The Future of SME Finance

Gerhard HuemerUEAPME Director Economic and Fiscal Policy

3rd SME Summit

Luxemburg, April 23, 2004

Introduction

economic restructuring and innovation

=> needs investment

better qualification and developing new markets

=> needs investment

creation of more and better jobs

=> needs investment

SMEs are ready to invest, but

access to finance – main complain of SMEs

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Changes in the Finance sector

globalisation and internationalisation

mergers and restructuring

economic situation of some finance companies

Basel II

new State Aide rules

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Changes in Finance Sector results

in higher risk awareness of banks

the introduction of rating systems

the loss of personnel relations between

SME owner and decision-maker in banks

decrease of transparency for SMEs

higher costs due to previous losses and

higher administrative burdens

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SMEs have to face

the introduction Basel II

new obligations resulting from rating

higher credit costs

loss of personal contacts – soft factors

all of them endanger access to finance

and increase the uncertainty of SMEs

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Policy actions are required

to make credits and loans for SMEs available

to reduced the administrative costs or Basel II

for small / SME banks

to strengthen the capacity of SME to build risk capital

to increase the availability of external risk capital

for SMEs

to strengthen the confidence of SMEs

regarding access to finance

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UEAPME activities

Basel II consultation process with

Basel Committee, Commission and Parliament

Basel II dissemination conferences

extending the credit guaranty schemes

increase the transparency of risk assessment

and rating systems – Code of Conduct

to strengthen the confidence of SMEs

regarding access to finance

elaboration a comprehensive approach

for a better Future in SME finance

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Open list of proposed policy measures

SME friendly implementation of Basel II

=> administrative burdens for smaller Banks

=> partial use of the IRB approach

extension of credit guaranty schemes for SME credits

and SME portfolios

ensuring the transparency of rating systems

=> SMEs should not be confronted with a „Black Box“

tax reforms to allow SMEs to build-up risk capital

establishment of a market for SME venture capital

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