​The European Banking Authority published a report on the Small and Medium-sized Enterprise Supporting Factor. The SME SF was introduced by the Capital Requirements Regulation to counterbalance the rise in capital requirements resulting from the Capital Conservative Buffer whilst providing an adequate flow of credit to SMEs. The report provides: (i) analysis of the lending trends and conditions for SMEs; (ii) analysis of the effective riskiness of EU SMEs over a full economic cycle; and (iii) the consistency of funds requirements laid down in the CRR for credit risk to SME's. The EBA has concluded that there is currently not enough evidence to suggest that the SME SF has provided additional stimulus for lending to SMEs as compared to larger corporate entities. However, the EBA has also recognised that it may be too early to make strong conclusions based on the current analysis. The EBA makes four recommendations: (i) continued monitoring and a reassessment of the SME SF so as to understand its impact on lending; (ii) a more comprehensive approach for the review of risk weights; (iii) review of the amount owed limit criterion and in the application of the SME SF to understand its purpose and costs of application; and (iv) harmonisation of the SME definition in the CRR.

View the EBA's Report.