The massive increase in bank regulation since the global financial crisis was always going to have some perverse effects. It now seems that while sovereign and mortgage lending are powering ahead, corporate lending has taken a nosedive, especially lending to small and medium-sized enterprises (SMEs) – the very sector that governments most want to encourage.
A recent report from ratings agency Fitch, called 'The impact of macro-prudential reforms', makes for interesting reading. A study of 16 European G-SIBs (global systemically important banks) discovered that total lending had not reduced a great deal but that the allocation of credit has changed significantly. Exposures to residential mortgages and sovereigns were up, while exposures to financial institutions, securitisations (many of which would be securitisations of SME assets) and corporates were all down. Corporate lending was down 9% between 2010 and 2012.
