SME Financing
Savings banks are some of Europe's most important providers of SME finance
ESBG members are traditionally natural business partners with SMEs and follow their progress. Savings banks' local presence is a key factor for the close relationship with SMEs due to their clear focus on retail banking. >> ESBG study: EU, US Financial Systems | >> High-level principles on SME feedback
ESBG position on SME financing
ESBG has been in close contact and cooperation with the European Commission, the European Investment Bank (EIB) and the European Investment Fund (EIF) in the implementation and characteristics of SME-focused programmes outlined in the EU Action Plan for the 2014-2020 period. Together with other stakeholders, especially other banking associations and small business organisations, ESBG has participated in round tables (i.e. SME Finance Forum), in order to gather input for the elaboration of these initiatives.
SME financing should be encouraged by all possible means and should continue to rank high in the EU agenda. Bank lending should be further stimulated in order to allow SMEs to access the finance they need for their projects. More specifically:
ESBG stresses the importance of the complementarity of loan guarantees and risk-sharing facilities at EU and national levels. ESBG firmly believes that EU loan guarantee and risk-sharing facilities programmes are useful when they supplement national schemes (like structural funds that are implemented as loan, guarantee or (quasi) equity programmes by national or regional institutions) and that administrative procedures for applying to these funds should be reduced.
Capital markets can only complement the role of bank lending
ESBG approves the introduction of the SME Supporting Factor of 0.7619 as stipulated in Art. 501 CRR. ESBG also supports the recent compromise on the Risk Reduction Measures (RRM) package including the revised SME Supporting Factor (no upper limit and a capital reduction of 15% above €2.5 million).
ESBG recommends the revision of the current EU SME definition. ESBG supports an upward adjustment of the current thresholds regarding the number of employees, revenues and balance sheet totals to reflect economic evolutions since the initial introduction of the current definition in 2003. The scope of eligibility criteria should be maintained as it is as well as the so-called grace period allowing SMEs to keep their status despite potential fluctuations regarding size and financial situations.
Background
The European Commission, acknowledging the importance of SMEs, has been very active in recent years on the elaboration of policies that facilitate SMEs’ access to finance. The three main pillars supporting these policies are: i) the Investment Plan for Europe which aims at mobilising some €500 billion in private and public investment across the EU by 2020; ii) the initiative for a Capital Markets Union (CMU), which is a plan that aims to create deeper and more integrated capital markets in the 28 EU Member States (launched in November 2014); iii) the revision of the impact of bank capital requirements (CRD) on SMEs.
The Investment Plan for Europe has been supported by the creation of the European Fund for Strategic Investment (EFSI) jointly financed by the European Commission and the European Investment Bank Group (EIB and EIF). As of 13 November 2018, it has facilitated a total amount of €360 billion of investment in the EU. About 33% of the total amount invested has been allocated to SMEs, making it the most represented sector within the Fund. On 6 June 2018, the European Commission revealed its intention to create a new investment plan for Europe, called InvestEU, bringing EU budget financing in the form of loans, equity and guarantees under one roof. The newly simplified programme aims at mobilising over €650 billion in investments from both the public and private sectors over the period 2021-2027. Inspired by the Investment Plan for Europe, the programme aims at gathering the 16 centrally managed EU financial instruments (COSME, InnovFin, EaSI…) used during the 2014-2020 MFF.
On 19 November 2018, the Austrian Presidency of the Council reached a draft compromise on the Risk Reduction Measures (RRM) package including the revised SME Supporting Factor (no upper limit and a capital reduction of 15% above €2.5 million). Further trialogue discussions in December 2018 will determine whether the draft agreement on the threshold remains final.
On 6 February 2018, DG GROW launched a public consultation aiming at gathering views on the current EU SME definition and assessing its relevance according to current economic conditions. ESBG responded to this consultation on 4 May 2018 and advocated for a new definition increasing the existing thresholds. Based on stakeholders’ feedback, the European Commission may decide to adjust the EU SME definition including current thresholds regarding size and turnover.