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01 Oct 2005

The New Basel Capital Accord and SME Financing

SMEs and the New Rating Culture

Rym Ayadi

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CEPS Research Report in Finance and Banking, 119 pages

This study discusses the main characteristics of the SME sector in Europe and provides an informative analysis about what Basel II means for SMEs and its impact on their credit financing conditions. It also presents a detailed analysis of how banks formulate an internal rating system and illustrates how this system works in practice. Finally, it concludes with the key measures that should be taken by banks, SMEs and public policy-makers to improve SME financing in the new rating culture.