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Tackling Small and Medium Enterprise Problem Loans in Europe

Wolfgang Bergthaler, Kenneth Kang, Yan Liu and Dermot Monaghan

No 2015/004, IMF Staff Discussion Notes from International Monetary Fund

Abstract: The global financial crisis has left a large private sector debt overhang and high levels of non- performing loans (NPLs) in several European countries. Small and medium-size enterprises (SMEs) represent a significant and weak segment of the nonfinancial corporate sector. SMEs face a number of legal, financial, and regulatory challenges to restructuring that differ from those of larger corporates, such as a rigid and costly insolvency regime, a higher fixed cost to loan restructuring, and the lack of alternative sources of financing. Given SMEs’ large presence and close links to the banking system, addressing the SME loan problem in Europe will be critical for strengthening bank and corporate balance sheets and supporting a more robust and sustained recovery.

Keywords: SDN; government; Small and medium-sized enterprise; insolvency regime; small business; SME; debt restructuring; Europe; insolvency; economic recovery; debt distress; government effort; government guarantee scheme; EU country; government support; EU state aid rule; EU bank regulator; central bank; legal system; Small and medium enterprises; Solvency; Nonperforming loans; Loans (search for similar items in EconPapers)
Pages: 38
Date: 2015-03-30
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Citations: View citations in EconPapers (14)

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