Yahoo Finance EU may reboot securitisations market for SMEs
INVESTORS and banks will be encouraged to lend to small businesses under a series of reforms unveiled by the European Commission yesterday.
Brussels wants to create fund products to make it easier for investors to buy a diversified portfolio of SME equity or debt products.
And the Commission is considering reducing the cost to investors who buy up securitised loans – products which allow banks to sell off small business loans, raising funds rapidly to lend on again to more small businesses.
“Securitisation could play a larger role if the economics of SME loan securitisation can be restored as it is an efficient way for banks to be able to free up capital and raise cash for further lending to existing or new SME borrowers,” said the Association of Financial Markets in Europe.
Meanwhile, the European Central Bank (ECB) said yesterday that private lending volumes fell by 2.2 per cent in February, compared to a year earlier.
Despite political pressure on banks to lend more to small firms, some are still cutting down in size, some are pulling back from cross-border lending and others are trying to avoid any potentially risky loans ahead of the sector’s stress tests later this year.
But analysts hope the crunch in lending is at last bottoming out and could turn around in the near future, as the fall is slower than the 2.3 per cent drop reported in each of the previous three months.
“A slightly less negative growth rate of loans to the private sector of minus 2.2 per cent could point to a gradual inflection point in the credit cycle,” said economist Christian Schulz from Berenberg Bank.
“The economic recovery, lower interest rates and returning business confidence should gradually boost credit demand by households and companies, while the ECB’s asset quality review should remove the remaining obstacles to credit supply.”
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