Brussels, 06 May 2010
Commission to take on bottlenecks to financing of SMEs
Data from the European Commission and European Central Bank indicate that bank credit standards are still tight, net demand for loans from enterprises declined and almost 20% of SMEs’ bank loan applications are rejected. The SME Finance Forum 2010 being held in Brussels today focuses on new strategies for improving access to finance for SMEs. To address the difficult financing situation of SMEs, Vice-President Antonio Tajani, Commissioner for Industry and Entrepreneurship, in agreement with Michel Barnier, Commissioner for Internal Market and Services, has proposed to upgrade the SME Finance Forum into a high-level dialogue between financial institutions and SMEs. It will monitor market developments and will recommend concrete actions to improve access to finance and the financial markets for SMEs.
European Commission Vice-President Antonio Tajani said: "It is one of my top priorities to encourage new strategies for improving access to finance in order to help small and medium-sized enterprises to exit the recession and achieve smart growth. We should not forget - SMEs are the backbone of the European economy and the job generators of Europe. In tough times we need them more than ever to get the European economy going."
European Commissioner Michel Barnier said: "I am very aware how difficult it can be for SMEs to access the finance they need to prosper. And I want SMEs to be put back at the heart of the internal market. I firmly believe that capital markets must remain attractive to SMEs. One improvement would be for listing requirements to be proportionate to the size of issuers - without undermining investor protection. And we also need to act to attract investors' interest in smaller issuers."
The last economic downturn has lowered both supply and demand of lending to firms. The growth prospects of Europe require that the flow of bank lending to firms return to normal as soon as possible. The April 2010 bank lending survey of the European Central Bank (ECB) indicated that bank credit standards are still tight. 83% of banks have kept their credit standards to SMEs unchanged. Most banks also expect that their credit standards remain tight in 2010. Tight credit conditions endanger the growth or even survival of European small businesses, as almost 20% of loan applications from SMEs are rejected. Further, changes in capital requirements and other banking regulations are making the financial system safer, but their overall impact on bank lending should be carefully assessed without undermining financial stability.
Moreover, the already thin venture capital markets have suffered further from the recession. Insurance companies and pension funds should be able to invest in innovative firms through venture capital funds that are large enough to be able to benefit from economies of scale and scope. This requires making an efficient European venture capital market a reality so that it can provide more investments in innovative firms with high growth potential.
To complement this, new steps need to be taken to make listing of medium-sized firms in stock markets easier. Too often, these firms are disregarded by investors. At present, investment - and therefore liquidity – is concentrated in the very large stocks, to the detriment of smaller firms seeking to raise capital. That is why the Commission believes the visibility of smaller firms needs to be enhanced.
The Commission is reviewing the application of several securities markets directives imposing obligations on issuers (such as the directive on transparency obligations of listed companies or the directive on market abuse) with the "think small first" principle in mind. A conference on the application of the directive on transparency obligations will be organised on 11 June 2010, where this issue will be specifically addressed.
The SME Finance Forum 2010 will examine access to loans and capital in Europe and explore strategies to improve access to finance for SMEs. As a follow-up to this SME Forum, a high-level dialogue between representatives of financial institutions and SMEs will be set up to monitor market developments and make recommendations on how to improve access to finance.
More information on access to finance
April 2010 ECB Bank Lending Survey
More information on the Transparency Directive