ECB's Mersch touts securitisation of SME loans as way of boosting EU economy

The ECB's assessment of banks' balance sheets will support lending to small and medium-sized businesses (SMEs) by cleaning up bank balance sheets and reducing fragmentation in funding markets, ECB executive board member Yves Mersch said in a speech on Wednesday.

He added a "second priority" was to support the bank lending channel by strengthening capital markets. "As disintermediation is not an option for most euro area SMEs, a promising middle way is to increase possibilities for the securitisation of SME loans. This could build a bridge between SMEs and non-bank sources of finance," Mersch said.

Noting that "99.7% of the firms in the EU are SMEs" and that the European Commission last year estimated they employ nearly 70% of EU workers and contributed around 60% of value added, he argued the health of smaller businesses and that of the EU economy were "thoroughly intertwined".

"I fully support the initiatives being undertaken by the European Commission and European Investment Bank to stimulate both further securitisation activity and SME lending. These measures should provide a boost to both ABS markets and stressed economies," Mersch said.