In developing our pricing policy of all our rates and fees, Development Bank of Wales takes into account a number of factors.
Market economic operator principle
Our funds are subject to the Market Economy Operator Principle. This principle allows public bodies to enter into a transaction without triggering state aid as long as it is carried out within normal market conditions. These are calculated with reference to the European Reference Rate, the credit-worthiness of a business and the level of security available for the lender.
Gap funder position
As a gap funder and active co-investor, we aim to ensure that the prices we charge do not displace the private sector. One of our measures of success is our ability to attract private sector investors such as banks, private equity firms, business angels or institutional investors to invest alongside us.
Our pricing is also determined by the stakeholders who invest in our funds. Typically, our funds accept a higher level of risk in our lending than comparable private sector providers. Therefore our pricing is, in part, influenced by the level of risk and the level of defaults we experience.
Interest rate review
We carry out regular independent benchmarking to see how our interest rates compare with other loan providers in the market. This is factored into our pricing policy reviewed on an annual basis.