The Financial Stability Board has published its final report on the impact of financial regulatory reforms on the provision of financing to small- and medium-sized enterprises. The report follows the FSB’s consultation in June 2019 on its draft paper examining the way in which the Basel III and certain national and regional regulatory reforms have impacted SME financing. The consultation sought feedback from the public on the conclusions and approaches adopted in the paper. Alongside the final report, the FSB has also published an overview of the responses it received to its consultation. The final report fulfills the aims of the FSB’s post-implementation analysis of its regulatory reforms by considering whether the reforms have achieved their intended outcomes and identifying any unintended consequences.
The FSB’s final report finds that there have not generally been material and persistent negative effects on SME financings as a result of the introduction of the reforms analyzed in the paper. Although a slowing of pace and tightening of conditions of SME lending has been identified in some jurisdictions as a result of Basel III’s more stringent risk-based capital requirements, these effects are not found across all jurisdictions and are generally found to be temporary. The report does find a positive resumption of SME lending in recent years, although the number of banks lending to SMEs still falls short of pre-crisis levels in some jurisdictions. Financial technology lending is found to have played an increasing part in SME lending in recent years, although the sustainability of such lending has yet to be proven. Stakeholder feedback has pointed to macroeconomic conditions as opposed to financial regulation as being the main driver of SME financing trends. Klass Knot, the FSB Vice Chair, led the work and said of the final report: “The evaluation provides robust evidence that the post-crisis financial reforms have not led to a material and persistent reduction in SME lending.”