State Aid to Banks and Credit for SMEs: Is There a Need for Conditionality?

Abstract

This study assesses whether lending to SMEs could and should be one of the conditions for a bank to qualify to receive State aid. The assessment consists of a legal and an economic part. In the legal part the possibilities to apply the conditionality to State aid are explored. The economic part consists of a qualitative and quantitative assessment at both the member state- and bank level. The results could provide policy-makers with measures that reduce the obstacles for SMEs in case banks are bailed out, as well as to maximise the social return on taxpayers’ money. This study was prepared by Policy Department A at the request of the Committee on Economic and Monetary Affairs (ECON).

Keywords: state aid, bank, credit, risk, cooperative, financial crise, economic crise, cooperative banks, SME, small and medium enterprises