recent survey on smes conducted by the eurosystem, in the second bis central bankers ’ speeches and third quarter of 2011 access to finance remained one of their most pressing problems. to put things into perspective, bear in mind that the number of firms concerned about financing was actually lower in 2009, a period when economic activity in the euro area was very weak. according to the survey, bank financing ( via overdrafts, credit lines and bank loans ) remained the most important source of external financing for smes. in addition, 20 % of the respondents perceived a further decline in banks ’ willingness to provide loans. therefore, after the improvement registered in 2010, smes were experiencing once again significant constraints in obtaining financing. in the light of this evidence, the concrete risk that the increasing pressures on banks ’ funding and capital positions could lead to a significant curtailment of banks ’ lending activity in some countries was judged to be extremely high in december 2011. in particular, a dangerous loop involving low economic activity, funding stress for banks and a reduction in lending had increased the downside risks to price stability. it was therefore a top priority to break this loop before it spiralled out of control. launch of new non - standard measures and their impact faced with this critical situation, the eurosystem adopted a two - pronged strategy. first, it offered ample liquidity at very long maturity to prevent funding issues from igniting a potentially destructive deleveraging process. second, it widened the eligible collateral to facilitate access to the liquidity and the provision of credit to smes. specifically, on 8 december 2011, the ecb announced the following initiatives. first, the ecb said it would launch two longer - term refinancing operations ( ltros ) with a maturity of 36 months. the ltros were to be conducted as fixed - rate tender procedures with full allotment, with the interest rate fixed at the average rate of the main refinancing operations over the life of the respective operation. to increase the flexibility of the operations and to cater for different liquidity needs, counterparties were offered the option to repay after one year any part of the allotted amounts. second, the ecb decided to increase collateral availability by allowing national central banks, among other things, to accept as collateral additional performing credit claims ( i. e. bank loans ) that satisfy specific eligibility criteria. as an example, the banque de france has accepted real estate residential loans with a mortgage or

less willing to lend to the non - financial private sector, and that banks may have entered a vicious circle which could compromise their ability to supply credit to the economy, both in the short and the long run. the additional negative impact on banks ’ balance sheets of rapidly declining sovereign bond prices made the situation even worse. banks typically have three ways to adjust to pressures on their funding and capital positions : they can sell assets, raise capital or reduce lending. let ’ s look at each of these options in turn. in an environment of extreme uncertainty and high risk aversion, risky assets can only be disposed of at very low prices, possibly considerably below their book value. fire sales would weigh on profits, further deteriorating banks ’ capital positions, generating in the process negative externalities and sub - optimal collective behaviour. therefore, to be successful, significant reductions on the assets side of the banks ’ balance sheet require a stabilisation of the economic and financial environment. raising capital is also challenging in an unstable environment. uncertainty about the pricing of the risky assets and the overall risk surrounding the valuation of banks makes it particularly difficult to attract new equity investors. raising capital in such circumstances may not be accepted by shareholders as it may send a negative signal to the markets and lead to a drop in share prices. and, compared to 2008 – 2009, credible government support for banks ’ capital positions was less available. this left banks with the third option, namely, to reduce lending. banks could easily stop rolling over their loans or granting new ones. this strategy, however, while optimal from an individual bank ’ s perspective, would lead, if pursued collectively, to a credit crunch, with significant negative consequences on the real economy and additional strains on the banking sector. a credit crunch would have been particularly dangerous for small and medium - sized enterprises ( smes ), given their heavy reliance on bank funding. it is no exaggeration to say that smes form the backbone of europe ’ s economy, accounting for approximately two - thirds of employment. let me give you a few statistics : smes constitute about 99 % of all firms in the euro area, employ 72 % of the euro area ’ s labour force and generate around 60 % of value added. they have significantly higher gross job creation ( and destruction ) rates than large enterprises. at the same time, smes tend to face more stringent financial constraints, have a higher cost of external finance and exhibit higher debt levels than large firms. according to the most