The Basel, Switzerland-based Financial Stability Board today released for consultation an analysis of the effects of post-crisis regulation—specifically the Basel III capital and liquidity requirements—on lending to small and medium-sized enterprises. Comments on the document are due by Aug. 7, 2019, with the final report to be issued in November.
While the report “did not identify material and persistent negative effects” of the regulatory changes on SME financing, it did note that in certain jurisdictions, Basel III’s stringent risk-based capital requirements caused SME lending to slow and lending conditions to tighten among institutions that were least capitalized pre-crisis relative to other banks. “The reduction in the pace of lending seems to have affected SMEs relatively more than other corporates, resulting in some cases in a portfolio re-composition away from SMEs,” the report said.
On a positive note, SME lending growth appears to have resumed in recent years after falling during the crisis years across many jurisdictions, the report noted. However, in some jurisdictions, the FSB noted that SME lending remains below pre-crisis levels today.
