Lending to the real economy is a fundamental ingredient to restore a sustainable growth path. Especially important is lending to Small Medium Enterprises (SMEs). This for two reasons. First because these firms account for a large share of GDP in all advanced and emerging economies; second, because SMEs are fairly risky subjects and Basel III and beyond Basel III regulatory requirements may hinder banks’ lending to them.
The second issue of European Economy – Banks Regulation and the Real Sector will be devoted to this theme, to whether it is still sustainable for banks to fund SMEs at market conditions. It will look at how far the supply of credit to SMEs involves unsustainable risk taking, given the current and perspective regulatory framework and, if so, whether this is a structural constrain, or, rather, just related to the post-crisis loads of non-performing loans. The issue will also consider whether financial tools could open new market based channels of funding for SMEs and the possible non-distortive role of public funds in supporting SMEs.