The small and medium-sized enterprises (SMEs) represent a backbone of the EU economy. According to the data of the European Commission (EC) and the European Central Bank (ECB) they account for 99.8% of the number of firms in the euro area, 60% of turnover and 70% of employment. SMEs in the EU have been usually hit hardest by recession. Restoring SMEs health and growth has moved to the top of policy agendas in Europe.
SMEs largely rely on banks when selecting sources of external financing, typically they use bank loans or bank overdraft. Leasing, hire purchase, factoring or trade credits also play a relatively important role. The market-based financing is of minor importance. Unsurprisingly, the European authorities focus on the access of SMEs to bank financing and factors having an impact on the availability of this financing. Since 2009 the Survey on the access to finance of enterprises (SAFE) has been conducted on behalf of the EC and the ECB. Based on this, the reports providing evidence on changes in the financial situation, financing needs and access to financing of SMEs in the euro area are regularly published.
Numerous studies by European authorities or private institutions have come up with analyses on this topic or potentially with some recommendations. The EC makes an effort working with financial institutions to improve the funding available to SMEs. A practical example of this effort can be evidenced by a new financing agreement to benefit SMEs in the Czech Republic.
The effort to restore SMEs growth also affected the prudential regulation. The so-called supporting factor has been incorporated into the Capital Requirement Regulation (CRR). This is a multiplicative factor reducing capital charges for exposures to SMEs in order to allow credit institutions to increase lending to SMEs. The European Banking Authority (EBA) launched on 31st July 2015 a call for evidence on SMEs and the SME supporting factor (SF). EBA is now inviting stakeholders to provide their input and evidence aimed at supporting the ongoing analysis on bank lending to SMEs and the impact of the SME SF. This activity is based on the EBA's mandate in Article 501(5) CRR according to which EBA is to analyse lending trends and conditions for SMEs and the consistency of capital requirements according to CRR. The consultation runs until 1 October 2015.
A discussion paper is attached to the EBA's call for evidence containing a preliminary analytical insight on the issue. The EBA states that SME bank lending has suffered a significant backdrop in volumes, from a peak of EUR 95 billion in mid-2008 to approximately EUR 54 billion in 2013/2014. Nevertheless, it is noticeable that according to the recent SAFE published in June 2015 euro area SMEs considered access to finance the least important problem that they faced (only 11% of respondents, versus almost 20 % in 2009), while finding customers was the dominant concern. Therefore, it remains questionable whether the EU is indeed focusing at the most critical or primary issues that SMEs face.
The EBA's call for evidence can be found on: http://www.eba.europa.eu/-/eba-calls-for-evidence-on-sme-lending-and-the-sme-supporting-factor