EBA · 2013_343 Final Q&A

Definition of SME

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
501, para. 2
Topic
Credit risk
Submitted by
Industry association
Submitted
2013-10-07
Answered
2014-01-31
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

SMEs are defined by turnover alone (EUR 50 million according to OJ L 124, 20.05.2003). Our question concerns when turnover is recorded. Is it (i) at inception of the loan or (ii) on an on-going basis? We would also like to know what level of documentation/proof is required, if any.

Background

Not all of our members, particularly smaller ones, hold turnover data on their systems so will have no actual "proof". It would be disproportionately burdensome for them to start collecting this data, particularly if it had to be monitored. But it would be relatively straightforward for them to determine what percentage of their loan book would never exceed the SME turnover threshold either at inception or during the life of the loan.

Answer

Under Article 501(2)(b) of Regulation (EU) No. 575/2013 (CRR) an SME is defined in accordance with Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium sized enterprises. A deviation results only to the extent that, among the criteria listed in Article 2 of the Annex to that Recommendation, only the annual turnover shall be taken into account. Since the possible relief in capital requirements under Article 501 of the CRR is limited to exposures to SMEs, it needs to be ensured that this privilege is not extended inappropriately. An institution therefore needs to have adequate current information available on an on-going basis and should be able to adequately demonstrate the fulfilment of this requirement to its competent authorities.

Original source: European Banking Authority, Q&A ID 2013_343

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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