Support for the SME Supporting Factor - Multi-country empirical evidence on systematic risk factor for SME loans

Our study contributes to Article 501 of the Capital Requirements Regulation (CRR) requesting analysis the consistency of own funds requirements with the riskiness of SMEs. In both the French and the German sample, results suggest that the relative différences between the capital requirements for large corporates and those for SMEs (in other words the capital relief for SMEs) are lower in the Basel III framework than implied by empirically estimated asset correlations. Results show that the SME Supporting Factor in the CRR/CRDIV is able to compensate the difference between estimated and CRR/CRDIV capital requirements for loans in the corporate portfolio.