FSB Receives Feedback on Impact of Regulatory Reforms on SME Financing
FSB published the feedback it received on the effects of financial regulatory reforms on small- and medium-sized enterprises (SME) financing. About twenty organizations, including Moody's Investors Service, European Banking Federation, Bank Policy Institute, Institute of International Finance, NASDAQ, and World Council of Credit Unions, responded to this call for feedback. FSB, on February 25, 2019, had requested stakeholder feedback on the specified issues and it will use the feedback to prepare its draft report on SME evaluation, which will be issued for public consultation ahead of the June 2019 G20 Summit. The final report, reflecting the feedback from the public consultation, will be published in October 2019.
On February 25, 2019, FSB had also published a note that summarizes the main concerns raised in the FSB roundtable on the effects of financial regulatory reforms on SME financing. At the FSB roundtable, it was noted that, while internationally agreed reforms play a role, the interaction of the reforms with other domestic regulation and public policies, as well as how the regulation is implemented and interpreted by relevant authorities, ultimately determines the extent to which various economic actors, including SMEs, are affected. Basel III was identified by participants as the most relevant reform. Some participants expressed concern that banks may have increased the pricing and the proportion of secured SME lending—as well as reduced credit to riskier firms—including as a result of the reduced eligibility of collateral (both intangibles and physical collateral) for regulatory capital purposes. In that context, some participants raised the question of whether regulation strikes the right balance in terms of overall financing structure needs of SMEs. Other potentially relevant reforms that the participants identified included the following:
- Accounting rules (IFRS 9), which may incentivize banks to reduce the maturity of SME loans, to request higher collateralization, and to reduce credit availability in a downturn
- Insurance regulation such as Solvency II, preventing insurance companies from investing in securitizations of SME loans
- Domestic stress test frameworks, which may "disproportionally" affect SME finance because of the penalizing implicit risk-weight assumptions embedded in some of these tests
Related Links
Keywords: International, Banking, Insurance, Securities, Accounting, Regulatory Reform, SME, Basel III, Solvency II, IFRS 9, Responses to Calculation, FSB
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager

Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Previous Article
IFRS Publishes Taxonomy 2020 and Taxonomy Formula Linkbase 2020Related Articles
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
ISSB Standards Shine Spotlight on Comparability of ESG Disclosures
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
BCBS Proposes to Revise Core Principles for Banking Supervision
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
US Proposes Final Basel Rules, Transition Period to Start in July 2025
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
FSB Report Outlines Next Steps for Climate Risk Roadmap
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.