In the course of the economic transformation, substantial investment volumes must be financed. House banks play a crucial role in providing finance to small and medium-sized enterprises (SMEs), as they understand their customers’ business models better than capital markets do.
The German banking system is characterised by a small number of large banks and a large number of very small banks. This decentralised structure is an advantage, yet the equity base of many small institutions may be insufficient to finance all required investments. This contribution highlights that securitisation of SME loans can combine the strengths of house banks with those of the bond market. However, the necessary conditions, namely established platforms with standardised loans and processes, are still lacking.
The existing securitisation platform operated by True Sale International (TSI) appears suitable, due to its standardisation, to be used by small banks as well, particularly for transformation financing. To achieve this, securitisation markets in Europe must be strengthened overall, and initiatives at the level of federal states and banking groups in Germany need to be expanded.
