Revitalizing Securitization for Small and Medium-Sized Enterprises in Europe

Revitalizing Securitization for Small and Medium-Sized Enterprises in Europe

Small- and medium-sized enterprises (SMEs) account for more than half of business sector output and employment in Europe. Because they are highly dependent on bank finance, however, many SMEs, especially in vulnerable economies, find themselves credit-rationed or facing high borrowing costs in the wake of the recent financial crisis. These structural constraints hamper viable SMEs’ ability to invest, thereby undermining the recovery of output and employment. With banks still focused on raising capital and weighed down by impaired assets, the sources of long-term funding for SMEs need to be broadened. This action would alleviate potential credit constraints and make smaller firms more resilient to future shocks to the banking sector.