EBA Report on Impact of CRD IV Proposals on Smes


The amendments to the Capital Requirements Directive (CRD) proposed in CRD IV will require credit institutions to introduce a ‘capital conservation buffer’ of 2.5% of risk-weighted assets (in addition to the current 8% requirement). This will be phased in from 2016 to 2019, and there are concerns that it could have a negative impact on the level of bank lending available to SMEs.

On October 22, the European Banking Authority (EBA) published a report on the assessment of two proposals to mitigate these concerns. The proposals analysed were:

  • a reduction of the current risk weights (RWs) of SME lending by one third; and
  • an increase from EUR 1 million to EUR 5 million on the regulatory thresholds for SMEs.

In its report, the EBA cautions against the proposed altering of the RWs or the threshold for SME retail exposures. However, it does advise that alternative measures to provide the same capital alleviation could be considered, such as the introduction of a supporting discount which would not act on RWs, but would be applied at the end of the process of capital calculation. The EBA considers that these measures should be applied only to SME exposures and not to the whole retail exposure class.