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Support for the SME supporting factor: Multi-country empirical evidence on systematic risk factor for SME loans

Listed author(s):
  • Dietsch, Michel
  • Düllmann, Klaus
  • Fraisse, Henri
  • Koziol, Philipp
  • Ott, Christine

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 sizedependent constraints of the Basel formulas. Our study contributes to Article 501 of the Capital Requirements Regulation (CRR) requesting analysis of the consistency of own funds requirements with the riskiness of SME. In both the French and the German sample, results suggest that the relative differences between the capital requirements for large corporates and those for SME (in other words the capital relief for SME) are lower in the Basel III framework than implied by empirically estimated asset correlations. Results show that the SME Supporting Factor in the CRR/CRD IV is able to compensate the difference between estimated and CRR/CRD IV capital requirements for loans in the corporate portfolio. However, no empirical evidence is found supporting the € 1.5 mln SME threshold currently included in Article 501 (CRR).

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File URL: https://www.econstor.eu/bitstream/10419/148276/1/873235452.pdf
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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 45/2016.

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Date of creation: 2016
Handle: RePEc:zbw:bubdps:452016
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  17. Duellmann, Klaus & Küll, Jonathan & Kunisch, Michael, 2010. "Estimating asset correlations from stock prices or default rates--Which method is superior?," Journal of Economic Dynamics and Control, Elsevier, vol. 34(11), pages 2341-2357, November.
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  20. Düllmann, Klaus & Koziol, Philipp, 2013. "Evaluation of minimum capital requirements for bank loans to SMEs," Discussion Papers 22/2013, Deutsche Bundesbank, Research Centre.
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