Basel II SME solution close

Global banking regulators are optimistic they can resolve by mid-June the vexed question of the treatment of lending to small to medium-sized enterprises (SMEs) under the Basel II capital Accord.

The politically sensitive issue has dogged the development of the risk-based Accord and helped delay its coming-into-force until at least late 2006, or nearly three years later than originally planned (Risk December 2001).

The German government, which faces parliamentary elections in September, threatened to veto the Accord if it penalised bank lending to the country’s SMEs, or mittelstand, which are regarded as a vital part of the German economy. Other countries, including Japan, Italy and

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