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Did the bank capital relief induced by the Supporting Factor enhance SME lending?

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  • Mayordomo, Sergio
  • Rodríguez-Moreno, María

Abstract

The introduction of the SME Supporting Factor (SF) allows banks to reduce capital requirements for credit risk on exposures to SME. This means that banks can free up capital resources that can be redeployed in the form of new loans. Our study documents that the SF alleviates credit rationing for medium-sized firms that are eligible for the application of the SF but not for micro/small firms. These results suggest that European banks were aware of this policy measure and optimized both their regulatory capital and their credit exposures by granting loans to the medium-sized firms, which are safer than micro/small firms.

Suggested Citation

  • Mayordomo, Sergio & Rodríguez-Moreno, María, 2018. "Did the bank capital relief induced by the Supporting Factor enhance SME lending?," Journal of Financial Intermediation, Elsevier, vol. 36(C), pages 45-57.
    • Handle: RePEc:eee:jfinin:v:36:y:2018:i:c:p:45-57
    DOI: 10.1016/j.jfi.2018.05.002
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    Cited by:

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    2. Cathcart, Lara & Dufour, Alfonso & Rossi, Ludovico & Varotto, Simone, 2020. "The differential impact of leverage on the default risk of small and large firms," Journal of Corporate Finance, Elsevier, vol. 60(C).
    3. Auer, Raphael & Matyunina, Alexandra & Ongena, Steven, 2022. "The countercyclical capital buffer and the composition of bank lending," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    4. Chundakkadan, Radeef & Sasidharan, Subash, 2020. "Central bank's liquidity provision and firms' financial constraints," Economic Modelling, Elsevier, vol. 89(C), pages 245-255.
    5. Dafermos, Yannis & Nikolaidi, Maria, 2021. "How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis," Journal of Financial Stability, Elsevier, vol. 54(C).
    6. Elif C. Arbatli-Saxegaard & Ragnar E. Juelsrud, 2020. "Countercyclical capital requirement reductions, state dependence and macroeconomic outcomes," Working Paper 2020/9, Norges Bank.
    7. Dafermos, Yannis & Nikolaidi, Maria, 2022. "Greening capital requirements," Greenwich Papers in Political Economy 37779, University of Greenwich, Greenwich Political Economy Research Centre.
    8. Ćehajić, Aida & Košak, Marko, 2022. "Bank lending and small and medium-sized enterprises’ access to finance – Effects of macroprudential policies," Journal of International Money and Finance, Elsevier, vol. 124(C).
    9. Sajad Ebrahimi & Ali Ebrahimnejad & Mahdi Rastad, 2019. "The Real Effects of Credit Supply Disruptions: The Case of 2011 Embezzlement Scandal in Iran," Working Papers 1316, Economic Research Forum, revised 21 Aug 2019.
    10. Mathias Lé & Sandrine Lecarpentier & Henri Fraisse & Michel Dietsch, 2019. "Lower bank capital requirements as a policy tool to support credit to SMEs: evidence from a policy experiment," Working Papers hal-04141885, HAL.
    11. Ana Mol-Gómez-Vázquez & Ginés Hernández-Cánovas & Johanna Koëter-Kant, 2022. "Banking stability and borrower discouragement: a multilevel analysis for SMEs in the EU-28," Small Business Economics, Springer, vol. 58(3), pages 1579-1593, March.
    12. Ebrahimi, Sajad & Ebrahimnejad, Ali & Rastad, Mahdi, 2023. "Number of creditors and the real effects of credit supply disruptions," Emerging Markets Review, Elsevier, vol. 55(C).

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    More about this item

    Keywords

    SME; Credit access; Supporting Factor; Bank lending;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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