Support for the SME supporting factor: Multi-country empirical evidence on systematic risk factor for SME loans

Arbeitspapier

Using a unique and comprehensive data set on the two largest economies of the Eurozone - France and Germany - this paper first proceeds to a computation of the Gordy formula relaxing the ad hoc sizedependent constraints of the Basel formulas. Our study contributes to Article 501 of the Capital Requirements Regulation (CRR) requesting analysis of the consistency of own funds requirements with the riskiness of SME. In both the French and the German sample, results suggest that the relative differences between the capital requirements for large corporates and those for SME (in other words the capital relief for SME) are lower in the Basel III framework than implied by empirically estimated asset correlations. Results show that the SME Supporting Factor in the CRR/CRD IV is able to compensate the difference between estimated and CRR/CRD IV capital requirements for loans in the corporate portfolio. However, no empirical evidence is found supporting the € 1.5 mln SME threshold currently included in Article 501 (CRR).

Object Details

• ISBN: 978-3-95729-318-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 45/2016

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Bankruptcy; Liquidation
• Subject: SME finance ; Asset correlation ; Basel III ; CRR/CRD IV ; Asymptotic Single Risk factor Model ; SME Supporting Factor

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dietsch, Michel ; Düllmann, Klaus ; Fraisse, Henri ; Koziol, Philipp ; Ott, Christine
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/148276
• Last update: 10.03.2025, 11:45 AM CET