Key initiatives to unlock bank lending to the European corporate sector

In the wake of the crisis, the capacity of many banks to lend to relatively high-risk sectors such as SMEs and young, innovative firms is seriously impaired by capital constraints and a strong deterioration in the quality of the assets on their balance sheets. Abundant liquidity alone can do little to stimulate lending as long as both demand and bank’s balance sheet concerns remain unaddressed. Looking forward, as demand picks up, it is clear that the supply of bank credit could become a serious constraint on recovery. Different initiatives are needed to unlock bank lending for the corporate sector by restoring banks’ lending and risk-taking capacity. On the one hand, concerted efforts are needed to facilitate the resolution or disposal by banks of distressed assets. On the other, measures are needed to facilitate a more effective allocation of the risks of lending to corporates, so that they do not have to be absorbed entirely by banks. These measures include the further development of credit guarantee schemes and initiatives to revitalise the securitisation market in Europe as ways of freeing up regulatory bank capital for new lending. The present and potential future role of the EIB Group as a leading European investor in the area of credit guarantees, SME securitisation and private equity investment in SMEs and midcaps is discussed.