FSB publishes consultation on SME financing evaluation

The Financial Stability Board (FSB) has released for public consultation an Evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing. The evaluation was delivered to G20 finance ministers and central bank governors for their meeting, which took place in Fukuoka on 8-9 June. 

The FSB's 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. 

The FSB revealed that its analysis thus far does not identify material and persistent negative effects on SME financing in general, although there is some differentiation across jurisdictions.

It pointed out that 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, FSB found, 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," FSB said in its statement. 

"Access to external finance for SMEs also appears to have improved, particularly in advanced economies."

Moreover, it explained that stakeholder feedback suggests that SME financing trends are largely driven by factors other than financial regulation, such as public policies and macroeconomic conditions. 

The FSB's public consultation is open until Wednesday, 7 August 2019.