Othmar Karas, MEP (EPP, Austria)  organized with  UEAPME, ACCA (the Association of Chartered Certified Accountants) and AFME (Association for Financial Markets in Europe) a conference “Restarting the sme credit market” some days ago in the  European Parliament in Brussels.

The aim was to discuss how to ensure a careful revival of SME loan securitisation, building on the recent promising developments in this market. The main conclusions indicate that while Europe still remains strongly dependent on bank financing, alternative finance sources need to be explored. Securitisation has the potential to spread risk intelligently, but we need more transparency, public guarantees, regulatory certainty and proper use of information. It is essential to continue the dialogue between institutions, stakeholders, banks and businesses in order to retrieve investors’ confidence.

The roundtable was moderated by Corien Wortmann-Kool, MEP (EPP, the Netherlands). The panel was comprised of Alessandro Tappi, Head of Guarantees, Securitisation & Microfinance, European Investment Fund; Richard Hopkin, Managing Director in the Securitisation Division, AFME;  Vilmos Budavari, Unit SME access to finance, DG Enterprise and Industry, European Commission; Emmanouil Schizas, Senior Economic Analyst, ACCA; Gerhard Huemer, Director Economy Policy, UEAPME.  The event was attended by over 100 participants.

A more detailed report on the roundtable and the power point presentations are available here

http://www.accaglobal.com/en/discover/news/2013/02/sme-capital.html

Discussions revealed that:

o    Further support mechanisms are necessary to help boost the supply of credit for, and encourage investment in SMEs, since 80% of their financing is through loans. Would-be lenders to SMEs typically face two major challenges: high credit risk and higher costs of capital when lending to small businesses. Speakers stressed the need for alternative finance solutions in the long term, involving more equity financing but also collateral or guarantees through public funds. However, they also noted that it will take time to diversify EU SMEs’ financing away from debt – hence in the medium term it is important to facilitate lending to SMEs through securitisation.

o    There is now a consensus that securitisation, used in the right way, could spread the risk involved in SME lending intelligently. It is imperative however to create a proper set of instruments. To achieve recovery in securitisation, simplicity and transparency of structures, as well as regulatory measures will be needed. The European Commission and the European Investment Fund are supportive of the tool and are committed to promoting access to SME bond markets and securitisation. The newly published Green paper on long-term finance includes a section covering securitisation, though some speakers regretted that the Green Paper seemed too soft on the regulatory incentives against investing in SMEs.

o    Securitisation is only another way of combining the same raw materials of finance: information, control, collateral, and risk. The more it relies on information, the better the outcomes for all parties. Credit rating agencies have traditionally helped reduce the cost of producing such information, but current proposals for rating agency liability could make ratings impossible and cause the market to freeze as it did in the US between 2010 and 2011. Another way is to improve the opacity of products through initiatives such as the Prime Collateralised Securities (PCS) label.