Evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing: Consultation report
This public consultation on an evaluation of financing for small and medium-sized enterprises (SMEs) is part of a broader examination of the effects of the G20 regulatory reforms on financial intermediation. It was delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Fukuoka on 8-9 June.
This evaluation examines the effects of the post-crisis financial regulatory reforms on the financing of SMEs. As part of a broader FSB examination of the effects of the G20 regulatory reforms on financial intermediation, it is motivated by the need to better understand the effects of the reforms on the financing of real economic activity and their contribution to the G20 objective of strong, sustainable, balanced and inclusive economic growth.
For the reforms that are within the scope of this evaluation, the analysis thus far does not identify material and persistent negative effects on SME financing in general, although there is some differentiation across jurisdictions. There is some evidence that the more stringent risk-based capital requirements under Basel III slowed the pace and in some jurisdictions tightened the conditions of SME lending at those banks that were least capitalised ex ante relative to other banks. These effects are not homogeneous across jurisdictions and they are generally found to be temporary. The evaluation also provides some evidence for a reallocation of bank lending towards more creditworthy firms after the introduction of reforms, but this effect is not specific to SMEs.
SME lending growth has resumed in recent years, although volumes remain below the pre-crisis level in some jurisdictions. Access to external finance for SMEs also appears to have improved, particularly in advanced economies. Stakeholder feedback suggests that SME financing trends are largely driven by factors other than financial regulation, such as public policies and macroeconomic conditions.
Any potential costs found in this evaluation, which appear limited and transitory, should be framed against the wider financial stability benefits of the G20 reforms estimated in ex ante impact assessments. These studies generally found significant net overall benefits in terms of reducing the likelihood and severity (lost output) of financial crisesThe final report will be published in November 2019.
Responses to this public consultation should be sent to [email protected] by Wednesday 7 August 2019. Respondents are encouraged to use this template to submit their response. All responses will be published on the FSB website unless respondents expressly request otherwise. The final report will be published in November 2019.