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The De Backer report provides an insightful commentary on the challenge of improving access to finance for the EU’s SMEs, particularly in the wake of the crisis and the new regulation that it generated. The EBF welcomes the report’s thorough and thoughtful approach, and hopes that it will be taken into account by the European Commission as it proceeds to implement the SME Action Plan.
In this paper, the EBF discusses a number of points made in the De Backer report which touch on rather complex areas of banking practice, and offers its perspective as the main counterpart to SMEs in the financing relationship. The EBF’s group of SME financing experts would be pleased to contribute to the further discussion of these and other ideas, so that ultimately Europe’s SMEs will benefit through easier access to finance for worthy projects.
Europe’s banks welcome the different initiatives emerging from the EU at present, in the SME Action Plan as well as specific programmes of support such as the Competitiveness of Enterprises and small and medium-sized enterprises (COSME), and the activities of the European Investment Bank (EIB) and European Investment Fund (EIF). Wherever the EU is engaged in activity to assist SMEs, it should be as focused and cost-effective as possible, and aim to supplement the private market, without harming the dynamics of a healthy market mechanism.
Policy-makers are faced with finding a balance between the promotion of growth and jobs, and the temptation to over-regulate the commercial financial market. Some of the ideas put forward in the De Backer report (for example in transparency requirements) could imply additional costs and risks for banks, which could in turn deter credit provision, rather than encourage it. Ideally policy should favour a voluntary or incentive approach, for example, by rewarding banks which can offer certain solutions, with participation in EU programmes. Moreover, SMEs, and financing conditions and practices vary considerably around the EU, as noted in the De Backer report. Some flexibility and willingness to delegate to national level will be essential if policy measures are to meet the real needs of SMEs, and, on the banking side, avoid suppressing or duplicating systems which are already working effectively.
It seems that the essence of their message is the need for banks to communicate better, and explain their approach to the credit decision and the terms and conditions of their lending (e.g. level for personal guarantees). They recognise that banks need to assess creditworthiness appropriately; and that a personal guarantee may be helpful, if it enables an SME to access credit that it would not have otherwise. They also accept that some actions are better taken at national, not EU, level because of the diversity of SME markets.