Support for the SME Supporting Factor - Multi-country empirical evidence on systematic risk factor for SME loans

Michel Dietsch, K. Düllmann, Henri Fraisse, Philipp Koziol and C. Ott

Débats économiques et financiers from Banque de France

Abstract: 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 size-dependent constraints of the Basel formulas. Our study contributes to Article 501 of the Capital Requirements Regulation (CRR) requesting analysis the consistency of own funds requirements with the riskiness of SMEs. In both the French and the German sample, results suggest that the relative differences between the capital requirements for large corporates and those for SMEs (in other words the capital relief for SMEs) are lower in the Basel III framework than implied by empirically estimated asset correlations. Results show that the SME Supporting Factor in the CRR/CRDIV is able to compensate the difference between estimated and CRR/CRDIV capital requirements for loans in the corporate portfolio.

Keywords: SME Supporting Factor; Asset correlation; Basel III; Minimum Capital requirements; Asymptotic Single Risk factor Model; SME finance. (search for similar items in EconPapers)
JEL-codes: C13 G21 G33 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2016
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-rmg and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: Support for the SME supporting factor: Multi-country empirical evidence on systematic risk factor for SME loans (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:decfin:23

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