European banks adopt common principles on supporting SMEs in access to financing

14th June, 2017

This week, the European Banking Federation, to which Associação Portuguesa de Bancos (APB - Portuguese Banking Association) belongs, formally adopted a series of guidelines on communication between SMEs and banks regarding loan applications. The idea is for these customers to better understand the reasons for banks’ decisions whether or not to grant them loans.

“Ensuring that companies are better prepared to successfully obtain financing will contribute to their growth capacity and, as a result, to the Portuguese economy,” said the president of the APB. Fernando Faria de Oliveira also pointed out, “Banks play a key role in supporting company growth with the loans that they grant, along with other, alternative sources of finance that can also be important. We therefore consider it natural for the banking sector to take a more educational approach to companies’ financial know-how. The Portuguese business sector consists largely of SMEs and it is therefore crucial for them to be able to take advantage of the financing instruments that they have at their disposal so that good projects are able to go ahead.”

These principles were signed with four other European banking associations (EAPB, EACB, EMF-ECBC and ESBG) after being hashed out in talks with European SME organisations. Their aim is to help create a favourable environment for the growth of SMEs in Europe by fostering their ability to obtain funding, improving their financial know-how and promoting access to credit for sound business projects. The European banking sector also invited the European Commission to take part in the discussions.

These new principles lay down common guidelines on the information that financial institutions should give their existing and potential SME customers on i) what is expected of them in a loan application in understandable, clearly explained terms, ii) what additional information they may be asked to provide and iii) if their application is denied, how to ask why their loan has not been granted.

In an address on the principles by the European Banking Federation, its CEO said, “Higher growth rates can be achieved by helping SMEs whose applications have been turned down to understand what they can do to obtain financing”.

Further information at: http://www.ebf.eu/european-banking-associations-present-high-level-principles-for-banks-feedback-on-sme-credit-applications-press-release/