1. Market Building in a CMU: removing information barriers to investment in SMEs
Dr Pierre Schammo
Durham University, School of Law
Senior Visiting Fellow, European Institute, London School of Economics
@ CEPS, 8 February 2017

2. Talking points Reflections on building an SME funding market
Focus on informational issues affecting funding S side (i.e., finance providers) and funding D side (i.e., SMEs)
Consider CMU White Paper contribution
Make a set of recommendations for a CMU strategy on information barriers

3. SME funding: introduction
Access to capital for SMEs is a key objective of the CMU
Long standing policy theme (eg Risk Capital Action plan)
CMU ‘market-building’ strategy aims at facilitating access to, but also diversifying sources of, funding for SMEs
Building a (pan-EU) SME funding market presupposes strategy for addressing information problems
Problem definition:
Information problems on funding S side and funding D side
Information issues affect access to SME funding market, affect competition, inefficiencies in allocation of credit/funding
Information barriers work to the benefit of incumbent banks

4. Designing a strategy for addressing information barriers
Outside K markets context, less agreement among M-Ss on the paradigms, rules and institutions that are needed to address information barriers in SME funding market
Public sector vs market driven approaches to info sharing
UK at forefront of market driven approach
UK approach targets info barriers on funding D and S side
SBEE Act 2015, CMA ‘open API approach’
Voluntary vs mandatory information sharing
Information duties can be placed on several different actors
Self-reg approach delivered mixed results in UK
Education: ‘business support’, but also (!) ‘business awareness’

5. Information barriers to SME investment: White Paper approach
Three actions points
Strengthen feedback given by banks declining SME credit
Map existing local or national support and advisory capacities across the EU to promote best practice
Investigate how to develop/support pan-EU info systems
Credit information sharing via SME opt-in system?
Overall, lot of emphasis on self-reg (best practice) and conciliatory approach towards contribution of banking sector:
See eg Commission approach to CRR Art 431(4) which was not widely applied in the past
No mandatory information sharing

6. Information issues in SME funding market: suggestions
A paradigm shift based on three pillars:
‘Overcom[ing] information barriers’ in SME funding market requires market building measures
Inter alia, to support entrance of a new tier of actors in the market for SME information
Prospectus regulation, as a means to overcome information asymmetries will matter little for the vast majority of SMEs
Greater emphasis on policies of (quasi-mandatory) information sharing
CMU strategy is out of step with trends on information sharing that are taking place outside CMU context
More effective action on information barriers requires a market correcting strategy to dovetail market building

7. Thank you
Comments welcome: