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Banking system soundness is the key to more SME financing

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  • Zsolt Darvas

Abstract

The SME access-to-finance problem is not universal in the European Union and there are reasons for the fall in credit aggregates and higher SME lending rates in southern Europe. Possible market failures, high unemployment and externalities justify making greater and easier access to finance for SMEs a top priority. Previous European initiatives were able to support only a tiny fraction of Europe’s SMEs; merely stepping-up these programmes is unlikely to result in a breakthrough. Without repairing bank balance sheets and resuming economic growth, initiatives to help SMEs get access to finance will have limited success. The European Central Bank can foster bank recapitalisation by performing in the toughest possible way the asset quality review before it takes over the single supervisory role. Of the possible initiatives for fostering SME access to finance, a properly designed scheme for targeted central bank lending seems to be the best complement to the banking clean-up, but other options, such as increased European Investment Bank lending and the promotion of securitisation of SME loans, should also be explored.

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  • Zsolt Darvas, 2013. "Banking system soundness is the key to more SME financing," Policy Contributions 785, Bruegel.
  • Handle: RePEc:bre:polcon:785
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    Cited by:

    1. Filipa Fernandes & Alexandros Kontonikas & Serafeim Tsoukas, 2014. "On the real effects of financial pressure: Evidence from euro area firm-level employment during the recent financial crisis," Working Papers 2014_09, Business School - Economics, University of Glasgow.
    2. Karl Michael Beyer & Lars Braeutigam, 2016. "Das europaeische Schattenbankensystem: Typologisierung und die Bewertung regulatorischer Initiativen auf europaeischer Ebene," ICAE Working Papers 56, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    3. repec:agr:journl:v:xxiv:y:2017:i:1(610):p:291-298 is not listed on IDEAS
    4. Lars Bräutigam & Karl Michael Beyer, 2016. "Das europäische Schattenbankensystem," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 154, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    5. Bahar Öztürk & Mico Mrkaic, 2014. "SMEs’ Access to Finance in the Euro Area; What Helps or Hampers?," IMF Working Papers 14/78, International Monetary Fund.
    6. Andrei HREBENCIUC, 2017. "Banking Union framework and the stability of the European Banking sector," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 291-298, Spring.

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