Spain To Allow SME Loans As Covered Bond Collateral

Spain is changing its covered bond law to make small and medium enterprise (SME) loans eligible as underlying collateral, expanding what most investors think of as covered bonds and changing the risk profile. The idea is to improve lending to SMEs, which will be an important part of Spain’s recovery, but it opens the door to all kinds of new ‘covered bonds’ and market confusion.

Importance of SME loans for Spanish industry

“It should be stated how important the SMEs are for the European and especially the Spanish industry. It should be obvious that the share of SME on enterprises in general is extremely high. More importantly, however, is that the share of employment within the SME...