CREATING a new market in securitised small- and medium-sized enterprise (SME) loans will boost the supply of credit to the sector and improve the economy, European Central Bank (ECB) official Benoit Coeure said yesterday.
If loans are more standardised and can be bundled together and sold off, it creates a new funding stream for banks, a new product for investors and potentially a greater supply of loans for SMEs.
“Reviving credit growth is one of the most pressing challenges for the euro area today,” he said.
“A more balanced regulatory treatment for asset backed securities (ABS), acknowledging the past credit performance of these instruments, would ensure a level playing field with other securities regarding risk, rating and maturity.”
However Coeure added that banks still provide the vast majority of finance to small firms, and so must be cleaned up and turned around if SMEs are to borrow to expand.