Increasing capital requirements on SME lending will stifle economic growth and depress the UK’s small business sector, business groups have warned.
Under proposals being considered by the Prudential Regulation Authority (PRA) as part of the Basel 3.1 regulations, favourable treatment for SME lending will be removed.
Removing the preferential treatment, known as the SME Supporting Factor, will force SME lenders to hold a higher level of capital against loans to the sector.
