RT Generic
T1 Credit risk mitigation and SMEs bank financing in Basel II : the case of the Loan Guarantee Associations
A1 Cardone Riportella, Clara
A1 Trujillo Ponce, Antonio
A1 Casasola, María José
A2 Universidad Carlos III de Madrid. Departamento de Economía de la Empresa, 
AB The objective of this paper is to analyse the impact of the techniques foreseen in the Basel Agreement II(BII) for mitigating the risk of default on bank loans to small and medium enterprises (SMEs). In particular, wewill conduct an analysis of the effect of the guarantees that the Loan Guarantee Association (LGA) offer to theSMEs on the assignment of capital requirements of the financial entities under BII. At the same time, the studywill examine the effect of this guarantee on the credit risk premium that the financial entities should chargetheir clients, and whether this foreseeable decrease in the interest rates applicable to the SMEs is compensatedby the cost of the guarantee.The results show that, considering that the cost of the LGA guarantee in Spain is around 0.68%, it willbe advantageous for an SME with the annual sales of less than or equal to €5 million to request this guaranteewhenever the probability of default (PD) of the LGA is <1.1%, if the approach utilised by the financial entity isthe Internal Ratings-Based (IRB) and the SME is considered as corporate; however, if the SME is included in aregulatory retail portfolio, then the limit for the PD of the LGA decreases to 0.71%. On the other hand, whenthe approach utilised is the Standardised one, then will be profitable for an SME treated as retail to request thisguarantee whenever the PD of the LGA is <3.35% (3.95% for corporate exposures).
YR 2008
FD 2008-09
LK https://hdl.handle.net/10016/2936
UL https://hdl.handle.net/10016/2936
LA eng
DS e-Archivo
RD 27 jul. 2024