BB up to EUR 10-15m • BBB-AA up to EUR 15-100m • AAA up to EUR 150m (larger tickets possible for senior positions) • Max. term • Typically: 3-5 years WAL • Up to 10 years WAL; exceptionally up to 15 years • Competitive/Commercial pricing

15. Pool Criteria • Eligible countries and currencies • All EU Member States • Candidate and potential candidate countries (Turkey, Croatia, Western Balkans, etc.) • All European currencies • Obligor Entities • SMEs* (EU definition) • Middle-market companies eligible, but to a limited extent The portfolio should be SME focused! * ie < 250 employees and < EUR 50m turnover or < EUR 43m assets

16. Pool Criteria • Originator must be committed to new SME lending! • Typical underlying pool • Credit quality supported by PD, LGD, or historical data • Granularity of >500 names • Max. obligor exposure of 50bps • Industry diversification

17. Portfolio Summary • EIF’s securitisation portfolio • Outstanding commitment EUR 2.7 bn • Number of outstanding tranches 124 • Average transaction commitment EUR 24.2 m • Countries covered 18

18. Concluding Remarks SME financing/Securitisation • The revitalisation of SME securitisation is a systemic approach to strengthen banks’ capacities and capacities to supply long-term financing to SMEs. • The support of this market is very important for the future of SME financing. • Securitisation as efficient way of deploying public support. The EIF… • is a stable specialist, long term investor and guarantor. • plays a catalytic role in enhancing access to finance for SMEs. • intends to play a key role in rebuilding the SME securitisation market in Europe. • supports the introduction of “quality signals”, e.g. Prime Collateral Securities (PCS).

19. Alessandro Tappi Markus Schaber a.tappi@eif.org +352 42 66 88 352 m.schaber@eif.org +352 42 66 88 478 Contacts – EIF’s Securitisation European Investment Fund96, Blvd. Konrad Adenauer L-2968 Luxembourgwww.eif.org

20. Thank you for your attention!Helmut Kraemer-EisEuropean Investment FundHead of Research & Market Analysish.kraemer-eis@eif.org+352 42 66 88 394