The Impact of Basel III on the SMEs Financing: The Moment of Truth is Approaching

As soon as the first version of the Basel III’s agreements was published in December 2010, the French Banking Federation brought to the attention of the authorities the multiple and negative potential consequences of the capital and liquidity (LCR and NSFR) requirements’ strengthening on the SME’s financing. The European regulation named CRR adapting Basel III rules in Europe, which provides for a stable capital requirement for credit risk on exposures to SMEs compared to previous rules, in contradiction with the basic agreement, has not penalized the financing of the SMEs since its coming into force on January first, 2014. Indeed, the decrease of 7.4 % in corporate lending at the level of the Eurozone is due only to the cutbacks in Spain and in Italy, affected by the sovereign debt crisis.

On the other hand, we consider that the implementation of the LCR ratio might have a negative impact if not correctly calibrated by the European Commission in its delegated act due to be published before June 30, 2014. It drives banks to pursue their plea for an extension of liquid assets, for the recognition of Restricted Committed Liquidity Facilities granted by central banks and the recognition of Asset backed Securities as liquid assets. Furthermore today they are adapting their model of refinancing as shown by the recent set-up of a securitization company by five big French banks last April.