Following the introduction of stricter capital rules by the CRR and CRD IV, and in the context of credit tightening after the financial crisis, a capital reduction factor for loans to SMEs—the so-called SME SF—was introduced by the CRR to allow credit institutions to counterbalance the rise in capital requirements resulting from the CCB, and to provide an adequate flow of credit to this particular group of companies. While the CCB will be gradually phased-in from 2016 to 2019,1 the SME SF was implemented as early as 2014, thus currently reducing the capital requirements for exposures to SMEs in comparison with the pre-CRR/CRD IV framework.

In this context, the EBA is mandated to report to the European Commission on the following:
a) an analysis of the evolution of lending trends and conditions for SMEs ;
(b) an analysis of the effective riskiness of EU SMEs over a full economic cycle;
(c) the consistency of own funds requirements laid down in the CRR for credit risk on exposures to SMEs, with the outcomes of the analysis under points (a) and (b).
The current report aims to fulfil this mandate and provide a detailed account and analysis on these points.