SME Loan Securitisation 2.0: Market Assessment and Policy Options

Helmut Kraemer-Eis, George Passaris and Alessandro Tappi

No 2013/19, EIF Working Paper Series from European Investment Fund (EIF)

Abstract: A well-functioning securitisation market is a way to ease the supply problems by helping banks diversify their funding and achieve capital relief. In October 2010 we presented our first working paper on SME loan securitisation (SMESec); since then the financial and economic crisis continued and the debate about the need to revitalise the SMESec market in order to support the real economy has grown further. Despite the good performance of the European securitization market in general and the SME segment in particular in terms of low default rates the market environment for SME financing is still in a difficult shape, and the SMESec market did not recover – at least not the "real" primary market. Originators continue to mainly retain newly issued deals in order to create liquidity buffers and to use the assets as collateral with central banks; investors' confidence is not yet restored - and regulatory uncertainty is a major driver for concerns by originators and investors. Recent initiatives and proposals concerning this market segment (e.g. by the European Central bank (ECB), the European Investment Bank (EIB) Group2, and the European Commission) are aiming at the revival of the SMESec market, bearing in mind policy objectives. Its re-emergence would be an important element to enhance access to finance for SMEs in Europe. This paper analyses the current state of the market for SMESec, its main framework conditions, and presents important developments and policy options.

Date: 2013
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