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Abstract

This paper explores empirically the effect of consolidation in the French banking industry and of Basel II on the availability of credit for small and medium-sized enterprises (SMEs). Consolidation has been associated with an increase in the number of banks the average firm borrows from and this has improved credit availability. Furthermore, the paper shows, for France, that the current Basel II proposal would result in lower capital charges on SME loans due to portfolio diversification effects and low default correlations of SMEs. It also argues that the current Basel II proposal is conservative: capital charges could be even lower if they were based on our estimates of SME loan portfolio risk. Overall, in France, credit rationing of SMEs does not seem to be a serious problem and Basel II is unlikely to hold back SME lending.

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Bibliographic Info

Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 9/2003.

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Length: 28 pages
Date of creation: 09 Jun 2003
Date of revision:
Handle: RePEc:ris:eibpap:2003_009

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Related research

Keywords: French banking industry; Basel II; Credit availability; SMEs; SME lending; Capital charges;

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Find related papers by JEL classification:

• G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

References

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1. Berger, Allen N. & Klapper, Leora F. & Udell, Gregory F., 2001. "The ability of banks to lend to informationally opaque small businesses," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2127-2167, December.
   
   • Allen N. Berger & Leora F. Klapper & Gegory F. Udell, 2001. "The ability of banks to lend to informationally opaque small businesses," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 241-261.
   • Berger, Allen N. & Klapper, Leora F. & Udell, Gregory F., 2001. "The ability of banks to lend to informationally opaque small businesses," Policy Research Working Paper Series 2656, The World Bank.
   • Allen N. Berger & Leora F. Klapper & Gregory F. Udell, 2001. "The ability of banks to lend to informationally opaque small businesses," Finance and Economics Discussion Series 2001-34, Board of Governors of the Federal Reserve System (U.S.).
2. Michael B. Gordy, 1998. "A comparative anatomy of credit risk models," Finance and Economics Discussion Series 1998-47, Board of Governors of the Federal Reserve System (U.S.).
   
   • Gordy, Michael B., 2000. "A comparative anatomy of credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 119-149, January.
3. Thakor, Anjan V, 1996. " Capital Requirements, Monetary Policy, and Aggregate Bank Lending: Theory and Empirical Evidence," Journal of Finance, American Finance Association, vol. 51(1), pages 279-324, March.
4. Dietsch, Michel & Petey, Joel, 2002. "The credit risk in SME loans portfolios: Modeling issues, pricing, and capital requirements," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 303-322, March.

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Cited by:

1. Marsch, Katharina & Schmieder, Christian & Forster-van Aerssen, Katrin, 2007. "Banking consolidation and small businessfinance: empirical evidence for Germany," Discussion Paper Series 2: Banking and Financial Studies 2007,09, Deutsche Bundesbank, Research Centre.
2. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/10919, Université Paris-Dauphine.
3. Michel Dietsch, 2003. "De Bâle II vers Bâle III : les enjeux et les problèmes du nouvel Accord," Revue d'Économie Financière, Programme National Persée, vol. 73(4), pages 325-342.
4. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/8354, Université Paris-Dauphine.
5. Brick, Ivan E. & Palia, Darius, 2007. "Evidence of jointness in the terms of relationship lending," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 452-476, July.
6. Christian Schmieder & Katharina Marsch & Katrin Forster-van Aerssen, 2010. "Does banking consolidation worsen firms’ access to credit? Evidence from the German economy," Small Business Economics, Springer, vol. 35(4), pages 449-465, November.
7. Gómez-González, José Eduardo & Reyes, Nidia Ruth, 2011. "The number of banking relationships and the business cycle: New evidence from Colombia," Economic Systems, Elsevier, vol. 35(3), pages 408-418, September.
8. Gajewski, Krzysztof & Pawłowska, Małgorzata & Rogowski, Wojciech, 2012. "Relacje firm z bankami w Polsce w świetle danych ze sprawozdawczości bankowej
   [Bank-firm relationships in Poland in the light of data from bank reporting]," MPRA Paper 42544, University Library of Munich, Germany, revised 29 Oct 2012.

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