benoit cœure : sme financing – a euro area perspective speech by mr benoit cœure, member of the executive board of the european central bank, at the conference on small business financing, jointly organised by the european central bank, kelley school of business at indiana university, centre for economic policy research and review of finance, frankfurt am main, 13 december 2012. * * * ladies and gentlemen, 1 it is a pleasure to welcome you to the conference on “ small business financing ” organised jointly by the european central bank, the kelley school of business at indiana university, the centre for economic policy research and the review of finance. at the ecb, we regard small and medium - sized enterprises ( smes ) as a crucial component of the euro area economy. indeed, our deliberations on monetary policy systematically take into account the financial health of, and the growth prospects for, euro area smes. in particular, the financing environment and access to finance for euro area corporates are important elements in our policy - making process, both for standard and non - standard monetary policy decisions. to illustrate the importance of small businesses in the euro area, consider the following facts : smes constitute about 99 % of all euro area firms, they employ around three - quarters of euro area ’ s employees, and they generate around 60 % of value added. at the same time, unlike large firms which are generally more profitable and have access to alternative sources of finance, such as bond or equity finance, smes are highly dependent on bank loans and credit lines. due to asymmetric information and a higher risk of failure2, smes tend to face higher costs for bank finance and higher rejection rates than larger firms. while finding customers – potentially due to weak aggregate demand – is usually cited as a bigger problem for smes than access to finance, it is still the case that they are particularly vulnerable to adverse real - financial feedback loops or supply disruption in the provision of bank credit. nevertheless, the years prior to the financial crisis were a period of smooth transmission of monetary policy, and there was little evidence that euro area smes were constrained over and above levels expected in the context of a sound financial system. after mid - 2007, however, the costs of finance started to rise and access to finance started to deteriorate relative to the pre - crisis period. in some euro area jurisdictions, the financial crisis first and the sovereign debt crisis later led to a reduction of the supply of credit to both

mostly a domestic phenomenon. now the global transmission effects through international active banks and global investors cannot be ignored. this in turn will likely have an effect on the policy decisions of central banks around the globe. this is probably another area where further study and discussions are warranted within the central banking community. see also shirakawa ( 2010c ). references rajan, raghuram g., fault lines, princeton university press, 2010. shirakawa, masaaki, “ revisiting the philosophy behind central bank policy, ” speech at the economic club of new york, april 22, 2010a ( available at http : / / www. boj. or. jp / en / type / press / koen07 / ko1004e. htm ). _ _ _ _ _ _ _ _, “ future of central banks and central banking, ” opening speech at 2010 international conference hosted by the institute for monetary and economic studies, bank of japan, may 26, 2010b ( available at http : / / www. boj. or. jp / en / type / press / koen07 / ko1005a. htm ). _ _ _ _ _ _ _ _, “ roles for a central bank – based on japan ’ s experience of the bubble, the financial crisis, and deflation –, ” speech at the 2010 fall meeting of the japan society of monetary economics, september 26, 2010c ( available at http : / / www. boj. or. jp / en / type / press / koen07 / ko1009f. htm ). white, william r., “ should monetary policy “ lean or clean ”?, ” globalization and monetary policy institute working papers no. 34, federal reserve bank of dallas, 2009.