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Analyzing the role of mutual guarantee societies on bank capital requirements for small and medium-sized enterprises

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Listed author(s):
  • Clara Cardone-Riportella
  • Antonio Trujillo-Ponce
  • Anahí Briozzo

Abstract

This paper analyzes the impact of the guarantee provided by mutual guarantee societies (MGSs) on the risk premium that banks should charge for small- and medium-sized enterprise (SME) loans under the new Basel Capital Accords (Basel II and III). We also examine whether the foreseeable decrease in the theoretical credit risk premium would be compensated by the cost of the MGS guarantee. To do so, we develop a rating system for SMEs that uses a large sample of Spanish firms over the period from 2005 to 2009. We find that the final effect of the guarantee on the SME risk premium depends on the values taken by the credit variables of the MGS (essentially, the probability of default).

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File URL: http://hdl.handle.net/10.1080/17487870.2013.801317
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Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 16 (2013)
Issue (Month): 2 (June)
Pages: 142-159

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Handle: RePEc:taf:jpolrf:v:16:y:2013:i:2:p:142-159
DOI: 10.1080/17487870.2013.801317
Contact details of provider: Web page: http://www.tandfonline.com/GPRE19

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Cited by:

  1. Clara Cardone-Riportella & Marta García-Mandaloniz, 2017. "Does Recent Regulation Improve (or not) the Spanish Mutual Guarantee System?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 515-523.

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