Securitisation and SME credit availability in the EU

Abstract: This paper analyses the relationship between securitisation and SME financing through the bank lending channel in combination with the procyclicality of both. Using securitisation issuance data on a national level, panel survey data on SME financing conditions at the firm level, and the output gap as a proxy for the business cycle, I find that both securitisation and SME credit availability are procyclical. Furthermore, I find a positive relationship between securitisation and credit availability, supporting policy to stimulate securitisation in the EU. Lastly, I do not find conclusive answers to the question if securitisation amplifies the procyclicality of SME credit constraints. Concluding, I can say that securitisation could alleviate SME credit constraints during economic downturns, however due to the found procyclicality of securitisation, the effect of securitisation levels in a country on SME credit availability in times of crisis is unclear.