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Abstract
Small- and medium-sized enterprises (SMEs)—defined by the European Commission as having fewer than 250 employees, an annual turnover of less than €50 million, or a balance sheet total of no more than €43 million—are the backbone of the European economy. On the one hand, even in the best of times, small firms often have trouble obtaining financing; on the other hand, euro-area banks are holding large stocks of relatively illiquid loans to SMEs from all kinds of sectors. Via securitization—the pooling of assets and the subsequent transfer of these, typically tranched, loan portfolios (or their underlying risks) to the capital markets—these loans can be transformed into liquid assets and securitized. This process can spur more lending to SMEs, and this is the reason why there is currently so much discussion about the need to revive the SME securitization market (SMESec). In this article, the authors shed more light on this important topic.
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