ESBG: Economic demonstration of the economic impact of liquidity ratios in particular for SME lending

28 January 2014

This economic demonstration has been nourished by the works undertaken by Mr Alain Tourdjman from BPCE, and benefited from the full support of the ESBG Economic Affairs Committee.

The main risks of the Basel III framework in particular with regards to SMEs are:

• Limiting the efficiency of SME lending.
• The weak profits spread of the European companies limits their own flexibility to adapt to an increase in costs.
• This is also going to prolong the structural trend of SMEs to reduce their recourse of lending in order to increase the soundness, thus sacrificing business growth.
• This leads to a limitation of the potential growth of SMEs and as a result to a limitation of the competitiveness of the overall economy.

The trend leads to a sub-optimal growth model for SMEs due to the funding constrains and to a reduction in risk exposures. However, banks, public authorities and SME owners have nowadays a collective interest to find alternative solutions to make the growth model progress towards more competitiveness.

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