test the credit scoring situation in us estimated that the cost of evaluating micro loan applications in the us using credit scoring was reduced to around $ 100 compared to a range of $ 500 – $ 1800 prior to the introduction of credit scoring. the time saving involved meant that banks could focus more time on marginal applications, existing loans that are showing signs of distress and processing more loan applications. use bis central bankers ’ speeches of credit scoring has also meant that the marginal benefits of taking and maintaining collateral are not justified for small loans. 16. the bank of england has also acknowledged that there is some evidence of banks being more willing to lend on an unsecured basis when using credit scoring, which potentially improves the access to bank finance for very small and start - up small and medium enterprises. for the borrower, the benefits from credit scoring include increased access to credit and, in some cases, lower borrowing costs. in its study of sme credit scoring ’ s impact on access to credit, the federal reserve bank ( frb ) of atlanta found that, in general, the use of credit scoring increased the amount of credit banks extended to the small and medium enterprises. it found that banks using scoring were more likely to lend to the small and medium enterprises that lacked sufficient financial information for approval through traditional underwriting methods. presumably, this is due to the inclusion of the business owner ’ s personal information in the scoring process. the study also found that banks using scoring were more likely to lend in low - income areas, a fact it attributed to greater objectivity in the underwriting process. 17. while credit scoring would definitely improve the speed and efficiency in sme lending, banks need to ensure effective follow up and monitoring of the msme accounts. we should be careful to ensure that credit standards do not become lax so that lenders are willing to provide credit to more distant borrowers without conducting the appropriate due diligence or monitoring. ultimately while models do help there is no substitute for the commercial judgement of the seasoned hardnosed banker which also must be applied! f. way forward in bridging the gap in msme financing 18. access to finance needs to be enlarged through alternative sources of capital such as private equity, venture capital and angel funds. this is crucial for facilitating the growth of knowledge based enterprises which have high potential in indian context. they would require such alternative sources of finance since traditional channels may not meet their needs. apart from fiscal incentives for promoting such alternative sources of capital ( such as

erkki liikanen : the proposed regulation on structural measures for banks comments by mr erkki liikanen, governor of the bank of finland and chairman of the highlevel expert group on reforming the structure of the eu banking sector, on the european commission ’ s proposal of 29 january 2014 for a regulation on the separation of certain trading activities from credit institutions. * * * the european commission has today presented a regulatory proposal based on the report of the high - level expert group on reforming the structure of the eu banking sector. in october 2012 our group proposed that proprietary trading and certain risky trading activities including market - making as well as exposures to shadow banking entities such as hedge funds ought to be separated from deposit - taking and lending activities. the commission proposal has the same objectives as the recommendations in our final report. the set of activities which the proposal would affect are also similar. in some respects, the proposed regulation does, however, differ from our recommendations. the commission ’ s proposal includes an outright ban on organised proprietary trading instead of requiring it to be assigned to a separate and separately capitalised legal entity. in this respect the commission proposal resembles the structural reform implemented in the united states. this would allow for regulatory convergence at the international level. as for market - making, risky securitisation and complex derivatives, the proposal empowers the competent authority to require separation when specific conditions prevail and also empowers the competent authority to require separation of other trading activities. the high - level expert group asked the commission to work on the calibration of the thresholds for application of the new rules. the commission has accordingly included the thresholds in its proposal. the proposal would cover the largest and most trading - intense banks in europe. while striving for the same objectives as the high - level expert group, the commission proposal leaves an important role for the future judgment of the competent authorities, the eba and the commission itself. in implementation of the regulation, the commission could grant individual credit institutions derogations from application of the regulation if national primary law in their home country is already adopted and considered at least as stringent as the regulation itself. moreover, competent authorities or member states may decide to impose similar measures also on some smaller banks, or exempt some qualifying banks from the requirement if these banks can demonstrate that they do not compromise the objectives of the regulation or threaten financial stability. these elements of discretion entrust the competent authorities, the eba and the commission with