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CAPITAL REQUIREMENTS : SMES WORRIED ABOUT BANK CAPITAL CHARGES.

The small business group UEAPME has called on the European Commission to take care that its new rules on capital requirements are not too punitive. The group's Economic Director, Gerhard Huemer, said the plan to make banks to hold more cash should be "reasonable" and should not deter lending to small and medium-sized enterprises (SMEs).

"The temptation to use a blanket approach must be resisted," he said at a conference, on 3 December. "Capital requirements can and should be increased for the products that caused the current crisis, such as the trading book and sophisticated products, but certainly not for normal retail or SME loans. The real economy would end up footing the bill twice otherwise".

The Commission is revising the Capital Requirements Directive (2006/48/EC and 2006/49/EC) for the second time since the financial crisis broke, to deal with bankers' pay and re-securitisations (complex financial products based on pooling and reinvesting assets) and how banks account for assets in their trading book.

Finance ministers reached a general approach' on a review of the Capital Requirements Directives, on 10 November, which means negotiations with the European Parliament can begin. The review was proposed by the European Commission, on 13 July, to allow regulators to impose higher charges on banks if they cannot prove they have understood the risks of investing in complex re-securitisations, fail to clamp down on excessive bonuses and properly account for risk in their trading book.

SMEs rely heavily on banks for financing and have been hard hit by the financial crisis. A survey by the European Central Bank, released this summer, said that 17% of smaller companies reported difficulties accessing loans - twice the percentage of larger firms.

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Publication:European Report
Date:Dec 7, 2009
Words:284
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