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Support for the SME Supporting Factor - Multi-country empirical evidence on systematic risk factor for SME loans

Listed author(s):
  • M. Dietsch
  • K. Düllmann
  • H. Fraisse
  • P. Koziol
  • C. Ott

Using a unique and comprehensive data set on the two largest economies of the Eurozone – France and Germany – this paper first proceeds to a computation of the Gordy formula relaxing the ad hoc size-dependent constraints of the Basel formulas. Our study contributes to Article 501 of the Capital Requirements Regulation (CRR) requesting analysis the consistency of own funds requirements with the riskiness of SMEs. In both the French and the German sample, results suggest that the relative differences between the capital requirements for large corporates and those for SMEs (in other words the capital relief for SMEs) are lower in the Basel III framework than implied by empirically estimated asset correlations. Results show that the SME Supporting Factor in the CRR/CRDIV is able to compensate the difference between estimated and CRR/CRDIV capital requirements for loans in the corporate portfolio.

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File URL: https://acpr.banque-france.fr/fileadmin/user_upload/acp/publications/Debats_economiques_et_financiers/20161017-SME-supporting-factor.pdf
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Paper provided by Banque de France in its series Débats économiques et financiers with number 23.

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Length: 51 pages
Date of creation: 2016
Handle: RePEc:bfr:decfin:23
Contact details of provider: Postal:
Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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