Kraemer-Eis, Helmut Schaber, Markus Tappi, Alessandro
Year of Publication:
EIF Working Paper 2010/07
Securitisation has, after a period of significant growth throughout the last 10-15 years, become the finance area which has fallen the most from its peak – both in terms of new volumes as well as its image as an innovative and efficient financing tool. While market insiders, including regulators, increasingly understand that securitisation can play a positive role in extending the sources of finance to the real economy, the perception of the wider public and the media remains negative. There were undoubtedly parts of the structured finance market which at least partially caused and clearly exacerbated the financial crisis. The excesses and the effects of these, notably the US subprime mortgage debacle as well as highly leveraged structures with problems of the alignment of interests, have been widely documented. The advantages of a functioning securitisation market are however often less obvious. This paper contributes to the substantiation of the discussion around securitisation. With a focus on the securitisation of loans to Small and Medium sized Enterprises, or SMEs (SMESec), we outline the benefits of this technique for the financing of SMEs; moreover we explain the need for the use of public resources to support this important market segment. A crisis also provides opportunities – in a more "healthy" environment of reduced moral hazard, reduced information asymmetries, and cognisant and careful risk taking, SMESec can provide an important contribution to SME's access to finance and is as such even more important in the aftermath of the crisis.