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Analyzing the role of mutual guarantee societies on bank capital requirements for small and medium-sized enterprises

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  • Clara Cardone-Riportella
  • Antonio Trujillo-Ponce
  • Anahí Briozzo

Abstract

This paper analyzes the impact of the guarantee provided by mutual guarantee societies (MGSs) on the risk premium that banks should charge for small- and medium-sized enterprise (SME) loans under the new Basel Capital Accords (Basel II and III). We also examine whether the foreseeable decrease in the theoretical credit risk premium would be compensated by the cost of the MGS guarantee. To do so, we develop a rating system for SMEs that uses a large sample of Spanish firms over the period from 2005 to 2009. We find that the final effect of the guarantee on the SME risk premium depends on the values taken by the credit variables of the MGS (essentially, the probability of default).

Suggested Citation

  • Clara Cardone-Riportella & Antonio Trujillo-Ponce & Anahí Briozzo, 2013. "Analyzing the role of mutual guarantee societies on bank capital requirements for small and medium-sized enterprises," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 16(2), pages 142-159.
    • Handle: RePEc:taf:jecprf:v:16:y:2013:i:2:p:142-159
    DOI: 10.1080/17487870.2013.801317
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    Cited by:

    1. Concepción de la Fuente-Cabrero & Mónica de Castro-Pardo & Rosa Santero-Sánchez & Pilar Laguna-Sánchez, 2019. "The Role of Mutual Guarantee Institutions in the Financial Sustainability of New Family-Owned Small Businesses," Sustainability, MDPI, vol. 11(22), pages 1-15, November.
    2. Lorenzo Gai & Maria Cristina Arcuri & Federica Ielasi, 2023. "How does government-backed finance affect SMEs’ crisis predictors?," Small Business Economics, Springer, vol. 61(3), pages 1205-1229, October.
    3. Clara Cardone-Riportella & Marta Garc a-Mandaloniz, 2017. "Does Recent Regulation Improve (or not) the Spanish Mutual Guarantee System?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 515-523.
    4. Rodrigo Martín-García & Jorge Morán Santor, 2021. "Public guarantees: a countercyclical instrument for SME growth. Evidence from the Spanish Region of Madrid," Small Business Economics, Springer, vol. 56(1), pages 427-449, January.
    5. Félix Corredera-Catalán & Filippo Pietro & Antonio Trujillo-Ponce, 2021. "Post-COVID-19 SME financing constraints and the credit guarantee scheme solution in Spain," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(3), pages 250-260, September.
    6. Maria Cristina Arcuri & Lorenzo Gai & Federica Ielasi, 2021. "Public Credit Guarantee Schemes in Supporting SMEs: An Evaluation of Effectiveness and Impacts," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(1), pages 174-174, July.

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