Analyzing the Role of Mutual Guarantee Societies on Bank Capital Requirements for Small and Medium-Sized Enterprises

Journal of Economic Policy Reform, Vol. 16, No. 2, 142-159

Posted: 30 Apr 2013 Last revised: 4 Aug 2013

See all articles by Clara Cardone-Riportella

Clara Cardone-Riportella

Department of Financial Economics & Accounting, Pablo de Olavide University (Seville, Spain)

Antonio Trujillo‐Ponce

Universidad Pablo de Olavide - Department of Financial Economics & Accounting

Anahí Briozzo

National University of the South

Date Written: April 29, 2013

Abstract

This paper analyzes the impact of the guarantee provided by mutual guarantee societies (MGSs) on the risk premium that banks should charge for small- and medium-sized enterprise (SME) loans under the new Basel Capital Accords (Basel II and III). We also examine whether the foreseeable decrease in the theoretical credit risk premium would be compensated by the cost of the MGS guarantee. To do so, we develop a rating system for SMEs that uses a large sample of Spanish firms over the period from 2005 to 2009. We find that the final effect of the guarantee on the SME risk premium depends on the values taken by the credit variables of the MGS (essentially, the probability of default).

Keywords: bank capital requirements, bank financing, credit risk mitigation, mutual guarantee societies, small businesses

JEL Classification: G21, G28, G32

Suggested Citation

Cardone-Riportella, Clara and Trujillo-Ponce, Antonio and Briozzo, Anahí, Analyzing the Role of Mutual Guarantee Societies on Bank Capital Requirements for Small and Medium-Sized Enterprises (April 29, 2013). Journal of Economic Policy Reform, Vol. 16, No. 2, 142-159, Available at SSRN: https://ssrn.com/abstract=2258255

Clara Cardone-Riportella

Department of Financial Economics & Accounting, Pablo de Olavide University (Seville, Spain) ( email )

Ctra. de Utrera, km 1
Seville, Seville 41013
Spain
00 34 954 349056 (Phone)

Antonio Trujillo-Ponce (Contact Author)

Universidad Pablo de Olavide - Department of Financial Economics & Accounting ( email )

Ctra. Utrera, Km.1
Sevilla, 41013
Spain

HOME PAGE: http://https://www.upo.es/investiga/banef/

Anahí Briozzo

National University of the South ( email )

Argentina

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