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SME lending trends in the EU

Extract from the latest European Banking Authority (EBA) report on Small and Medium Enterprises (SME) released on 23 March 2016

The volume of new lending to SMEs in the euro area has declined since 2008, the beginning of the economic and financial crisis. As shown in Panel A of Figure 15, between 2003 and 2008, monthly new lending to SMEs—proxied by loans to NFCs of up to, and including, EUR 1 million—in the euro area increased and peaked at about EUR 95 billion in mid-2008. Since then, consistent declines are observed up until 2012, at which point new lending appears to have stabilised at approximately EUR 54 billion (mean monthly lending for 2013/2014). The ECB data does not  include non-euro area countries, but a similar time series (based on loan size proxies of SMEs)was provided by the Czech Republic.

Similar to the ECB data, the trend in Panel B of Figure 15 shows an increase in lending of large size loans before a reversal of a trend towards the end of 2008, when the financial crisis started.

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New lending to large companies show a stronger increase before the crisis and a decrease thereafter. The decline was particularly pronounced in the 2 years following the beginning of the financial crisis. In addition, unlike SME lending, volume of lending to large companies has already recovered to its 2003-2004 pre-crisis level. The faster recovery of large companies may be explained by the access to alternative sources of financing, such as bond financing, as the role of bonds in euro area corporate financing has consistently increased during the last decades.

Both graphs show, for reference, the beginning of the global financial crisis (2008Q4-2009Q4) as a key event that triggered the credit contraction, and the period when the Capital Requirement Regulation (CRR) is applied in the EU.

It is to be noted, however, that other important events and programmes that may have an impact on lending were introduced in this period, but are not presented in the graphs for simplicity reasons. Among these, in August 2012, the ECB announced that it would undertake OMTs in secondary, sovereign bond markets, aimed ‘at safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy’. According to a recent study (Ferrando et al., 2015), this measure had an immediate positive impact on access to finance during the first 6 months after the announcement of the ECB’s OMT programme in countries that were affected more severely by the crisis. These additional factors should be kept in mind when interpreting the lending trends.

Besides the general trend, there is significant heterogeneity in the new lending across countries. Using, as a basis, the observed lending trends before and after the crisis, Figure 16 presents the mean growth rate in annual new lending in the euro area and the Czech Republic for equal periods of time pre- and post 2008, as well as the mean growth rate after 2014 (when the CRR was implemented in the EU). The majority of countries showed positive new lending growth between 2004 and 2007—in particular, Ireland (mean annual growth of 23.8%), France (17.5%), Italy (8.9%), Finland (9.1%) and Belgium (4.1%). Between 2008 and 2013, negative mean annual growth rates are observed for all countries (except Belgium and Austria). In this regard, Ireland, Slovenia and Spain show the largest reductions in annual new lending, with mean growth rates of -21.7%, -9.9% and -15.9% respectively. Overall, countries showing the strongest rise in new lending were not necessarily those countries where the lending flow declined the most. After the introduction of the CRR, the growth rate varies across countries.


The share of new SME lending in total new lending has decreased in the period 2004-2008 from one third to almost one fifth, showing that large corporations accounted for the major part of credit growth before the crisis (Figure 17). Since the beginning of the financial crisis, the share in SME lending has steadily increased and, in 2014, its share reached 28%—close to its pre-crisis level—of total bank loans to NFCs in the euro area. On a country basis (Figure 18), this is the case for Germany, Spain, Ireland, and Portugal. The share of SME loans even surpassed its pre-crisis level in Belgium, France, Italy, Lithuania and the Netherlands, which was, however, caused by less new lending to larger corporates than to SMEs. In other countries, the share of SME loans remained below pre-crisis levels mainly due to an increase in new lending to larger corporates while lending to SMEs was less strong in 2014.


As a share of GDP, new lending was steady at about 11% before 2008 but then declined consistently up until 2014 to less than 7% (Figure 17). The largest percentage point declines are registered in Spain, Slovenia, Cyprus and Ireland (Figure 19). In contrast, the change between the periods 2003-2007 and 2008-2013 is relatively more stable across countries, with the exception of Spain and Portugal (which show large declines) and Slovenia (which shows large increases).

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Given the above trends in lending flows, declines in lending stocks are expected. Total volume of outstanding loans both to small and large companies, shown in Figure 20, declined in January 2015 by approximately 12% (down to EUR 4.3 trillion) compared to the peak in January 2009 (EUR 4.9 trillion). As the data does not differentiate between small and large loans, the actual share of SMEs in the total outstanding loans is not known. Given, however, a higher decrease in new SME lending compared to large corporates, it is expected that the SME share in outstanding loans also decreased.

eba6 eba7It appears that the decreases in post-crisis lending stocks are larger in countries that experienced the highest pre-crisis expansions. This relationship can be observed in Figure 21, which shows, on the x-axis, the percentage increase in stocks in January 2009 relative to January 2003. The y-axis shows the percentage decrease in stocks in January 2015 relative to January 2009. For example, Ireland, Spain and Slovenia show both the largest pre-crisis expansions and subsequent post-crisis contractions.




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